<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 27, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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SPECTRX, INC.
(Exact name of Registrant as specified in its charter)
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<TABLE>
<S> <C> <C>
DELAWARE 3845 58-2029543
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Identification
of Classification Code Number) Number)
incorporation or organization)
</TABLE>
6025A UNITY DRIVE
NORCROSS, GEORGIA 30071
(770) 242-8723
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
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MARK A. SAMUELS
CHIEF EXECUTIVE OFFICER
SPECTRX, INC.
6025A UNITY DRIVE
NORCROSS, GEORGIA 30071
(770) 242-8723
(Name, address, including zip code, and telephone number,
including area code, of agent of service)
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COPIES TO:
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<S> <C>
ROBERT D. BROWNELL, ESQ. THOMAS W. CHRISTOPHER, ESQ.
MARNIA NICHOLS, ESQ. WILLIAM L. HORTON, JR., ESQ.
WILSON SONSINI GOODRICH & ROSATI WHITE & CASE
PROFESSIONAL CORPORATION 1155 AVENUE OF THE AMERICAS
650 PAGE MILL ROAD NEW YORK, NY 10036-2787
PALO ALTO, CA 94304 (212) 819-8200
(415) 493-9300
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. []
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act of 1933 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 of
1933 registration statement number of the earlier effective registration
statement for the same offering. []
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. []
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CALCULATION OF REGISTRATION FEE
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PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE
SECURITIES TO BE OFFERING PRICE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED PER SHARE(2) PRICE(2) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock, $0.001 par 2,300,000
value........................ shares(1) $12.00 $27,600,000 $8,400
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</TABLE>
(1) Includes Shares that the Underwriters have the option to purchase solely to
cover over-allotments.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(a) under the Securities Act of 1933.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to the registration or qualification under the securities
law of any such State.
SUBJECT TO COMPLETION DATED FEBRUARY 27, 1997
PROSPECTUS
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2,000,000 SHARES
SPECTRX (LOGO)
COMMON STOCK
All of the 2,000,000 shares of Common Stock offered hereby are being sold
by SpectRx, Inc. ("SpectRx" or the "Company"). Prior to this offering, there has
been no public market for the Common Stock of the Company. It is currently
estimated that the initial public offering price will be between $10.00 and
$12.00 per share. See "Underwriting" for a discussion of the factors to be
considered in determining the initial public offering price. The Company has
applied to have the Common Stock approved for quotation on the Nasdaq National
Market under the symbol SPRX.
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THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 6.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
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<S> <C> <C> <C>
Per Share......................... $ $ $
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Total(3).......................... $ $ $
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(1) See "Underwriting" for indemnification arrangements with the several
Underwriters.
(2) Before deducting expenses payable by the Company estimated at $650,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 300,000 additional shares of Common Stock solely to cover
over-allotments, if any. If all such shares are purchased, the total Price
to Public, Underwriting Discount and Proceeds to Company will be
$ , $ and $ , respectively. See "Underwriting."
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The shares of Common Stock are offered by the several Underwriters subject
to prior sale, receipt and acceptance by them and subject to the right of the
Underwriters to reject any order in whole or in part and certain other
conditions. It is expected that certificates for such shares will be available
for delivery on or about , 1997, at the office of the agent of
Hambrecht & Quist LLC in New York, New York.
HAMBRECHT & QUIST VOLPE, WELTY & COMPANY LLC
, 1997.
<PAGE> 3
SPECTRX (LOGO)
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
------------------
SpectRx(TM), is a trademark of the Company. This Prospectus also includes
trade names, trademarks and registered trademarks of companies other than
SpectRx.
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements and Notes thereto
appearing elsewhere in this Prospectus. The Common Stock offered hereby,
involves a high degree of risk. See "Risk Factors."
THE COMPANY
SpectRx, Inc. ("SpectRx" or the "Company") is engaged in the research and
development of products that offer less invasive and painless alternatives to
blood tests currently used for glucose monitoring, diabetes screening and infant
jaundice. The Company's goal is to introduce products that reduce or eliminate
pain, are convenient to use and provide rapid results at the point of care,
thereby improving patient well being and reducing health care costs. The
Company's glucose monitoring, diabetes screening and infant jaundice products
are based on proprietary electro-optical and microporation technology that can
eliminate the pain and inconvenience of a blood sample. The Company has entered
into collaborative arrangements with Abbott Laboratories ("Abbott"), Boehringer
Mannheim Corporation ("Boehringer Mannheim") and Healthdyne Technologies, Inc.
("Heathdyne") to facilitate the development, commercialization and introduction
of its glucose monitoring, diabetes screening and infant jaundice products,
respectively.
Diabetes is a major health care problem that is estimated to affect over
100 million people worldwide. If undiagnosed and untreated, diabetes leads to
severe medical complications over time, including blindness, loss of kidney
function, nerve degeneration and cardiovascular disease. Diabetes is the sixth
leading cause of death by disease in the United States and is estimated to cost
the American economy over $100 billion annually. Diabetes occurs when the body
does not produce sufficient levels of, or effectively utilize, insulin, a
hormone that regulates the metabolism (breakdown) of glucose. Glucose levels in
the blood must be within a specific concentration range to ensure proper
cellular function and health. Studies indicate that maintaining proper glucose
control through adjustments to oral medication, diet, exercise, and insulin
injections can significantly reduce the risk of complications from diabetes.
Personal glucose monitoring products play a critical role in managing diabetes
by helping diabetics make the proper adjustments to control their blood glucose
levels.
The Company is developing a hand held glucose monitoring product that
combines its proprietary microporation technology with a disposable assay
cartridge. This product is intended to offer an alternative to current glucose
monitoring products, which require a blood sample usually obtained by lancing
the fingertip. The Company believes that the worldwide market for glucose
monitoring products is approximately $2.0 billion annually and growing at
approximately 15% a year. The Company's prototype glucose monitoring product
uses a laser to create a micropore approximately the diameter of a human hair.
The laser creates a micropore with a depth approximately the thickness of a
sheet of paper. This micropore provides painless access to interstitial fluid,
an extracellular fluid that is prevalent throughout the body and just beneath
the skin, which contains glucose and many other analytes found in blood. Because
interstitial fluid is found throughout the body, the micropore can be created on
various parts of the body. Once access to interstitial fluid is achieved, the
device is intended to force the interstitial fluid out of the micropore and into
the disposable assay cartridge. The fluid is then analyzed using chemistry
similar to that in currently available blood glucose monitors. In a pilot study
involving 10 subjects and yielding 438 measurements, the Company found a
correlation coefficient of 0.96 between blood glucose levels measured using
conventional finger stick technology and interstitial fluid glucose levels
measured using the Company's early stage prototype. In October 1996, the Company
entered into a collaborative arrangement with Abbott under which Abbott is
primarily responsible for undertaking or funding the development, regulatory
clearance, manufacture and sale of the Company's glucose monitoring product.
Under its agreement with Abbott, the Company receives development funding,
payments on achievement of technical milestones and a royalty on Abbott's sales
of the product. In addition, Abbott has made a $3 million equity investment in
the Company. If development milestones are achieved, the Company expects Abbott
to file a 510(k) premarket notification with the United States Food and Drug
Administration (the "FDA") for its glucose monitoring product in 1999, but there
can be no assurance that this filing will occur within this time frame, or at
all.
The Company has also developed a compact diabetes screening product based
on measurements of fluorescence in the lens of the eye. This product is intended
to provide an alternative to the fasting plasma glucose test, the screening
technique recommended by the American Diabetes Association (the "ADA"),
3
<PAGE> 5
which requires a blood draw following an eight hour fasting period. The Company
believes that the market for diabetes screening in the United States is
approximately $400 million annually. While the individual looks into the
Company's device it automatically tracks the eye and measures lens fluorescence,
which is evaluated by the Company's proprietary algorithm. An abnormally high
level of lens fluorescence can be indicative of prolonged exposure to high
levels of glucose due to diabetes. The entire procedure takes approximately one
minute and does not require a fasting period. In a pilot study of more than
1,300 subjects conducted by Boehringer Mannheim, an early stage prototype of the
Company's diabetes screening product demonstrated an ability to detect diabetes
comparable to the fasting plasma glucose test. In December 1994, the Company
entered into a collaborative arrangement with Boehringer Mannheim under which
Boehringer Mannheim is primarily responsible for the clinical trials, regulatory
clearance and sale of the Company's diabetes screening product. Under the
Company's agreement with Boehringer Mannheim, the Company receives development
funding and would receive a manufacturing profit on products sold to Boehringer
Mannheim. If development milestones are achieved, the Company expects Boehringer
Mannheim to file a 510(k) premarket notification with the FDA for the Company's
diabetes screening product in 1998, but there can be no assurance that this
filing will occur within this time frame, or at all.
In addition to its two products for diabetes, the Company is developing an
infant jaundice screening and monitoring product. Infant jaundice is
characterized by a yellowing of the skin and eyes caused by an excess of
bilirubin in the body. If left untreated infant jaundice may, in extreme cases,
lead to brain damage or death. The Company believes the worldwide market for
infant jaundice screening and monitoring products is approximately $180 million.
The Company's infant jaundice product is intended to offer an alternative to
conventional blood tests for infant jaundice, which involve a traumatic heel
stick to obtain a blood sample from the infant. This product is intended to be a
hand held instrument, which incorporates a microspectrometer to collect
spectroscopic information from the skin and a proprietary, disposable
calibration element. After calibration, the instrument is applied to the skin of
the infant for five to ten seconds, during which time the bilirubin level is
measured using a proprietary algorithm that adjusts for testing difficulties due
to skin color, gestational age and other factors. Using an early stage
prototype, the Company tested over 100 infants in a pilot study and found a
correlation coefficient of 0.92 between total serum bilirubin measured using a
conventional blood test and that measured using the Company's prototype. In June
1996, the Company entered into a collaborative arrangement with Healthdyne under
which Healthdyne is responsible for regulatory approval and sales of the
Company's infant jaundice product in the United States and Canada. The Company
retains manufacturing rights and is responsible for regulatory approval and
sales of the infant jaundice product outside of the United States and Canada.
Under its agreement with Healthdyne, the Company receives license fees and would
receive a manufacturing profit on hand held instruments sold to Healthdyne and a
share of any profits from the sales of disposables by Healthdyne. The Company
expects Healthdyne to commence clinical testing and file a 510(k) premarket
notification with the FDA for the Company's infant jaundice product in 1997, but
there can be no assurance that this filing will occur within this time frame, or
at all.
The Company's offices are located at 6025A Unity Drive, Norcross, Georgia
30071, and its telephone number is (770) 242-8723. The Company was incorporated
in Delaware in 1992.
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THE OFFERING
Common Stock offered by the Company..... 2,000,000 shares
Common Stock to be outstanding after the
offering................................ 7,567,590 shares(1)
Use of Proceeds......................... For continued development, testing
and clinical trials for the
Company's products; continued
research and development; sales,
marketing and manufacturing
activities; capital expenditures;
and working capital and other
general corporate purposes.
Proposed Nasdaq National Market
symbol.................................. SPRX
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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<CAPTION>
YEAR ENDED DECEMBER 31,
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1994 1995 1996
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<S> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA
Revenues........................................................... $ 122 $1,179 $ 452
Operating loss..................................................... (1,223) (793) (3,110)
Net Loss........................................................... (1,347) (680) (3,178)
Pro forma net loss per share....................................... $ (1.03)
=======
Shares used in per share calculation(2)............................ 3,094
=======
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<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------------
ACTUAL AS ADJUSTED(3)
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<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA
Cash and Cash Equivalents.............................................. $4,721 $ 25,223
Working capital........................................................ 3,870 24,372
Total assets........................................................... 5,946 26,448
Total liabilities...................................................... 1,192 1,192
Accumulated deficit.................................................... (6,422) (6,422)
Total stockholders' equity............................................. 4,754 25,256
</TABLE>
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(1) Based on the number of shares outstanding as of December 31, 1996. Excludes
663,362 shares of Common Stock issuable upon exercise of options outstanding
on such date, which had a weighted average exercise price of $0.64 per
share; excludes 8,572 shares of Common Stock issuable upon exercise of an
outstanding warrant with an exercise price of $1.40 per share; and excludes
47,398 shares of Common Stock issuable pursuant to a Convertible Promissory
Note at any time until June 19, 1998 at an assumed initial public offering
price of $11.00 per share. See "Management -- Stock Plans" and "Description
of Capital Stock -- Notes, Warrants and Options."
(2) See Note 2 of Notes to Consolidated Financial Statements for an explanation
of the determination of shares used in computing net earnings per share.
(3) As adjusted (i) to reflect the sale of 2,000,000 shares of Common Stock
offered hereby at an assumed public offering price of $11.00 per share and
the receipt of the estimated proceeds therefrom, and (ii) the exercise of
warrants (which expire if they are not exercised prior to the closing of
this offering) for 553,126 shares of Common Stock and receipt of the
exercise price therefrom. See "Use of Proceeds" and "Capitalization."
---------------
Except as otherwise noted, all information in this Prospectus assumes (i) a
1 for 1.4 reverse stock split of the Company's Common Stock effective on
February 19, 1997, (ii) the filing and effectiveness upon the closing of this
offering of the Company's Amended and Restated Certificate of Incorporation
authorizing a class of undesignated Preferred Stock, (iii) the automatic
conversion of all outstanding shares of Preferred Stock into 3,482,762 Shares of
Common Stock upon the closing of this offering, (iv) the exercise of warrants
(which expire if they are not exercised prior to the closing of this offering)
for 553,126 shares of Common Stock with a weighted average exercise price of
$1.25 per share, and (v) no exercise of the Underwriters' over-allotment option.
See "Description of Capital Stock," "Underwriting" and Notes to Consolidated
Financial Statements.
5
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RISK FACTORS
This Prospectus contains forward-looking statements that involve risks and
uncertainties. Actual results could differ materially from those discussed in
the forward-looking statements as a result of certain factors, including those
set forth below and elsewhere in this Prospectus. The following risk factors
should be considered carefully in addition to the other information in this
prospectus before purchasing the shares of Common Stock offered hereby.
Early Stage of Development; No Assurance of Successful Product Development
To date, the Company has only tested prototypes of its products. Because
the Company's research and clinical development programs are at an early stage,
substantial additional research and development and clinical trials will be
necessary before commercial prototypes of the Company's glucose monitoring and
infant jaundice products are produced. There can be no assurance that the
Company will not encounter unforeseen problems in the development of these
technologies and applications or that the Company will be able to successfully
address those problems that do arise. In addition, there can be no assurance
that any of the Company's products will be successfully developed, proven safe
and efficacious in clinical trials, meet applicable regulatory standards, be
capable of being produced in commercial quantities at acceptable costs, be
eligible for third-party reimbursement from governmental or private insurers, be
successfully marketed or achieve market acceptance. If any of the Company's
development programs are not successfully completed, required regulatory
approvals or clearances are not obtained, or products for which approvals or
clearances are obtained are not commercially successful, the Company's business,
financial condition and results of operations would be materially adversely
affected.
The Company's business is subject to the risks inherent in the development
of new products using new technologies and approaches. There can be no assurance
that unforeseen problems will not develop with these technologies or
applications, that the Company will be able to successfully address
technological challenges it encounters in its research and development programs
or that commercially feasible products will ultimately be developed by the
Company. See "Business -- Research, Development and Engineering."
Dependence on Collaborative Arrangements
The Company's business strategy for the development, clinical testing,
regulatory approval, manufacturing and commercialization of its products depends
upon the Company's ability to selectively enter into and maintain collaborative
arrangements with leading medical device companies. The Company has entered into
collaborative arrangements with (i) Abbott under which Abbott is primarily
responsible for undertaking or funding the development, clinical testing,
regulatory approval process, manufacture and sale of the Company's glucose
monitoring product, (ii) Boehringer Mannheim under which Boehringer Mannheim is
primarily responsible for undertaking or funding the development, clinical
testing, regulatory approval process and sale of the Company's diabetes
screening product, and (iii) Healthdyne under which Healthdyne is primarily
responsible for undertaking or funding the development, clinical testing,
regulatory approval process and sale of the Company's infant jaundice product in
the United States and Canada. The agreements evidencing these collaborative
arrangements grant a substantial amount of discretion to each of Abbott,
Boehringer Mannheim and Healthdyne. For example, each of these collaborative
partners may terminate their respective collaborative arrangements with the
Company effective upon the expiration of certain notice periods. In addition,
the obligation of each of the Company's collaborative partners to fund or
undertake the development, clinical testing, regulatory approval process,
marketing, distribution and/or sale of the products covered by their respective
collaborative arrangements with the Company is, to a large extent, dependent
upon the satisfaction of certain goals or "milestones" by certain specified
dates, some of which are outside the Company's control. To the extent that the
obligations of the Company's collaborative partners to fund or undertake all or
certain of the foregoing activities are not contingent upon the satisfaction of
certain goals or milestones, the collaborative partners nevertheless retain a
significant degree of discretion regarding the timing of these activities and
the amount and quality of financial, personnel and other resources that they
devote to these activities. Furthermore, there can be no assurance that disputes
will not arise between the Company and one or more of its collaborative partners
regarding their respective rights and obligations under the collaborative
arrange-
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ments. Finally, there can be no assurance that one or more of the Company's
collaborative partners will not be unable, due to financial, regulatory or other
reasons, to satisfy its obligations under its collaborative arrangement with the
Company or will not intentionally or unintentionally breach its obligations
under the arrangement.
There can be no assurance that one or more of the Company's collaborative
partners will not, for competitive reasons, support, directly or indirectly, a
company or product that competes with the Company's product that is the subject
of its collaborative arrangement with the Company. Furthermore, any dispute
between the Company and one of its collaborative partners might require the
Company to initiate or defend expensive litigation or arbitration proceedings.
Any termination of any collaborative arrangement by one of the Company's
collaborative partners, any inability of a collaborative partner to fund or
otherwise satisfy its obligations under its collaborative arrangements with the
Company and any significant dispute with, or breach of a contractual commitment
by, a collaborative partner, would likely require the Company to seek and reach
agreement with another collaborative partner or to assume, to the extent
possible and at its own expense, all the responsibilities being undertaken by
this collaborative partner. There can be no assurance that the Company would be
able to reach agreement with a replacement collaborative partner. If the Company
were not able to find a replacement collaborative partner, there can be no
assurance that the Company would be able to perform or fund the activities for
which such collaborative partner is currently responsible. Even if the Company
were able to perform and fund these activities, the Company's capital
requirements would increase substantially. In addition, the further development
and the clinical testing, regulatory approval process, marketing, distribution
and sale of the product covered by such collaborative arrangement would be
significantly delayed.
In January 1997, Healthdyne became the subject of a hostile takeover
attempt by Invacare Corporation. There can be no assurance that a change in
control of Healthdyne would not adversely affect the Company's collaborative
arrangement with Healthdyne.
Any of the foregoing circumstances could have a material adverse effect
upon the Company's business, financial condition and results of operations. See
"Business -- Collaborative Arrangements" and "-- Research, Development and
Engineering."
Fixed Royalty Rates and Manufacturing Profits
Substantially all of the Company's revenues and profits are expected to be
derived from royalties and manufacturing profits that the Company will receive
from Abbott, Boehringer Mannheim and Healthdyne resulting from sales of its
glucose monitoring, diabetes screening and infant jaundice products,
respectively. The royalties and manufacturing profits that the Company is
expected to receive from each of its collaborative partners depend on sales of
such products. There can be no assurance that the Company, together with its
collaborative partners, will be able to sell sufficient volumes of the Company's
products to generate substantial royalties and manufacturing profits for the
Company. In addition, the Company's profit margins are not likely to increase
over time because the Company's royalty rates and manufacturing profit rates are
predetermined.
In addition, it is common practice in the glucose monitoring device
industry for manufacturers to sell their glucose monitoring devices at
substantial discounts to their list prices or to offer customers rebates on
sales of their products. Manufacturers offer such discounts or rebates to expand
the use of their products and thus increase the market for the disposable assay
strips they sell for use with their products. Because Abbott may, pursuant to
its collaborative arrangement with the Company, determine the prices at which it
sells the Company's glucose monitoring devices, it may choose to adopt this
marketing strategy. If Abbott adopts this marketing strategy and discounts the
prices at which it sells the Company's glucose monitoring devices, the royalties
earned by the Company in respect of such sales will decline. There can be no
assurance that, if this strategy is adopted, royalties earned by the Company on
sales of the disposable cartridges to be used in connection with its glucose
monitoring device will be equal to or greater than the royalties the Company
would have earned had its glucose monitoring devices not been sold at a
discount. This possible reduction in royalties on sales of the Company's glucose
monitoring devices could have a material adverse effect upon the
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Company's business, financial condition and results of operations. See
"Business -- Collaborative Arrangements" and "-- Licensing Arrangements."
Limited Operating History; History of Losses and Expectations of Future Losses
The Company has a limited operating history upon which its prospects can be
evaluated. Such prospects must be considered in light of the substantial risks,
expenses and difficulties encountered by entrants into the medical device
industry, which is characterized by an increasing number of participants,
intense competition and a high failure rate. The Company has experienced
operating losses since its inception, and, as of December 31, 1996, the Company
had an accumulated deficit of approximately $6.4 million. To date, the Company
has engaged primarily in research and development efforts, and a number of the
Company's key management and technical personnel have only recently joined the
Company. The Company has never generated revenues from product sales and does
not have experience in manufacturing, marketing or selling its products. There
can be no assurance that the Company's development efforts will result in
commercially viable products, that the Company will be successful in introducing
its products, or that required regulatory clearances or approvals will be
obtained in a timely manner, or at all. There can be no assurance that the
Company's products will ever gain market acceptance or that the Company will
ever generate revenues or achieve profitability. The development and
commercialization of its products will require substantial development,
regulatory, sales and marketing, manufacturing and other expenditures. The
Company expects its operating losses to continue through 1999 as it continues to
expend substantial resources to complete development of its products, obtain
regulatory clearances or approvals, build its marketing, sales, manufacturing
and finance organizations and conduct further research and development. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business -- Manufacturing and Sources of Supply," "-- Sales,
Marketing and Distribution," "-- Research, Development and Engineering" and
"-- Government Regulation."
Dependence on Licensed Patent Applications and Proprietary Technology
SpectRx's success depends in large part upon its ability to establish and
maintain the proprietary nature of its technology through the patent process and
to license from others patents and patent applications necessary to develop its
products. The Company has licensed from Altea Technologies, Inc. ("Altea") one
granted patent and know how related to its glucose monitoring product, jointly
applied with Altea for a U.S. patent and an international patent related to this
device and has licensed this granted patent and these patent applications to
Abbott pursuant to the parties' collaborative arrangements. SpectRx has license
agreements with Georgia Tech Research Corporation ("GTRC") that give the Company
the right to use two patents related to its diabetes screening product, and the
Company has licensed this proprietary technology to Boehringer Mannheim pursuant
to the Company's collaborative arrangement with Boehringer Mannheim. The Company
has license agreements with the University of Texas M.D. Anderson Cancer Center
("M.D. Anderson") that give SpectRx access to one patent related to the
Company's infant jaundice product, and the Company has applied for two patents
related to this product. SpectRx has licensed the one patent and two patent
applications to Healthdyne pursuant to its collaborative arrangement with that
company. In addition, SpectRx has licensed from Joseph Lakowicz, Ph.D. of the
University of Maryland several granted patents and patent applications related
to fluorescence spectroscopy that it intends to use in its research and
development efforts.
There can be no assurance that one or more of the patents held directly by
the Company or licensed by the Company from third parties, including the
disposable components to be used in connection with its glucose monitoring and
infant jaundice products, or processes used in the manufacture of the Company's
products, will not be successfully challenged, invalidated or circumvented or
that the Company will otherwise be able to rely on such patents for any reason.
In addition, there can be no assurance that competitors, many of whom have
substantial resources and have made substantial investments in competing
technologies, will not seek to apply for and obtain patents that prevent, limit
or interfere with the Company's ability to make, use and sell its products
either in the United States or in foreign markets. If any of the Company's
patents are successfully challenged, invalidated or circumvented or the
Company's right or ability to manufacture its products were to
8
<PAGE> 10
be proscribed or limited, the Company's ability to continue to manufacture and
market its products could be adversely affected, which would likely have a
material adverse effect upon the Company's business, financial condition and
results of operations.
The medical device industry has been characterized by extensive litigation
regarding patents and other intellectual property rights. Certain companies in
the medical device industry have instituted intellectual property litigation,
including patent infringement actions, for legitimate and, in certain cases,
competitive reasons. In addition, the United States Patent and Trademark Office
("USPTO") may institute litigation or interference proceedings. There can be no
assurance that the Company will not become subject to patent infringement claims
or litigation or interference proceedings instituted by the USPTO to determine
the priority of inventions. The defense and prosecution of intellectual property
suits, USPTO interference proceedings and related legal and administrative
proceedings are both costly and time consuming. Litigation may be necessary to
enforce patents issued to the Company, to protect trade secrets or know how
owned by the Company or to determine the enforceability, scope and validity of
the proprietary rights of others. Any litigation or interference proceedings
brought against, initiated by or otherwise involving the Company may require the
Company to incur substantial legal and other fees and expenses and may require
some of the Company's employees to devote all or a substantial portion of their
time to the prosecution or defense of such litigation or proceedings. An adverse
determination in litigation or interference proceedings to which the Company may
become a party, including any litigation that may arise against the Company,
could subject the Company to significant liabilities to third parties, require
the Company to seek licenses from third parties or prevent the Company from
selling its products in certain markets, or at all. Although patent and
intellectual property disputes regarding medical devices are often settled
through licensing or similar arrangements, there can be no assurance that the
Company would be able to reach a satisfactory settlement of such a dispute that
would allow it to license necessary patents or other intellectual property. Even
if such a settlement were reached, the settlement process may be expensive and
time consuming and the terms of the settlement may require the Company to pay
substantial royalties. An adverse determination in a judicial or administrative
proceeding or the failure to obtain a necessary license could prevent the
Company from manufacturing and selling its products, which would have a material
adverse effect on the Company's business, financial condition and results of
operations.
In addition to patents, the Company relies on trade secrets and proprietary
know how, which it seeks to protect, in part, through confidentiality and
proprietary information agreements. There can be no assurance that such
confidentiality or proprietary information 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 to or be independently developed
by competitors. See "Business -- Patents."
No Assurance of Regulatory Approvals
The design, manufacturing, labeling, distribution and marketing of the
Company's products will be subject to extensive and rigorous government
regulation in the United States and certain other countries where the process of
obtaining and maintaining required regulatory clearance or approvals is lengthy,
expensive and uncertain. In order for the Company to market its products in the
United States, the Company must obtain clearance or approval from the United
States Food and Drug Administration ("FDA"). The Company intends to seek
clearance to market each of its products through a 510(k) premarket notification
supported by clinical data. Although no 510(k) premarket notification has been
filed with the FDA for clearance to market any of the Company's products, the
Company expects 510(k) premarket notifications for clearance to market its
infant jaundice product, its diabetes screening product and its glucose
monitoring product to be filed in 1997, 1998 and 1999, respectively. There can
be no assurance that any such notifications will be filed in accordance with
this schedule, that the FDA will act favorably or quickly on such 510(k)
submissions, or that significant difficulties and costs will not be encountered
during efforts to obtain FDA clearance or approval. Specifically, the FDA may
request additional data or require additional clinical studies be conducted to
obtain 510(k) clearance for one or more of the Company's products. In addition,
there can be no assurance that the FDA will not require the Company to submit a
premarket approval ("PMA") application to obtain FDA approval to market one or
more of its products. The PMA process is more rigorous and lengthier than the
9
<PAGE> 11
510(k) clearance process and can take several years from initial filing and
require the submission of extensive supporting data and clinical information. In
addition, there can be no assurance that the FDA will not impose strict labeling
or other requirements as a condition of its 510(k) clearance or PMA approval,
any of which could limit the Company's ability to market its products. Further,
if the Company wishes to modify a product after FDA clearance of a 510(k)
premarket notification or approval of a PMA, including changes in indications or
other modifications that could affect safety and efficacy, additional clearances
or approvals will be required from the FDA. Any request by the FDA for
additional data or any requirement by the FDA that the Company conduct
additional clinical studies or submit to the more rigorous and lengthier PMA
process could result in a significant delay in bringing the Company's products
to market and substantial additional research and other expenditures by the
Company. Similarly, any labeling or other conditions or restrictions imposed by
the FDA on the marketing of the Company's products could hinder the Company's
ability to effectively market its products. Any of the foregoing actions by the
FDA could delay or prevent altogether the Company's ability to market and
distribute its products and could have a material adverse effect on the
Company's business, financial condition and results of operations.
In order for the Company to market its products under development in Europe
and certain other foreign jurisdictions, the Company and its distributors and
agents must obtain required regulatory registrations or approvals and otherwise
comply with extensive regulations regarding safety, efficacy and quality in
those jurisdictions. Specifically, certain foreign regulatory bodies have
adopted various regulations governing product standards, packaging requirements,
labeling requirements, import restrictions, tariff regulations, duties and tax
requirements. These regulations vary from country to country. In order to
commence sales in Europe, the Company will be required to obtain ISO 9001
certifications and after mid-1998, the Company will be prohibited from selling
its products in Europe until such time as the Company receives CE mark
certification, which is an international symbol of quality and compliance with
applicable European medical device directives. There can be no assurance that
the Company will be successful in obtaining ISO 9001 or CE mark certification.
Failure to receive ISO 9001 or CE mark certification or other foreign regulatory
approvals could have a material adverse effect on the Company's business,
financial condition and results of operations. There can be no assurance that
the Company will obtain any other required regulatory registrations or approvals
in such countries or that it will not be required to incur significant costs in
obtaining or maintaining such regulatory registrations or approvals. Delays in
obtaining any registrations or approvals required to market the Company's
products, failure to receive these registrations or approvals, or future loss of
previously obtained registrations or approvals could have a material adverse
effect on the Company's business, financial condition and results of operations.
The Company and its collaborative partners will be required to adhere to
applicable FDA regulations regarding Good Manufacturing Practice ("GMP") and
similar regulations in other countries, which include testing, control, and
documentation requirements. Ongoing compliance with GMP and other applicable
regulatory requirements will be strictly enforced in the United States through
periodic inspections by state and federal agencies, including the FDA, and in
foreign jurisdictions by comparable agencies. Failure to comply with applicable
regulatory requirements could result in, among other things, warning letters,
fines, injunctions, civil penalties, recall or seizure of products, total or
partial suspension of production, refusal of the government to grant premarket
clearance or premarket approval for devices, withdrawal of approvals previously
obtained and criminal prosecution. The restriction, suspension or revocation of
regulatory approvals or any other failure to comply with regulatory requirements
would have a material adverse effect on the Company's business, financial
condition and results of operations.
The Clinical Chemistry Branch of the FDA's Division of Clinical Laboratory
Devices (the "Branch") has traditionally been the reviewing branch for
blood-based personal glucose monitoring products. The Clinical Chemistry and
Clinical Toxicology Devices Panel (the "Panel") is an external advisory panel
that provides advice to the Branch regarding devices that are reviewed by the
Branch. A meeting of the Panel is scheduled for March 20-21, 1997, and an agenda
item for the meeting is a discussion of invasive and non-invasive
self-monitoring blood glucose devices, including a discussion of current
technology and its performance capabilities and limitations. The Panel's input
may be used by the FDA to revise its 510(k) guidance document for blood glucose
monitoring devices. There can be no assurance that this meeting will not result
in a FDA policy or change in FDA policy that is materially adverse to the
Company's regulatory position.
10
<PAGE> 12
The Company will rely upon Abbott and Boehringer Mannheim to obtain United
States and foreign regulatory approvals and clearances for its glucose
monitoring and diabetes screening products, respectively, and if such approvals
or clearances are obtained the Company will rely upon these collaborative
partners to maintain them in full force and effect and to otherwise remain in
compliance with all applicable United States and foreign regulatory
restrictions. The inability or failure of such third parties to comply with the
varying regulations or the imposition of new regulations would materially
adversely effect the Company's business, financial condition and results of
operations. See "Business -- Government Regulation."
Uncertainty of Market Acceptance
The Company's products are based upon new methods of glucose monitoring,
diabetes screening and infant jaundice monitoring and screening, and there can
be no assurance that any of these products will gain market acceptance.
Physicians and individuals will not recommend or use the Company's products
unless they determine, based on experience, clinical data, relative cost, and
other factors, that these products are an attractive alternative to current
blood-based tests that have a long history of safe and effective use. To date,
the Company's products have been utilized by only a limited number of subjects,
and no independent studies regarding the Company's products have been published.
The lack of any such independent studies may have an adverse effect on the
Company's ability to successfully market its products. In addition, purchase
decisions for products like the Company's diabetes screening and infant jaundice
products are greatly influenced by health care administrators who are subject to
increasing pressures to reduce costs. Failure of the Company's products to
achieve significant market acceptance would have a material adverse effect on
the Company's business, financial condition and results of operations. See
"-- Uncertainty of Third-Party Reimbursement" and "Business -- Third-Party
Reimbursement."
Competition
The medical device industry in general, and the markets for glucose
monitoring and diabetes screening devices and processes in particular, are
intensely competitive. If successful in its product development, the Company
will compete with other providers of personal glucose monitors, diabetes
screening tests and infant jaundice products. A number of competitors, including
Johnson & Johnson, Inc. (which owns Lifescan, Inc.), Boehringer Mannheim, Bayer
AG (which owns Miles Laboratories, Inc.) and Abbott (which owns MediSense Inc.),
are currently marketing traditional glucose monitors. These monitors are widely
accepted in the health care industry and have a long history of accurate and
effective use. Furthermore, a number of companies have announced that they are
developing products that permit non-invasive and less invasive glucose
monitoring. Accordingly, competition in this area is expected to increase.
Many of the Company's competitors have substantially greater financial,
research, technical, manufacturing, marketing and distribution resources than
the Company and have greater name recognition and lengthier operating histories
in the health care industry. There can be no assurance that the Company will be
able to effectively compete against these and other competitors. In addition,
there can be no assurance that the Company's glucose monitoring, diabetes
screening or infant jaundice products will replace any currently used devices or
systems, which have long histories of safe and effective use. Furthermore, there
can be no assurance that the Company's competitors will not succeed in
developing, either before or after the development and commercialization of the
Company's products, devices and technologies that permit more efficient, less
expensive non-invasive and less invasive glucose monitoring, diabetes screening
and infant jaundice monitoring. It is also possible that one or more
pharmaceutical or other health care companies will develop therapeutic drugs,
treatments or other products that will substantially reduce the prevalence of
diabetes or infant jaundice or otherwise render the Company's products obsolete.
Such competition could have a material adverse effect on the Company's business,
financial condition and results of operation.
In addition, there can be no assurance that one or more of the Company's
collaborative partners will not, for competitive reasons, reduce its support of
its collaborative arrangement with the Company or support, directly or
indirectly, a company or product that competes with the Company's product that
is the subject of the collaborative arrangement. See "Business -- Competition."
11
<PAGE> 13
No Manufacturing Experience; Dependence on Sole Sources of Supply
To date, the Company's manufacturing activities have consisted only of
building certain prototype devices. If the Company successfully develops its
diabetes screening and infant jaundice products and, together with Boehringer
Mannheim and Healthdyne, obtains FDA clearance and other regulatory approvals to
market these products, the Company will undertake to manufacture these products.
The Company has no experience manufacturing such products in the volumes that
would be necessary for the Company to achieve significant commercial sales.
There can be no assurance that the Company will be able to establish and
maintain reliable, full scale manufacturing of these products at commercially
reasonable costs. Although the Company has leased space that it plans to use to
manufacture its products, it may encounter various problems in establishing and
maintaining its manufacturing operations, resulting in inefficiencies and
delays. Specifically, companies often encounter difficulties in scaling up
production, including problems involving production yield, quality control and
assurance, and shortages of qualified personnel. In addition, the Company's
manufacturing facilities will be subject to GMP regulations, including possible
preapproval inspection, international quality standards and other regulatory
requirements. Difficulties encountered by the Company in manufacturing scale-up
or failure by the Company to implement and maintain its manufacturing facilities
in accordance with GMP regulations, international quality standards or other
regulatory requirements could result in a delay or termination of production,
which could have a material adverse effect on the Company's business, financial
condition and results of operations.
Numerous components of the Company's diabetes screening and infant jaundice
products are currently available from only one supplier. Any significant problem
experienced by one of the Company's sole source suppliers may result in a delay
or interruption in the supply of components to the Company until such supplier
cures the problem or an alternative source of the component is located and
qualified. Any such delay or interruption would likely lead to a delay or
interruption in the Company's manufacturing operations, which could have a
material adverse effect upon the Company's business, financial condition and
results of operations. See "Business -- Manufacturing and Sources of Supply."
No Marketing and Sales Experience
If the Company, together with Healthdyne, successfully develops the
Company's infant jaundice product and obtains, in countries other than the
United States and Canada, necessary regulatory approvals and clearances to
market this product, the Company will be responsible for marketing this product
in these countries. The Company has no experience in marketing or selling
medical device products and only has a three person marketing and sales staff.
In order to successfully market and sell its infant jaundice product outside the
United States and Canada, the Company must either develop a marketing and sales
force or enter into arrangements with third parties to market and sell this
product. There can be no assurance that the Company will be able to successfully
develop a marketing and sales force or that it will be able to enter into
marketing and sales agreements with third parties on acceptable terms, if at
all. If the Company develops its own marketing and sales capabilities, it will
compete with other companies that have experienced and well-funded marketing and
sales operations. If the Company enters into a marketing arrangement with a
third party for the marketing and sale of its infant jaundice product outside
the United States and Canada, any revenues to be received by the Company from
this product will be dependent on this third party, and the Company will likely
be required to pay a sales commission or similar amount to this party.
Furthermore, the Company is currently dependent on the efforts of Abbott and
Boehringer Mannheim for any revenues to be received from its glucose monitoring
and diabetes screening products, respectively. There can be no assurance that
the efforts of these third parties for the marketing and sale of the Company's
products will be successful. See "-- Dependence on Collaborative Arrangements,"
"Business -- Sales, Marketing and Distribution," and "-- Collaborative
Arrangements."
Product Liability Risk; Limited Insurance Coverage
The development, manufacture and sale of medical products entail
significant risks of product liability claims. The Company currently has no
product liability insurance coverage beyond that provided by its general
liability insurance. Accordingly, there can be no assurance that the Company is
adequately protected from any
12
<PAGE> 14
liabilities, including any adverse judgments or settlements, it might incur in
connection with the development, clinical testing, manufacture and sale of its
products. In addition, product liability insurance is expensive and may not be
available to the Company on acceptable terms, if at all. A successful product
liability claim or series of claims brought against the Company that results in
an adverse judgment against or settlement by the Company in excess of any
insurance coverage could have a material adverse effect on the Company's
business, financial condition and results of operations. See
"Business -- Product Liability and Insurance."
Possible Future Capital Requirements
Substantial capital will be required to develop the Company's products,
including completing product testing and clinical trials, obtaining all required
United States and foreign regulatory approvals and clearances, commencing and
scaling up manufacturing and marketing its products. Pursuant to the Company's
collaborative arrangements with Abbott, Boehringer Mannheim and Healthdyne,
these collaborative partners will either directly undertake these activities or
will fund a substantial portion of these expenditures. The obligations of the
Company's collaborative partners to fund the Company's capital expenditures is
largely discretionary and depends on a number of factors, including the
Company's ability to meet certain milestones in the development and testing of
its products. There can be no assurance that the Company will meet such
milestones or that the Company's collaborative partners will continue to fund
the Company's capital expenditures. Any failure of the Company's collaborative
partners to fund its capital expenditures would have a material adverse effect
on the Company's business, financial condition and results of operations.
In addition to funds that the Company expects to be provided by its
collaborative partners, the Company may be required to raise additional funds
through public or private financing, additional collaborative relationships or
other arrangements. The Company believes that its existing capital resources and
the net proceeds of this offering will be sufficient to satisfy its funding
requirements for at least the next 24 months, but may not be sufficient to fund
the Company's operations to the point of commercial introduction of its glucose
monitoring product. There can be no assurance that any required additional
funding, if needed, will be available on terms attractive to the Company, or at
all, which could have a material adverse effect on the Company's business,
financial condition and results of operations. Any additional equity financing
may be dilutive to stockholders, and debt financing, if available, may involve
restrictive covenants. See "Use of Proceeds" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
Uncertainty of Third-Party Reimbursement
In the United States and elsewhere, sales of medical products are
dependent, in part, on the ability of consumers of these products to obtain
reimbursement for all or a portion of their cost from third-party payors, such
as government and private insurance plans. Third-party payors are increasingly
challenging the prices charged for medical products and services. If the Company
succeeds in bringing one or more products to market, there can be no assurance
that these products will be considered cost effective and that reimbursement to
the consumer will be available or sufficient to allow the Company to sell its
products on a competitive basis. See "Business -- Third-Party Reimbursement."
Dependence Upon Key Personnel
The Company's ability to operate successfully and manage its potential
future growth depends in significant part upon the continued service of certain
key scientific, technical, managerial and finance personnel, and its ability to
attract and retain additional highly qualified scientific, technical, managerial
and finance personnel. None of these key employees has an employment contract
with the Company nor are any of these employees covered by key person or similar
insurance. In addition, if the Company, together with its collaborative
partners, is able to successfully develop and commercialize the Company's
products, the Company will need to hire additional scientific, technical,
managerial and finance personnel. The Company faces intense competition for
qualified personnel in these areas, many of whom are often subject to competing
employment offers, and there can be no assurance that the Company will be able
to attract and retain such personnel. The loss of key personnel or inability to
hire and retain additional qualified personnel in the future
13
<PAGE> 15
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business -- Employees."
Control by Directors, Executive Officers and Affiliated Entities
The Company's directors, executive officers and entities affiliated with
them, will, in the aggregate, beneficially own approximately 46% of the
Company's outstanding Common Stock following the completion of this offering.
These stockholders, if acting together, would be able to control substantially
all matters requiring approval by the stockholders of the Company, including the
election of directors and the approval of mergers and other business combination
transactions. See "Principal Stockholders."
No Prior Public Market for Common Stock; Potential Volatility of Stock Price
Prior to this offering, there has been no public market for the Company's
Common Stock, and there can be no assurance that a regular trading market will
develop and continue after this offering or that the market price of the Common
Stock will not decline below the initial public offering price. The initial
public offering price will be determined through negotiations between the
Company and the representatives of the Underwriters and may not be indicative of
the market price of the Common Stock following this offering. The stock markets
have experienced extreme price and volume fluctuations that have substantially
affected small capitalization medical technology companies, resulting in changes
in the market prices of the stocks of many such companies that may not have been
directly related to their operating performance. Such broad market fluctuations
may adversely affect the market price of the Common Stock following this
offering. In addition, the market price of the Common Stock following this
offering may be highly volatile. Factors such as variations in the Company's
financial results, changes in the Company's collaborative arrangements, comments
by security analysts, announcements of technological innovations or new products
by the Company or its competitors, changing government regulations and
developments with respect to FDA submissions, patents and proprietary rights, or
litigation may have a material adverse effect on the market price of the Common
Stock. See "Underwriting."
Potential Adverse Effect of Shares Eligible for Future Sale
The number of shares of Common Stock available for sale in the public
market is limited by lock-up agreements under which all directors, executive
officers and certain other stockholders of the Company that beneficially own or
have dispositive power over substantially all of the shares of Common Stock
outstanding prior to this offering, including Common Stock to be issued upon the
closing of this offering upon conversion of the Company's Preferred Stock, have
agreed not to sell or otherwise dispose of any of their shares for a period of
180 days following the offering, without the prior written consent of Hambrecht
& Quist LLC. However, Hambrecht & Quist LLC may, in its sole discretion, permit
the sale or other disposition of all or any portion of the securities subject to
such lock-up agreements prior to the expiration of this 180 day period. If
Hambrecht & Quist LLC were to release any securities from the prohibitions on
sales and other dispositions imposed by these lock-up agreements, up to
1,089,827 shares of Common Stock may be eligible for immediate sale. Although
Hambrecht & Quist LLC does not have any agreements or understandings regarding
the release of any securities from the prohibitions on sales and other
dispositions imposed by these lock-up agreements, it retains the right at any
time and without notice to release from the scope of the lock-up restrictions
all or any portion of the securities currently subject to such restrictions. The
release of any securities from such prohibitions and the subsequent sale of such
shares may have an adverse effect on the ability of the Company to raise capital
and could adversely affect the market price of the Company's Common Stock. See
"Shares Eligible for Future Sale" and "Underwriting."
Anti-Takeover Effect of Certain Charter and Bylaw Provisions on Price of Common
Stock
Certain provisions of the Company's Certificate of Incorporation and Bylaws
may have the effect of making it more difficult for a third party to acquire, or
of discouraging a third party from attempting to acquire, control of the
Company. Such provisions could limit the price that certain investors might be
willing to pay in the future for shares of the Company's Common Stock. Certain
of these provisions allow the
14
<PAGE> 16
Company to issue Preferred Stock without any vote or further action by the
stockholders, eliminate the right of stockholders to act by written consent
without a meeting and specify procedures for director nominations by
stockholders and submission of other proposals for consideration at stockholder
meetings. Certain provisions of Delaware law applicable to the Company,
including Section 203, which prohibits a Delaware corporation from engaging in
any business combination with any interested stockholders for a period of three
years unless certain conditions are met, could also delay or make more difficult
a merger, tender offer or proxy contest involving the Company. The possible
issuance of Preferred Stock, the procedures required for director nominations
and stockholder proposals and 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 or making more difficult the
acquisition of a substantial block of the Company's Common Stock. These
provisions could also limit the price that investors might be willing to pay in
the future for shares of the Company's Common Stock. See "Description of Capital
Stock -- Preferred Stock" and "-- Certain Charter and Bylaw Provisions and
Delaware Anti-Takeover Statute."
Dilution
Investors purchasing shares of Common Stock in this offering will incur
immediate and substantial dilution in net tangible book value of the Common
Stock of $7.68 per share. To the extent that currently outstanding options to
purchase the Company's Common Stock are exercised, there will be further
dilution. See "Dilution."
Lack of Dividends
The Company has not paid any dividends and does not anticipate paying any
dividends in the foreseeable future. See "Dividend Policy."
15
<PAGE> 17
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,000,000 shares of
Common Stock offered by the Company hereby at an assumed initial public offering
price of $11.00 per share are estimated to be approximately $19.8 million
(approximately $22.9 million if the Underwriters' over-allotment option is
exercised in full).
The Company anticipates that the net proceeds of this offering will be used
to fund the continued development, testing and clinical trials of its products;
continued research and development; the scale-up of sales, marketing and
manufacturing operations; capital expenditures; and working capital and other
general corporate purposes. The amounts actually expended for these purposes
will depend upon numerous factors, including the results of clinical studies,
the design and cost of the Company's initial manufacturing facility and other
factors. Pending the use of the net proceeds of the offering, the Company will
invest the funds in short-term, interest-bearing, investment-grade securities.
The Company believes that its existing capital resources and the net proceeds of
this offering will be sufficient to fund its operations for at least the next 24
months, but such amounts may not be sufficient to fund the Company's operations
to the point of commercial introduction of its glucose monitoring product.
DIVIDEND POLICY
The Company has never declared or paid dividends on its Common Stock. The
Company intends to retain earnings, if any, and will not pay cash dividends in
the foreseeable future. Any future determination to pay cash dividends will be
at the discretion of the Board of Directors and will be dependent upon the
Company's financial condition, results of operations, capital requirements,
general business conditions and such other factors as the Board of Directors may
deem relevant.
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<PAGE> 18
CAPITALIZATION
The following table sets forth as of December 31, 1996, (i) the actual
capitalization of the Company, (ii) the pro forma capitalization of the Company
after giving effect to the conversion of all of the outstanding shares of
Convertible Preferred Stock into Common Stock and the exercise of warrants
(which expire if they are not exercised prior to the closing of this offering)
for 553,126 shares of Common Stock with a weighted average exercise price of
$1.25 per share, and (iii) the pro forma capitalization of the Company as
adjusted to reflect the issuance and sale of 2,000,000 shares of Common Stock
offered hereby at an assumed public offering price of $11.00 per share and the
receipt of the estimated net proceeds therefrom. This table should be read in
conjunction with the Consolidated Financial Statements and the Notes thereto and
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED(1)
------- --------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Convertible subordinated promissory notes....................... $ 250 $ 250 $ 250
------- -------
Stockholders' equity:
Preferred Stock, 5,000,000 shares ($0.001 par value)
authorized; 4,875,835 shares issued and outstanding;
none issued and outstanding pro forma or pro forma
as adjusted......................................... 5 -- --
Common Stock, 50,000,000 shares ($0.001 par value)
authorized; 1,531,702 shares issued and outstanding;
5,567,590 shares issued and outstanding pro forma
and 7,567,590 shares issued and outstanding pro
forma as adjusted................................... 2 6 8
Additional paid-in capital............................ 11,330 12,196 32,004
Notes receivable from officers........................ (48) (48) (48)
Deferred compensation................................. (286) (286) (286)
Warrants.............................................. 173 -- --
Accumulated deficit................................... (6,422) (6,422) (6,422)
------- -------
Total stockholders' equity.................. 4,754 5,446 25,256
------- -------
Total capitalization................... $ 5,004 $ 5,696 $ 25,506
======= =======
</TABLE>
- ---------------
(1) Excludes, as of December 31, 1996, 663,362 shares of Common Stock reserved
for issuance upon exercise of outstanding options granted pursuant to the
Company's 1995 Stock Plan at a weighted average price of $0.64 per share;
8,572 shares of Common Stock issuable upon the exercise of an outstanding
warrant with an exercise price of $1.40 per share; and 47,398 shares of
Common Stock issuable pursuant to a Convertible Promissory Note at any time
until June 19, 1998 at an assumed initial public offering price of $11.00
per share. See "Management -- Stock Plans" and "Description of Capital
Stock -- Notes, Warrants and Options."
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<PAGE> 19
DILUTION
As of December 31, 1996, the Company had a pro forma net tangible book
value of approximately $5,328,000 or approximately $0.96 per share of Common
Stock. Pro forma net tangible book value represents the amount of pro forma
total tangible assets less total liabilities divided by the number of shares of
Common Stock outstanding (assuming the conversion into Common Stock of all of
the Company's outstanding Preferred Stock and the exercise of outstanding stock
purchase warrants to purchase 553,126 shares of Common Stock). Without taking
into account any other changes in the net tangible book value after December 31,
1996, other than to give effect to the receipt by the Company of the net
proceeds from the sale of 2,000,000 shares of Common Stock offered by the
Company hereby at an assumed initial public offering price of $11.00 per share,
the pro forma net tangible book value of the Company as of December 31, 1996
would have been approximately $25,138,000 or approximately $3.32 per share. This
represents an immediate increase in net tangible book value per share of
approximately $2.36 to existing shareholders and an immediate dilution of
approximately $7.68 per share to new investors. The following table sets forth
this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share...................... $11.00
Pro forma net tangible book value per share as of December 31,
1996........................................................... $ .96
Increase per share attributable to new investors................ 2.36
-----
Pro forma net tangible book value per share after the Offering....... 3.32
------
Dilution per share to new investors.................................. $ 7.68
======
</TABLE>
The following table summarizes, on a pro forma basis as of December 31,
1996, the differences between existing stockholders and new investors with
respect to the total number of shares of Common Stock and Preferred Stock (all
of which Preferred Stock will be converted into Common Stock upon the closing of
the Offering) purchased from the Company, the total consideration paid and the
average price per share paid (assuming the sale of 2,000,000 shares of Common
Stock at an initial public offering price of $11.00 per share).
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ----------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- --------------
<S> <C> <C> <C> <C> <C>
Existing shareholders.... 5,567,590 73.6% $11,908,000 35.1% $ 2.14
New investors............ 2,000,000 26.4 22,000,000 64.9 11.00
--------- ----- ----------- -----
Total... 7,567,590 100.0% $33,908,000 100.0%
========= ===== =========== =====
</TABLE>
- ------------------------------
The above calculations do not give effect to (i) the exercise of outstanding
options to purchase 663,362 shares of Common Stock at a weighted average
exercise price of $0.64 per share outstanding on December 31, 1996, (ii) the
exercise of an outstanding warrant to purchase 8,572 shares of Common Stock at
an exercise price of $1.40 per share outstanding on December 31, 1996 and (iii)
the conversion of 47,398 shares of Common Stock pursuant to a Convertible
Promissory Note convertible at any time until June 19, 1998 at an assumed
initial public offering price of $11.00 per share. To the extent that these
options and warrants become exercisable and are exercised, or the Convertible
Promissory Note is converted, there will be further dilution to new investors.
See "Management -- Stock Plans" and "Description of Capital Stock -- Notes,
Warrants and Options."
18
<PAGE> 20
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data for the period from October 27,
1992 (date of inception) through December 31, 1993, and for the years ended
December 31, 1994, 1995 and 1996 and as of December 31, 1994, 1995 and 1996, are
derived from the Consolidated Financial Statements of the Company which have
been included elsewhere herein and have been audited by Arthur Andersen LLP,
independent public accountants. The data set forth below is qualified by
reference to and should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Consolidated
Financial Statements and Notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1993(1) 1994 1995 1996
------- ------- ------ -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA
Revenues............................................. $ -- $ 122 $1,179 $ 452
Expenses:
Research and development........................... 638 869 1,189 1,815
Sales and marketing................................ 196 126 146 221
General and administrative......................... 403 350 637 1,526
------- ------- ------ -------
1,237 1,345 1,972 3,562
------- ------- ------ -------
Operating loss..................................... (1,237) (1,223) (793) (3,110)
Interest Expense, net................................ -- 144 5 132
Other (Income)....................................... (20) (20) (118) (64)
------- ------- ------ -------
Net Loss............................................. $(1,217) $(1,347) $ (680) $(3,178)
======= ======= ====== =======
Pro forma net loss per share(2)...................... $ (1.03)
=======
Pro forma weighted average shares outstanding........ 3,094
=======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------
1993 1994 1995 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA
Cash and cash equivalents........................... $ 422 $ 937 $ 107 $ 4,721
Working capital..................................... 313 299 (444) 3,870
Total assets........................................ 756 1,327 751 5,946
Total liabilities................................... 133 689 787 1,192
Accumulated deficit................................. (1,217) (2,564) (3,244) (6,422)
Total shareholders' equity.......................... 623 638 (36) 4,754
</TABLE>
- ---------------
(1) From the Company's inception on October 27, 1992 through December 31, 1993.
(2) See Note 2 of Notes to Financial Statements for a description of the
computation of pro forma net loss per share.
19
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
"Selected Consolidated Financial Data" and the Company's Consolidated Financial
Statements and Notes thereto included elsewhere in this Prospectus. Except for
the historical information contained herein, the discussion in this Prospectus
contains certain forward-looking statements that involve risks and
uncertainties, such as statements of the Company's plans, objectives,
expectations, and intentions. The cautionary statements made in this Prospectus
should be read as being applicable to all related forward-looking statements
wherever they appear in this Prospectus. The Company's actual results could
differ materially from those discussed here. Factors that could cause or
contribute to such differences include those discussed in "Risk Factors," as
well as those discussed elsewhere herein.
OVERVIEW
SpectRx was initially funded in early 1993, and immediately began research
and development activities with the objective of commercializing less invasive
diagnostic screening and monitoring products. As part of its business strategy,
the Company has selectively established arrangements with leading medical device
companies for the development, commercialization and introduction of its
products. Since inception, the Company has entered into collaborative
arrangements with Abbott, Boehringer Mannheim and Healthdyne for its glucose
monitoring, diabetes screening and infant jaundice products, respectively.
The Company has a limited operating history upon which its prospects can be
evaluated. Such prospects must be considered in light of the substantial risks,
expenses and difficulties encountered by entrants into the medical device
industry, which is characterized by an increasing number of participants,
intense competition and a high failure rate. The Company has experienced
operating losses since its inception, and, as of December 31, 1996, the Company
had an accumulated deficit of approximately $6.4 million. To date, the Company
has engaged primarily in research and development efforts, and a number of the
Company's key management and technical personnel have only recently joined the
Company. The Company has never generated revenues from product sales and does
not have experience in manufacturing, marketing or selling its products. There
can be no assurance that the Company's development efforts will result in
commercially viable products, that the Company will be successful in introducing
its products, or that required regulatory clearances or approvals will be
obtained in a timely manner, or at all. There can be no assurance that the
Company's products will ever gain market acceptance or that the Company will
ever generate revenues or achieve profitability. The development and
commercialization of its products will require substantial development,
regulatory, sales and marketing, manufacturing and other expenditures. The
Company expects its operating losses to continue through 1999 as it continues to
expend substantial resources to complete development of its products, obtain
regulatory clearances or approvals, build its marketing, sales, manufacturing
and finance organizations and conduct further research and development.
Substantially all of the Company's revenues and profits are expected to be
derived from royalties and manufacturing profits that the Company will receive
from Abbott, Boehringer Mannheim and Healthdyne resulting from sales of its
glucose monitoring, diabetes screening and infant jaundice products,
respectively. The royalties and manufacturing profits that the Company is
expected to receive from each of its collaborative partners depend on sales of
such products. There can be no assurance that the Company, together with its
collaborative partners, will be able to sell sufficient volumes of the Company's
products to generate substantial royalties and manufacturing profits for the
Company. In addition, the Company's profit margins are not likely to increase
over time because the Company's royalty rates and manufacturing profit rates are
predetermined.
In addition, it is common practice in the glucose monitoring device
industry for manufacturers to sell their glucose monitoring devices at
substantial discounts to their list prices or to offer customers rebates on
sales of their products. Manufacturers offer such discounts or rebates to expand
the use of their products and thus increase the market for the disposable assay
strips they sell for use with their products. Because Abbott may, pursuant to
its collaborative arrangement with the Company, determine the prices at which it
sells the Company's glucose monitoring devices, it may choose to adopt this
marketing strategy. If Abbott adopts this
20
<PAGE> 22
marketing strategy and discounts the prices at which it sells the Company's
glucose monitoring devices, the royalties earned by the Company in respect of
such sales will decline. There can be no assurance that, if this strategy is
adopted, royalties earned by the Company on sales of the disposable cartridges
to be used in connection with its glucose monitoring device will be equal to or
greater than the royalties the Company would have earned had its glucose
monitoring devices not been sold at a discount. This possible reduction in
royalties on sales of the Company's glucose monitoring devices could have a
material adverse effect upon the Company's business, financial condition and
results of operations.
The Company has entered into collaborative arrangements with Abbott,
Boehringer Mannheim and Healthdyne. The agreements evidencing these
collaborative arrangements grant a substantial amount of discretion to each
collaborative partner. If one or more of the Company's collaborative partners
were to terminate its arrangement with the Company, the Company would either
need to reach agreement with a replacement collaborative partner or undertake at
its own expense the activities handled by its collaborative partner prior to
such termination, which would require the Company to develop expertise it does
not currently possess, would significantly increase the Company's capital
requirements and would limit the programs the Company could pursue. The Company
would likely encounter significant delays in introducing its products and the
development, manufacture and sale of its products would be adversely affected by
the absence of such collaborative arrangements. The termination of any of the
Company's collaborative arrangements would have a material adverse effect on the
Company's business, financial condition and results of operations.
RESULTS OF OPERATIONS
Comparison of Years Ended December 31, 1996 and 1995
General. Net losses increased to approximately $3.2 million during the
year ended December 31, 1996 from approximately $680,000 during the same period
in 1995 due to an increase in research and development expenses and general and
administrative expenses. The Company expects net losses to continue. If the
Company is unable to attain certain milestones under a collaboration agreement,
its collaborative partner may not make milestone payments under or may terminate
altogether such agreement. If this were to happen, future net losses would
escalate rapidly because of spending increases necessary to complete research,
development and clinical trials of the Company's products, commence sales and
marketing efforts and establish a manufacturing capability.
Research and development expenses. Research and development expenses
increased to approximately $1.8 million during the year ended December 31, 1996
from approximately $1.2 million during the same period in 1995. The increase in
research and development expenses was primarily due to increases in
compensation, benefit and employee recruiting costs and, to a lesser extent,
increases in consulting expenses, patent legal fees and the cost of prototype
materials purchased. The Company expects research and development expenses to
increase in the future as it begins clinical trials for its products.
Sales and marketing expenses. Sales and marketing expenses increased to
$221,000 during the year ended December 31, 1996 from $146,000 during the same
period in 1995. The increase was due primarily to compensation and recruiting
costs, product design costs and expenses related to building a marketing
organization for the Company's infant jaundice product. Sales and marketing
expenses are expected to increase in the future as the Company begins to market
this product.
General and administrative expenses. General and administrative expenses
increased to approximately $1.5 million during the year ended December 31, 1996
from approximately $637,000 during the same period in 1995. The increase in
general and administrative expenses was due to increases in compensation and
facility costs. General and administrative expenses are expected to increase in
the future as a result of overhead costs associated with research and
development activities and, to a lesser extent, expenses associated with being a
public company.
Net interest expense. Net interest expense increased to $132,000 during
the year ended December 31, 1996 from an expense of $5,000 during the same
period in 1995. This increase resulted from interest incurred in conjunction
with the issuance of convertible notes, which have since been redeemed.
21
<PAGE> 23
Comparison of Years Ended December 31, 1995 and 1994
General. Net losses decreased to approximately $680,000 during 1995 from
$1.3 million during 1994. This decrease was the result of an increase in
licensing fees earned by the Company, and other income.
Research and development expenses. Research and development expenses
increased to approximately $1.2 million during 1995 from approximately $869,000
during 1994. The increases in research and development expenses were due
primarily to increases in compensation, benefit and employee recruiting costs
and, to a lesser extent, increases in consulting expenses, patent legal fees and
the cost of prototype materials purchased.
Sales and marketing expenses. Sales and marketing expenses increased to
approximately $146,000 during 1995 from approximately $126,000 during 1994. The
increase was due primarily to increases in compensation and recruiting and
product design costs.
General and administrative expenses. General and administrative expenses
increased to approximately $637,000 during 1995 from approximately $350,000
during 1994. The increases in general and administrative expenses were due to
increases in compensation, facility costs and depreciation of furniture and
equipment.
Net interest expense. Net interest expense decreased to approximately
$5,000 during 1995 from approximately $144,000 during 1994, due to the
conversion to equity securities of notes outstanding during 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations since inception primarily through
private sales of its equity securities. From October 27, 1992 (inception)
through December 31, 1996, the Company received approximately $11.2 million in
net proceeds from sales of its equity securities. At December 31, 1996, the
Company had cash of approximately $4.7 million and working capital of
approximately $3.9 million, as compared to $107,000 and $(444,000),
respectively, at December 31, 1995. The increase was primarily due to receipt of
net proceeds of approximately $3.5 million from private sales of Series B
Preferred Stock, approximately $3.0 million from sales of Series C Preferred
Stock to Abbott, and $1.2 million from the sale of convertible notes (of which
$982,000 subsequently was converted into Series B Preferred Stock), which were
partially offset by the Company's operating expenses and capital expenditures.
The Company currently invests its excess cash balances and intends to invest the
estimated net proceeds of this offering primarily in short-term, investment-
grade, interest-bearing obligations until such funds are utilized in operations.
Substantial capital will be required to develop the Company's products,
including completing product testing and clinical trials, obtaining all required
United States and foreign regulatory approvals and clearances, commencing and
scaling up manufacturing and marketing its products. Pursuant to the Company's
collaborative arrangements with Abbott, Boehringer Mannheim and Healthdyne,
these collaborative partners will either directly undertake these activities or
will fund a substantial portion of these expenditures. The obligations of the
Company's collaborative partners to fund the Company's capital expenditures is
largely discretionary and depends on a number of factors, including the
Company's ability to meet certain milestones in the development and testing of
its products. There can be no assurance that the Company will meet such
milestones or that the Company's collaborative partners will continue to fund
the Company's development expenditures. Any failure of the Company's
collaborative partners to fund its development expenditures would have a
material adverse effect on the Company's business, financial condition and
results of operations.
In addition to funds that the Company expects to be provided by its
collaborative partners, the Company may be required to raise additional funds
through public or private financing, additional collaborative relationships or
other arrangements. The Company believes that its existing capital resources and
the net proceeds of this offering will be sufficient to satisfy its funding
requirements for at least the next 24 months, but may not be sufficient to fund
the Company's operations to the point of commercial introduction of its glucose
monitoring product. There can be no assurance that any required additional
funding, if needed, will be available on terms attractive to the Company, or at
all, which could have a material adverse effect on the
22
<PAGE> 24
Company's business, financial condition and results of operations. Any
additional equity financing may be dilutive to stockholders, and debt financing,
if available, may involve restrictive covenants.
23
<PAGE> 25
BUSINESS
OVERVIEW
SpectRx is engaged in the research and development of products that offer
less invasive and painless alternatives to blood tests currently used for
glucose monitoring, diabetes screening and infant jaundice. The Company's goal
is to introduce products that reduce or eliminate pain, are convenient to use
and provide rapid results at the point of care, thereby improving patient well
being and reducing health care costs. The Company's products for glucose
monitoring, diabetes screening and infant jaundice are based on proprietary
electro-optical and microporation technology that can eliminate the pain and
inconvenience of a blood sample. The Company has entered into collaborative
arrangements with Abbott, Boehringer Mannheim and Healthdyne to facilitate the
development, commercialization and introduction of its glucose monitoring,
diabetes screening and infant jaundice products, respectively.
The Company is developing a hand held glucose monitoring product that
combines its proprietary microporation technology with a disposable assay
cartridge. This product is intended to offer an alternative to current glucose
monitoring products, which require a blood sample usually obtained by lancing
the fingertip. The Company believes that the worldwide market for glucose
monitoring products is approximately $2.0 billion annually and growing at
approximately 15% a year. The Company's prototype glucose monitoring product
uses a laser to create a micropore approximately the diameter of a human hair.
The laser creates a micropore with a depth approximately the thickness of a
sheet of paper. This micropore provides painless access to interstitial fluid,
an extracellular fluid that is prevalent throughout the body and just beneath
the skin, which contains glucose and many other analytes found in blood. Because
interstitial fluid is found throughout the body, the micropore can be created on
various parts of the body. Once access to interstitial fluid is achieved, the
device is intended to force interstitial fluid out of the micropore and into the
disposable assay cartridge. The fluid is then analyzed using chemistry similar
to that in currently available blood glucose monitors. In a pilot study
involving 10 subjects and yielding 438 measurements, the Company found a
correlation coefficient of 0.96 between blood glucose levels measured using
conventional finger stick technology and interstitial fluid glucose levels
measured using the Company's early stage prototype. In October 1996, the Company
entered into a collaborative arrangement with Abbott under which Abbott is
primarily responsible for undertaking or funding the development, regulatory
clearance, manufacture and sale of the Company's glucose monitoring product.
Under its agreement with Abbott, the Company receives development funding,
payments on achievement of technical milestones and a royalty on Abbott sales of
the product. In addition, Abbott has made a $3 million equity investment in the
Company. If the development milestones are achieved, the Company expects Abbott
to file a 510(k) premarket notification for its glucose monitoring product in
1999, but there can be no assurance that this filing will occur during this time
frame, or at all.
The Company has developed a compact diabetes screening product based on
measurements of fluorescence in the lens of the eye. This product is intended to
provide an alternative to the fasting plasma glucose test, the screening
technique recommended by the ADA, which requires a blood draw following an eight
hour fasting period. The Company believes that the market for diabetes screening
in the United States is approximately $400 million annually. While the
individual looks into the Company's device it automatically tracks the eye and
measures lens fluorescence, which is evaluated by the Company's proprietary
algorithm. An abnormally high level of lens fluorescence can be indicative of
prolonged exposure to high levels of glucose due to diabetes. The entire
procedure takes approximately one minute and does not require a fasting period.
In a pilot study of more than 1,300 subjects conducted by Boehringer Mannheim,
an early stage prototype of the Company's diabetes screening product
demonstrated an ability to detect diabetes comparable to the fasting plasma
glucose test. In December 1994, the Company entered into a collaborative
arrangement with Boehringer Mannheim under which Boehringer Mannheim is
primarily responsible for the clinical trials, the regulatory clearance and sale
of the Company's diabetes screening product. Under the Company's agreement with
Boehringer Mannheim, the Company receives development funding and would receive
a manufacturing profit on products sold to Boehringer Mannheim. If development
milestones are achieved, the Company expects Boehringer Mannheim to file a
510(k) premarket notification with the FDA for the Company's
24
<PAGE> 26
diabetes screening product in 1998, but there can be no assurance that this
filing will occur within this time frame, or at all.
In addition to its two products for diabetes, the Company is developing an
infant jaundice screening and monitoring product. Infant jaundice is
characterized by a yellowing of the skin and eyes caused by an excess of
bilirubin in the body. If left untreated infant jaundice may, in extreme cases,
lead to brain damage or death. The Company believes the worldwide market for
infant jaundice screening and monitoring products is approximately $180 million.
The Company's infant jaundice product is intended to offer an alternative to
conventional blood tests, which involve a traumatic heel stick to obtain a blood
sample from the infant. This product is intended to be a hand held instrument,
which incorporates a microspectrometer to collect spectroscopic information from
the skin, and a proprietary, disposable calibration element. After calibration,
the instrument is applied to the skin of the infant for five to ten seconds,
during which time the bilirubin level is measured using a proprietary algorithm
that adjusts for testing difficulties due to skin color, gestational age and
other factors. Using an early stage prototype, the Company tested over 100
infants in a pilot study and found a correlation coefficient of 0.92 between
total serum bilirubin measured using a conventional blood test and that measured
using the Company's prototype. In June 1996, the Company entered into a
collaborative arrangement with Healthdyne under which Healthdyne is responsible
for regulatory approval and sales of the Company's infant jaundice product in
the United States and Canada. The Company retains manufacturing rights and is
responsible for regulatory approval and sales of the infant jaundice product
outside of the United States and Canada. Under its agreement with Healthdyne,
the Company receives license fees and would receive a manufacturing profit on
hand held instruments sold to Healthdyne and a share of any profits from the
sales of disposables by Healthdyne. The Company expects Healthdyne to commence
clinical testing and file a 510(k) premarket notification with the FDA for the
Company's infant jaundice product in 1997, but there can be no assurance that
this filing will occur within this time frame, or at all. Healthdyne has stated
that it plans to commence marketing of the product in the United States and
Canada, subject to obtaining FDA clearance and necessary Canadian regulatory
approvals. The Company expects to commence marketing of the infant jaundice
marketing product in certain European countries by the end of 1997 subject to
obtaining necessary regulatory approvals. There can be no assurance that
marketing will occur within this time frame, or at all.
SPECTRX'S BUSINESS STRATEGY
The Company's goal is to introduce products that reduce or eliminate pain,
are convenient to use and provide rapid results at the point of care, thereby
improving patient well being and reducing health care costs. To achieve this
objective, the Company is pursuing the following business strategy.
- FOCUS ON CURRENT PRODUCT PORTFOLIO. The Company intends to continue to
advance its current products to commercialization by (i) leveraging the
expertise of its collaborative partners, (ii) seeking 510(k) clearance
from the FDA for these products, (iii) expanding its internal product
development capabilities and (iv) developing its sales, marketing and
manufacturing capabilities.
- EXPAND THE MARKET FOR ITS GLUCOSE MONITORING PRODUCT. The Company
believes that its less invasive, easy-to-use glucose monitoring product
could lead to greater patient compliance with recommended glucose
monitoring rates. In addition, the Company believes that its diabetes
screening product could substantially increase the number of diagnosed
diabetics, thus increasing the demand for its glucose monitoring device
and disposable assay cartridge.
- COLLABORATE WITH MARKET LEADERS. The Company has selectively established
collaborative arrangements with Abbott, Boehringer Mannheim and Healthdyne
to develop and commercialize its products. The Company intends to continue
selectively establishing strategic relationships with leading companies,
as appropriate, for the development, commercialization and introduction of
future products.
- LEVERAGE PROPRIETARY TECHNOLOGIES. The Company intends to leverage its
proprietary electro-optical and microporation technologies by developing
future products based on these technologies that can provide cost
effective, less invasive alternatives to current diagnostic or monitoring
products. For example, the Company believes its interstitial fluid
sampling technology may be applicable for monitoring analytes other than
glucose.
25
<PAGE> 27
- ADDRESS LARGE MARKET OPPORTUNITIES. The Company intends to selectively
develop future products for large markets in which its products can (i)
apply for 510(k) clearance from the FDA, (ii) incorporate a disposable
component and (iii) qualify for third-party reimbursement.
DIABETES
Background
Diabetes is a major health care problem that is estimated to affect over
100 million people worldwide. If undiagnosed and untreated, diabetes leads to
severe medical complications over time, including blindness, loss of kidney
function, nerve degeneration and cardiovascular disease. Diabetes is the sixth
leading cause of death by disease in the United States and is estimated to cost
the American economy over $100 billion annually.
Diabetes occurs when the body does not produce sufficient levels of, or
effectively utilize, insulin, a hormone that regulates the metabolism
(breakdown) of glucose. Glucose levels in the blood must be within a specific
concentration range to ensure proper cellular function and health. Insulin
deficiency results in an abnormally high blood glucose concentration, which
causes protein glycation throughout the body, impairs the ability of cells to
intake glucose and has other adverse effects. In Type I (insulin-dependent
juvenile-onset) diabetes, which affects about 10% of all people with diagnosed
diabetes, the cells that make insulin have been destroyed. Type I diabetes is
treated with daily insulin injections. In the more prevalent form of diabetes,
Type II (non-insulin-dependent adult-onset) diabetes, the insulin producing
cells are unable to produce enough insulin to compensate for the patient's poor
sensitivity to the hormone in glucose using tissues such as skeletal muscle (a
condition called insulin resistance). Type II diabetes is initially managed with
proper diet, exercise and oral medication. However, based on statistics
published by the National Institutes of Health, the Company estimates that
approximately 50% of Type II diabetics will eventually require insulin therapy.
The Glucose Monitoring Market
Many people with diabetes have difficulty achieving optimal glucose
control. For proper glucose control, each insulin injection should be adjusted
to reflect the person's current blood glucose concentration, carbohydrate
consumption, exercise pattern, stress or other illness. Accordingly, personal
glucose monitoring products have become critical in managing diabetes by
allowing diabetics to measure their glucose levels in order to adjust their
diet, exercise and use of oral medication or insulin to maintain proper blood
glucose levels.
In June 1993, the National Institutes of Health announced the results of
the Diabetes Control and Complications Trial ("DCCT"). This long term study of
approximately 1,400 people with Type I diabetes established the importance of
glucose control as a determinant of long term risk of degenerative
complications. The data from the DCCT demonstrated that the risk of degenerative
complications is significantly reduced if blood glucose concentrations in people
with Type I diabetes can be brought closer to the concentrations measured in
non-diabetic individuals. For example, the DCCT study demonstrated that the risk
of complications of diabetic retinopathy, the leading cause of blindness in the
United States, could be reduced by 76% through proper glucose control. The DCCT
panel recommended that Type I diabetics measure their blood glucose four times
per day in order to maintain proper control over their glucose levels. Although
the DCCT study involved people with Type I diabetes only, a similar Japanese
study on Type II diabetics supports the conclusion of the DCCT study that
maintaining low average glucose levels reduces the risks of complications
associated with diabetes.
Because glucose monitoring is an important part of the everyday life of the
world's approximately 50 million diagnosed diabetics, the personal glucose
monitoring market is substantial. That market is estimated to be approximately
$2.0 billion annually and to be growing at a rate of approximately 15% per year.
The Company believes that the global market for personal glucose monitoring
products is driven by four main factors: 1) an aging population; 2) the
realization that tight glucose control dramatically reduces the risk of
complications; 3) the availability of third-party reimbursement in developed
nations; and 4) the promotion and increased availability of glucose monitoring
products. It is estimated that currently diabetics monitor their glucose on
average less than twice a day instead of the DCCT recommendation of four times
per day. The Company believes that the pain and inconvenience associated with
conventional finger stick blood glucose
26
<PAGE> 28
monitoring systems is the primary reason that most people with diabetes fail to
comply with the recommendations of the DCCT panel. The Company believes that
greater awareness of the benefit of frequent self-monitoring and less painful,
more convenient monitoring products could significantly increase the global
market. There are currently no non-invasive glucose monitoring systems
commercially available.
Glucose monitoring products have evolved rapidly over time. Various factors
have allowed new entrants to establish market share in the glucose monitoring
product market, including technological advances, broader product distribution
and increased patient awareness of product innovations. These factors have also
expanded the overall size of the market for glucose monitoring products.
Current commercially available glucose monitoring systems are painful and
inconvenient. These systems require that a blood sample be obtained from a
patient, applied to a disposable test strip and then measured for glucose
concentrations using a battery-powered, hand held monitor. Under these systems,
the blood sample is usually obtained from a patient's fingertip because of the
high concentration of capillaries at this site and because the blood produced at
the fingertip can most easily be applied directly to test strips used in such
devices. These systems typically require the patient to complete the following
steps: insert the disposable test strip into the meter, lance the finger, apply
the drop of blood to the test strip and wait for the meter to display the
results. Because nerve endings are concentrated in the fingertips, this sampling
process can be painful. The level of patient discomfort is compounded by the
fact that the fingertips offer a limited surface area from which to obtain a
blood sample. Thus, the patient can be required to repeatedly sample from the
same site, eventually resulting in callouses. In addition, applying the drop of
blood to the test strip is difficult for those diabetics who have lost dexterity
in their extremities due to nerve degeneration.
The SpectRx Glucose Monitoring Product
The Company is developing a glucose monitoring product in collaboration
with Abbott that utilizes the Company's proprietary interstitial fluid sampling
technology to allow people with diabetes to easily and accurately measure their
glucose levels. Interstitial fluid is an extracellular fluid that is prevalent
throughout the body and just beneath the skin. Interstitial fluid is the means
by which proteins and chemicals, including glucose, pass between capillaries and
cells. Studies based on the Company's and independent research have indicated
that interstitial fluid glucose levels correlate closely with blood glucose
levels. The Company believes that using interstitial fluid to assay glucose
levels is more efficient than using blood because it is free of interferences
such as red blood cells, which must often be separated from the plasma prior to
measurement. SpectRx's glucose monitoring product uses the Company's
microporation technology to rapidly collect a sufficient sample of interstitial
fluid. The product is intended to measure the glucose concentration of the fluid
using disposable assay technology supplied and being designed by Abbott
specifically for use with the Company's product. Because the Company's glucose
monitoring product is designed to obtain a sample of interstitial fluid from the
outermost layers of the skin and does not require a blood sample, its use does
not stimulate pain sensors and capillaries found in the deeper layers of skin
and is thus free of the pain and blood
27
<PAGE> 29
involved in conventional finger stick assaying techniques. In addition, the
Company believes that the entire process will take no longer than current blood
glucose monitoring tests.
CROSS SECTION OF HUMAN SKIN
[CRC GLUCOSE MONITORING]
The Company's glucose monitoring product is designed to be comprised of a
small, hand held battery-powered, monitoring device and a proprietary,
disposable assay cartridge. The monitoring device will be placed on the skin,
and a laser or other suitable energy source mounted in the housing will be
directed onto the skin. When activated, a micropore will be painlessly created
in the outermost layer of skin, the stratum corneum. The Company believes the
creation of this micropore will not damage adjacent tissue or penetrate deeply
enough to reach the capillary bed or nerve layer below the stratum corneum. The
Company anticipates that the device will have a proprietary mechanism that will
force the interstitial fluid out of the micropore and into the disposable
cartridge. When the assay cartridge is full and the interstitial fluid has been
analyzed, the results will appear on a LCD display.
In January 1996, the Company undertook a pilot study of 10 subjects (six
diabetics and four nondiabetics) under a protocol reviewed and approved by the
Georgia Baptist Medical Center. The study was designed to evaluate the
correlation between results obtained using early stage prototypes of the
Company's glucose monitoring system and a leading conventional personal blood
glucose monitoring system. The study compared the glucose levels in interstitial
fluid and blood of 10 subjects who were each administered 75 grams of glucose.
The study, which yielded a total of 438 glucose measurements (219
contemporaneous measurements of interstitial fluid and blood), produced a
correlation coefficient of 0.96 between glucose levels in interstitial fluid and
blood.
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In October 1996, the Company entered into a collaborative arrangement with
Abbott for the development and commercialization of the Company's glucose
monitoring product. Pursuant to the arrangement the Company granted Abbott an
exclusive worldwide license for the Company's glucose monitoring product and
other related glucose monitoring devices in all countries except Singapore and
the Netherlands, where the license is non-exclusive. Pursuant to the terms of
the collaborative arrangement, Abbott has agreed to pay all costs associated
with a joint research and development program, to make certain milestone
payments to the Company and to pay the Company a royalty based on net sales.
Abbott will also be responsible for conducting clinical trials, obtaining
regulatory approval for and manufacturing, marketing, distributing and selling
the products covered by the arrangement. In addition, Abbott made a $3 million
equity investment in the Company. See "-- Collaborative Arrangements -- Abbott
Laboratories" and "Risk Factors -- Dependence on Collaborative Arrangements."
The Company expects to complete development related to the collection of
interstitial fluid, followed later by the integration of the Company's
microporation technology and Abbott's disposable assay technology into a
prototype device. The Company expects prototype development to be followed by
clinical trials and a regulatory submission. Unexpected problems may, however,
arise during the development process. In addition, Abbott retains a significant
degree of discretion regarding the timing of these activities and the amount and
quality of financial, personnel and other resources that it devotes to these
activities. Accordingly, there can be no assurance that these events will occur.
See "Risk Factors -- Early Stage of Development; No Assurance of Successful
Product Development."
The Company's glucose monitoring product will be subject to rigorous FDA
and other government regulation and may not be marketed in the U.S. unless and
until the Company has received the necessary approval or clearance from the FDA.
Pursuant to the Company's collaboration agreement with Abbott, Abbott will be
responsible for obtaining such approval or clearance. While the Company believes
the FDA may grant the Company and Abbott clearance to market the Company's
glucose monitoring device through the 510(k) premarket notification process, the
Company and Abbott will need to devote a substantial amount of time and effort
attempting to secure such clearance because they will need to demonstrate that
the device is substantially equivalent to one or more currently marketed
"predicate" glucose monitoring devices. There can be no assurance that Abbott
and the Company will be successful in obtaining clearance of a 510(k) premarket
notification in a timely manner if at all. Additionally, there can be no
assurance that the FDA will not require the submission of a PMA to obtain FDA
approval to market the Company's glucose monitoring product. See "-- Government
Regulation" and "Risk Factors -- No Assurance of Regulatory Approvals."
The Diabetes Screening Market
The ADA estimates that there are over 16 million people in the United
States with diabetes, only half of whom have been diagnosed with the disease.
The long term health care costs of a diabetic patient can be substantially
reduced if the patient can be diagnosed in the early stages of the disease so
that glucose levels can be monitored and properly controlled, thereby reducing
complications that result from long term exposure to elevated glucose levels.
These complications include diabetic retinopathy, kidney disease, nerve
degeneration and cardiovascular disease. Currently, of the approximately 625,000
new cases of diabetes diagnosed each year in the United States, over 20% of
those diagnosed have complications that generally appear eight to ten years
after onset of the disease. The Company believes that the low rate of diabetes
diagnosis and the failure in many cases to diagnose the disease prior to the
onset of complications is due primarily to the lack of a convenient and accurate
diabetes screening test. Approximately 27 million diabetes screening tests are
administered annually in the United States. The Company believes that the market
in the United States for diabetes screening tests is approximately $400 million
annually.
There are several existing diabetes screening tests in use today. The ADA
recommended diabetes screening procedure is the blood-based fasting plasma
glucose test. This test is difficult and inconvenient to administer because it
requires the patient to fast for eight hours prior to the drawing of blood, and
because the blood sample is usually sent to a laboratory for analysis, which
delays the receipt by the patient of the test results. Current methods for
diabetes screening utilizing random finger stick blood glucose tests are no
longer recommended by the ADA because the random nature of the test results in
an unacceptably low level of
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sensitivity (i.e., the ability to correctly determine that a particular person
has diabetes) and specificity (i.e., the ability to correctly determine that a
particular person does not have diabetes). Glucose urine test products, which
are available over-the-counter, have an even lower test sensitivity and
specificity and are not recommended for screening by the ADA. The low levels of
sensitivity and specificity in both the random finger stick blood glucose test
and the glucose urine test result in cases of both undetected diabetes, which
can prevent early treatment of the disease in such cases, and false indications
of diabetes, which can cause patients to incur the expense of, and devote the
time for, needless additional testing.
The SpectRx Non-Invasive Diabetes Screening Product
The SpectRx diabetes screening product is designed to detect and measure
fluorescence in the lens of the eye and evaluate that measurement using the
Company's proprietary algorithm. An abnormally high level of florescence in the
lens of the eye is indicative of prolonged exposure to high levels of glucose
due to diabetes. A measurement indicating a patient has or is likely to have
diabetes could be confirmed by subsequent testing using conventional blood-based
diagnostics. The performance of the Company's diabetes screening product has
been shown to be comparable to that of the blood-based fasting plasma glucose
test. Unlike the fasting plasma glucose test, however, the SpectRx diabetes
screening product is painless and would provide the patient with test results in
less than a minute, and would not require the patient to fast for eight hours
prior to administration of the test.
The Company's diabetes screening product is designed to be simple and
painless to use and to produce accurate point of care results in a very short
period of time. The Company believes this is likely to become as prevalent as
glaucoma testing, which is regularly performed during eye exams. Thus, the
Company believes that the product may result in increased diagnoses of the
approximately 50 million undiagnosed diabetics worldwide, including the
approximately eight million in the United States. For this reason, the Company
believes that its diabetes screening product presents a substantial opportunity
to identify new patients who can benefit from proper treatment thereby reducing
incidence of complications and their associated cost.
The Company's diabetes screening product is designed as a compact
instrument that will meet the space requirements of optometrists' and
physicians' offices and will also be suitable for retail establishments such as
pharmacies. To use the device, the individual looks into the instrument while
placing his head against a rest. The individual is instructed to look at a fixed
light as the instrument locates the eye and automatically tracks the pupil
opening. The device measures fluorescence in the lens of the eye using a
low-intensity blue light. The results of the analysis will indicate that the
patient should undergo further diagnostic testing or that there is no indication
of diabetes. In a pilot study of more than 1,300 subjects (both diabetics and
non-diabetics) conducted by Boehringer Mannheim, an early stage prototype of the
Company's diabetes screening product demonstrated an ability to detect diabetes.
The results of this pilot study indicated that the sensitivity and specificity
of the Company's diabetes screening product were comparable to the sensitivity
and specificity indicated in published studies of the fasting plasma glucose
test. The Company is currently testing four advanced prototypes of its diabetes
screening product.
The Company is currently conducting pilot clinical studies with a prototype
of its diabetes screening product. The Company believes the data from these
pilot studies are expected to provide the design changes necessary to complete
the production prototype. The Company expects Boehringer Mannheim to commence
clinical testing and file for 510(k) clearance from the FDA in 1998. Unexpected
problems may, however, arise in the development process. In addition, Boehringer
Mannheim retains a significant degree of discretion regarding the timing of
these activities and the amount and quality of financial, personnel and other
resources that it devotes to these activities. Accordingly, there can be no
assurance that this filing will occur within this time frame, or at all.
The Company has entered into a collaboration agreement with Boehringer
Mannheim, pursuant to which the Company has granted Boehringer Mannheim an
exclusive worldwide license to sell and market the Company's diabetes screening
product. The Company receives development funding and expects to receive a
manufacturing profit on products sold to Boehringer Mannheim. Boehringer
Mannheim is responsible for conducting clinical testing, obtaining regulatory
approvals for, and the marketing, distribution and sales of, the Company's
diabetes screening product. See "-- Collaborative Arrangements -- Boehringer
Mannheim Cor-
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poration" and "Risk Factors -- Early Stage of Development; No Assurance of
Successful Product Development" and "-- Dependence on Collaborative
Arrangements."
INFANT JAUNDICE
Background
Infant jaundice is a condition that primarily affects newborns within the
first three to 10 days of life. If left untreated infant jaundice may, in
extreme cases, lead to brain damage or death (kernicterus). Jaundice is
characterized by a yellowing of the skin and eyes caused by an excess of
bilirubin in the body. Bilirubin is a normal waste product resulting from the
breakdown of red blood cells and is removed from the body by the liver. Prior to
birth, the bilirubin in an infant is processed by the mother's liver and
excreted. After birth, an infant must eliminate bilirubin without the mother's
help. It may take the infant's system several days to begin eliminating the
bilirubin faster than it is produced. Infants who are born prematurely, who are
underfed, or who belong to certain ethnic groups are at increased risk of
developing jaundice. The initial screening of jaundice is the observation of
yellow skin. This is a subjective determination prone to errors due to differing
skin colors and gestational ages. If a baby is selected for further jaundice
testing, the current procedure requires that a blood sample be obtained from the
infant, usually by lancing the infant's heel, which is a traumatic process for
the infant. Since jaundice normally presents in infants 36 to 72 hours after
birth, infants who are sent home after a short hospital stay pursuant to managed
care guidelines in the United States are at risk because the condition may not
have presented prior to release.
The Infant Jaundice Screening and Monitoring Market
Of the approximately four million newborns each year in the United States,
50% have recognizable jaundice and 1.7 million receive at least one blood test
for bilirubin. Of those infants in the United States diagnosed with jaundice,
approximately 700,000 undergo phototherapy, a treatment that converts bilirubin
into a water soluble form that can be processed and eliminated from the infant's
system. The Company believes that the average newborn under active phototherapy
treatment receives three to four bilirubin monitoring tests. The Company
believes the current worldwide market for infant jaundice monitoring products is
approximately $180 million per year.
The SpectRx Non-Invasive Infant Jaundice Product
The Company's infant jaundice product is based upon reflection spectroscopy
that measures bilirubin regardless of skin color or gestational age. The product
is designed to provide rapid, point of care bilirubin measurements and to serve
as an initial screening and ongoing monitoring device. The Company believes that
the device has the potential to replace the painful heel stick procedure
currently utilized.
The design of the Company's infant jaundice product consists of a hand
held, battery-operated instrument, which sits in a compact recharger base. This
instrument incorporates a microspectrometer to collect spectroscopic information
from the skin and a proprietary, disposable calibration element. After
calibration, the instrument is applied to the skin of the infant for five to ten
seconds, during which time the bilirubin level is measured by collecting
spectroscopic information from the skin and analyzing it using a proprietary
algorithm that adjusts for testing difficulties due to skin color, gestational
age and other factors.
Using an early stage prototype, the Company tested over 100 infants in a
pilot study conducted at Northside Hospital and found a correlation coefficient
of 0.92 between total serum bilirubin measured using conventional blood tests
and that measured using the Company's prototype. In addition, the Company has
ongoing pilot study programs at Northside Hospital, Gwinnett Women's Hospital
and Pennsylvania Hospital.
The Company is currently conducting pilot clinical trials at two sites
using a laboratory prototype of its infant jaundice product. The Company expects
Healthdyne to commence clinical testing and file for 510(k) clearance from the
FDA in 1997. Healthdyne has stated that it plans to commence marketing of the
product in the United States and Canada, subject to obtaining FDA clearance and
necessary Canadian regulatory approvals. Subject to obtaining necessary
regulatory approvals, the Company expects to commence marketing of the infant
jaundice monitoring product in certain European countries by the end of 1997.
Unexpected problems may arise in the development and regulatory approval
process. In addition, Healthdyne retains a
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significant degree of discretion regarding the timing of these activities and
the amount and quality of financial, personnel and other resources that they
devote to these activities. Accordingly, there can be no assurance that the
filing schedule will be met, if at all.
The Company's infant jaundice product is being developed pursuant to a
collaborative arrangement with Healthdyne. Under the terms of the arrangement,
SpectRx will develop and manufacture the product and Healthdyne will pay the
costs associated with the FDA approval process and conducting clinical trials.
In addition, Healthdyne will pay for a portion of the product development.
Healthdyne has been granted a license to market and sell the product in the
United States and Canada, while SpectRx retains the rights to sell the product
in all other world markets. See "-- Collaborative Arrangements -- Healthdyne
Technologies, Inc." and "Risk Factors -- Dependence on Collaborative
Arrangements."
COLLABORATIVE ARRANGEMENTS
The Company's business strategy for the development, clinical testing,
regulatory approval, manufacturing and commercialization of its products depends
upon the Company's ability to selectively enter into and maintain collaborative
arrangements with leading medical device companies. The Company currently has
collaborative arrangements with Abbott, Boehringer Mannheim and Healthdyne. The
Company is, to varying degrees, dependent upon its collaborative partners for
the development, clinical testing, regulatory approval, manufacturing and
commercialization of its products. The Company's current collaborative
arrangements grant a great deal of discretion to its collaborative partners. The
termination of any collaborative arrangement by one of the Company's
collaborative partners, any inability of a collaborative partner to fund or
otherwise satisfy its obligations under its collaborative arrangements with the
Company, or any significant disputes with, or breaches of contractual
commitments by, a collaborative partner could have a material adverse effect
upon the Company's business, financial condition and results of operations. See
"Risk Factors -- Dependence on Collaborative Arrangements."
Abbott Laboratories
In October 1996, SpectRx entered into a Research & Development and License
Agreement (the "Abbott Agreement") with Abbott for the development and
commercialization of the Company's glucose monitoring product in the field of
extracting interstitial fluid samples for glucose monitoring (the "Field").
Pursuant to the Agreement, SpectRx has granted to Abbott a worldwide license
under its patents, patent applications and know how (the "Technology") useful in
the Field, including improvements, to manufacture and sell products in the
Field. The license is exclusive in all countries except Singapore and the
Netherlands where the license is non-exclusive. Abbott also has certain rights
of first negotiation with the Company regarding any rights the Company may have
to license the Technology for the development and commercialization of other
products relating to the measurement of analytes in interstitial fluid and the
delivery of therapeutic agents based on such measurements. Under the Abbott
Agreement, SpectRx receives from Abbott development funding, payments on
achievement of milestones and a royalty on Abbott product sales. In addition,
Abbott made a $3 million equity investment in SpectRx.
Under the Abbott Agreement, the parties have agreed to jointly conduct a
research program to demonstrate that the Company's glucose monitoring product
can extract an adequate sample of interstitial fluid in a targeted time period.
During the joint development program Abbott will pay mutually agreed development
costs. SpectRx is responsible for the completion of a prototype and its human
clinical testing. Thereafter, if Abbott wishes to commercialize the product, it
is responsible for further product development and obtaining all required
regulatory approvals. After obtaining these regulatory approvals, Abbott is
required to diligently pursue the sales of the products but is not prohibited
from marketing competing products. If Abbott elects not to commercialize the
product, the agreement may be terminated by either party. Abbott has a fixed
period from the date of notice to the Company of its intention to commercialize
the product in which to complete commercialization and begin shipment of
products. If such commercialization has not been completed within the permitted
time, SpectRx may terminate the agreement.
Under the Abbott Agreement, all technology invented solely by SpectRx
during the joint development program is owned solely by SpectRx. All technology
invented solely by Abbott and all clinical data, regulatory
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filings and government marketing approvals developed solely by Abbott is the
property of Abbott. On certain early termination events, SpectRx has a right to
obtain a license to certain of the relevant Abbott technology. Technology
jointly invented during the joint development program will be jointly owned
pursuant to a royalty sharing arrangement.
The Abbott Agreement remains in effect until the expiration of the last
licensed patent to expire. Abbott has the right to terminate the Abbott
Agreement without cause upon not less than 60 days' prior notice to the Company
at any time prior to the first shipment of products and upon not less than 120
days' prior notice to the Company thereafter. If Abbott terminates without cause
after completion of the research program but before the first product is
shipped, Abbott must pay to the Company a one time development program milestone
payment. Abbott may terminate the Abbott Agreement upon not less than 30 days'
prior notice to the Company for certain product development failures or failure
to obtain key patent protection.
Boehringer Mannheim Corporation
In December 1994, SpectRx entered into a Development and License Agreement
(the "Development Agreement") with Boehringer Mannheim Corporation with respect
to a non-invasive instrument that measures changes in the lens of the human eye
for the purpose of detecting diabetes. Pursuant to the Development Agreement,
SpectRx has granted to Boehringer Mannheim an exclusive, worldwide license to
sell and market the Company's diabetes screening product. SpectRx receives
development funding from Boehringer Mannheim Corporation pursuant to the
Development Agreement. The Development Agreement remains exclusive for so long
as Boehringer Mannheim meets certain minimum volume purchase requirements set
forth in the Supply Agreement with Boehringer Mannheim (discussed below). The
Development Agreement may be terminated at any time by Boehringer Mannheim upon
written notice to SpectRx.
In January 1996, Boehringer Mannheim and SpectRx entered into a Supply
Agreement for the supply by SpectRx to Boehringer Mannheim of the Company's
diabetes screening product (the "Supply Agreement"). Boehringer Mannheim's
purchase price for the Company's diabetes screening product is calculated
pursuant to a formula based on a gross margin. Boehringer Mannheim is required
to meet minimum annual purchase requirements for the diabetes screening product
each year or Boehringer Mannheim forfeits its exclusivity under the marketing
license granted in the Development Agreement. The term of the Supply Agreement
is coincident with the term of the Development Agreement. Boehringer Mannheim
may terminate the Supply Agreement for material breach (including a failure to
supply adequate requirements) of the agreement by the Company which breach
remains unremedied for 30 days after notice to the Company, in which case
Boehringer Mannheim is deemed to have acquired a manufacturing license under the
Development Agreement. If Boehringer Mannheim acquires this manufacturing
license, it must pay royalties to SpectRx on Boehringer Mannheim sales of the
diabetes screening product. SpectRx has agreed that during the term of the
Supply Agreement it will not enter into any agreement to develop or manufacture
a non-invasive diabetes detection instrument using the same or similar
technology as used in the Company's diabetes screening product other than with
Boehringer Mannheim affiliates. Boehringer Mannheim is not restricted from
pursuing the development of a diabetes screening instrument with another party.
Healthdyne Technologies, Inc.
In June 1996, SpectRx entered into a Purchasing and Licensing Agreement
with Healthdyne (the "Healthdyne Agreement"). Pursuant to the Healthdyne
Agreement, Healthdyne is responsible for clinical trials, the regulatory
approval process and sale of the Company's infant jaundice product in the United
States and Canada. The Company retains manufacturing rights and is responsible
for the regulatory approval process and sale of the infant jaundice product
outside of the United States and Canada. Under the Healthdyne Agreement the
Company receives from Healthdyne licensing fees and a manufacturing profit on
products sold to Healthdyne and shares any profit from the sales of disposables
by Healthdyne. Healthdyne receives an exclusive license for the United States
and Canada (i) to use and sell instruments for non-invasive bilirubin
measurement ("Instruments"), (ii) to use and sell disposable probes, tips or
other devices which, when used with Instruments, measure bilirubin levels
("Disposables") and items accessory to and not necessary for the operation of
Instruments or Disposables ("Accessories"), and (iii) to make Instruments,
Disposables and/or
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Accessories (collectively, "Licensed Products"). Unless SpectRx is unable to
supply Licensed Products, Healthdyne must purchase its requirements for Licensed
Products from SpectRx. Healthdyne has agreed to pay SpectRx's cost for
manufacturing each Licensed Product. Healthdyne and SpectRx then share equally
the margin earned on the sale of Licensed Products. In order to maintain license
exclusivity, Healthdyne has agreed to purchase from SpectRx certain minimum
amounts of Licensed Products or pay a royalty to SpectRx for an equivalent
number of Licensed Products. In the event that SpectRx is unable to supply
Licensed products, Healthdyne receives a license to manufacture the Licensed
Products and pays a royalty to SpectRx on sales of Licensed Products.
SpectRx has granted to Healthdyne the exclusive option to acquire an
exclusive license for the United States and Canada, on terms substantially
similar to those contained in the Healthdyne Agreement, in respect of any new
intellectual property that comes into existence after the effective date of the
Healthdyne Agreement, covers devices that would compete, directly or indirectly,
with the Licensed Products and for which SpectRx has the right and authority to
grant licenses. In such event, Healthdyne has agreed to reimburse SpectRx for
one-half of SpectRx's cost to develop and commercialize such product, in lieu of
paying any license fees. If Healthdyne fails to exercise such option, SpectRx
may license such intellectual property to any third party on terms no more
favorable than those offered to Healthdyne.
The Healthdyne Agreement remains in effect for the longer of fifteen years
or until the expiration date of the last licensed patent to expire. Upon
expiration of the Healthdyne Agreement, Healthdyne has the option to renew the
Healthdyne Agreement for additional fifteen year terms indefinitely. Healthdyne
also has the right to terminate the Healthdyne Agreement without cause upon not
less than 30 days' written notice to the Company. In the event that certain
milestones are not achieved before certain specified dates, Healthdyne has the
right to assume the commercialization efforts with respect to the Licensed
Products, in which case: (i) all further development funding payable to SpectRx
under the Healthdyne Agreement ceases, (ii) Healthdyne must pay SpectRx a
royalty, and (iii) SpectRx must compensate Healthdyne for commercialization
costs through a royalty offset.
In January 1997, Healthdyne became the subject of a hostile takeover
attempt by Invacare Corporation. There can be no assurance that a change in
control of Healthdyne would not adversely affect the Company's collaborative
arrangement with Healthdyne.
LICENSING ARRANGEMENTS
Georgia Tech Research Corporation
The Company has a license agreement with Georgia Tech Research Corporation
("GTRC") pursuant to which GTRC has granted the Company an exclusive, worldwide
license (including the right to grant sublicenses) to make, use and sell
products that incorporate GTRC's know how related to a method of using
non-invasive instrumentation to quantitatively measure molecular changes in
living human lenses for the purposes of diagnosing diabetes and precataractous
conditions (the "GTRC Agreement"). Under the license, the Company must pay a
royalty to GTRC on net sales of any such products manufactured and sold by the
Company. The term of the GTRC Agreement is until the expiration date of the last
expiring patent covering any of the technology licensed or, if no patent issues,
for 15 years from the date of execution of the GTRC Agreement.
Altea Technologies, Inc.
In March 1996, SpectRx entered into a License and Joint Development
Agreement (the "Altea/Nimco Agreement") among the Company, Altea and
Non-Invasive Monitoring Company, Inc. ("Nimco") pursuant to which certain rights
in respect of jointly developed technology are allocated between the Company and
Altea. Both Altea and Nimco are jointly controlled by Jonathan Eppstein, a Vice
President of the Company, and his sister. See "Certain Transactions." The
Altea/Nimco Agreement covers two patents owned by Nimco and provides for
continued joint development efforts between SpectRx and Altea as mutually
agreed. The Altea/Nimco Agreement further provides for the joint ownership by
SpectRx and Altea of certain patents and technology relating to the
transdermal/intradermal movement of substances utilizing various methods. Under
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the Altea/Nimco Agreement, SpectRx receives worldwide, exclusive rights to any
technology useful in monitoring applications covered by the Nimco patents and
related joint technology and Altea receives exclusive, worldwide rights to any
technology useful in delivery applications covered by the joint technology.
Future inventions made by each of SpectRx and Altea based on jointly developed
technology are included within the Altea/Nimco Agreement.
SpectRx is obligated to pay royalties to Nimco for products using its
technology and to Altea for products using its technology, in each case based on
net sales of products by and net revenues from sublicensees. Royalties on
products using both Nimco and Altea technology will be allocated as mutually
agreed. Minimum annual royalties are payable by SpectRx to Altea. If actual
accrued royalties are less than the minimum royalty amount, SpectRx may pay
Altea the difference or the license will become non-exclusive. Thereafter,
SpectRx must offer a right of first refusal to acquire exclusive rights to the
monitoring technology to Altea.
The term of the Altea/Nimco Agreement is for the life of the patents
covered by the agreement. The agreement may be terminated by any party in the
event of a default by any other party that is not cured within 90 days of notice
to the defaulting party. The agreement may be terminated globally by Altea if
SpectRx fails to commercialize any product, use or application utilizing the
monitoring technology in any major country by the date of the first commercial
shipment date under the Abbott Agreement and may be terminated by Altea with
respect to certain regions if SpectRx fails to commercialize any product, use or
application in those regions by this date. SpectRx may terminate the agreement
upon not less than three months prior notice to Altea and Nimco if given before
it has commercialized the technology and upon not less than six months prior
notice to each party if given after commercialization has commenced. Except in
the case of termination of the agreement by SpectRx for breach, upon termination
all technology and joint technology shall become the exclusive property of
Altea, except the Nimco patents. If the agreement is terminated by SpectRx for
breach, all rights to the monitoring technology in the countries in which
SpectRx has retained its exclusive rights shall become the exclusive property of
SpectRx, each party shall retain non-exclusive rights to the monitoring
technology in other countries, and Altea shall retain all rights to the delivery
technology. If SpectRx loses its rights to the monitoring technology for failure
to commercialize (but not due to breach), Altea and Nimco, after their
reacquisition of rights from SpectRx, will pay an amount of money by way of a
royalty to SpectRx according to a formula to reflect each party's relative
investment.
The University of Texas M.D. Anderson Cancer Center
In March 1996, SpectRx, entered into a Patent License Agreement with the
Board of Regents (the "Board") of the University of Texas System and M.D.
Anderson pursuant to which the Board granted SpectRx an exclusive license under
certain of its patents to manufacture, have manufactured, use and sell products
within the United States for use within the licensed field of optical
measurement of bilirubin in human tissue (the "MDA Patent License Agreement").
SpectRx has the right to assign this license to affiliates and the right to
sublicense the foregoing rights. In connection with the MDA Patent License
Agreement, SpectRx has agreed to pay all expenses incurred in prosecuting and
maintaining the patents licensed and a royalty on net sales of products that
incorporate the licensed patents, subject to annual minimum royalty payments.
The term of the MDA Patent License Agreement is until the expiration date of the
last expiring patent licensed. The Board has the right at any time after one
year from the effective date of the MDA Patent License Agreement to terminate
the license if SpectRx, within 90 days after written notice from the Board,
fails to provide written evidence satisfactory to the Board that SpectRx has
commercialized or is actively and effectively attempting to commercialize an
invention licensed under the MDA Patent License Agreement.
Joseph Lakowicz, Ph.D.
The Company has a license agreement with Joseph Lakowicz, Ph.D. whereby Dr.
Lakowicz has granted the Company an exclusive, worldwide license (including the
right to grant sublicenses) to make, use, and sell medical products that
incorporate Dr. Lakowicz's intellectual property related to lifetime
fluorescence technology (the "Lakowicz Agreement"). The intellectual property
consists of a portfolio of granted patents, patent applications and foreign
filings in the area of lifetime fluorescence technology. The Company has
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agreed to pay a royalty to Dr. Lakowicz on net sales of such products
manufactured and sold. The Company has sublicensed some parts of this
intellectual property related to invasive blood tests to its majority owned
subsidiary, FluorRx, Inc. The term of the Lakowicz Agreement is until the
expiration date of the last expiring patent covering any of the technology
licensed.
RESEARCH, DEVELOPMENT AND ENGINEERING
To date, the Company has been engaged primarily in the research,
development and testing of the Company's glucose monitoring, diabetes screening
and infant jaundice products, including research for and development of its core
electro-optical and microporation technologies. Since inception, the Company has
incurred approximately $4.5 million in research and development expenses, net of
approximately $490,000 of which was reimbursed through collaborative
arrangements. Three distinct groups within the Company conduct research,
development and engineering. One group consists of 16 engineers and support
personnel who design optics, electronics, mechanical components and software for
the infant jaundice and diabetes screening products. A second group consists of
10 scientists and engineers who devote their time to the development of
microporation technology for the monitoring of glucose and other analytes. The
third group consists of four engineers and scientists focused on investigating
new applications for the Company's core electro-optical and microporation
technologies.
The Company believes that the interstitial fluid sampling technology under
development at SpectRx and Abbott for use in connection with the Company's
glucose monitoring product may also be used to develop alternatives for certain
blood tests where the analyte being tested is also present in comparable volumes
in interstitial fluid. Abbott has a right of first negotiation with the Company
regarding the use of interstitial fluid sampling technology for these
applications.
In 1996, SpectRx executed a licensing agreement with Dr. Joseph Lakowicz of
the University of Maryland pursuant to which the Company licenses a portfolio of
intellectual property related to lifetime fluorescence technology, a technology
used to determine the spectroscopic fingerprint of a substance. The Company
believes lifetime fluorescence technology may have applications including in
vitro blood chemistry, molecular diagnostics, flow cytometry, combinatorial
chemistry for pharmaceutical discovery research and noninvasive optical
diagnostics.
To date, the Company has only tested prototypes of its glucose monitoring,
diabetes screening and infant jaundice products. Because the Company's research
and clinical development programs are at an early stage, substantial additional
research and development and clinical trials will be necessary before commercial
prototypes of the Company's glucose monitoring and infant jaundice products are
produced. There can be no assurance that the Company will not encounter
unforeseen problems in the development of these technologies and applications or
that the Company will be able to successfully address those problems that do
arise. In addition, there can be no assurance that any of the Company's products
will be successfully developed, proven safe and efficacious in clinical trials,
meet applicable regulatory standards, be capable of being produced in commercial
quantities at acceptable costs, be eligible for third-party reimbursement from
governmental or private insurers, be successfully marketed or achieve market
acceptance. If any of the Company's development programs are not successfully
completed, required regulatory approvals or clearances are not obtained, or
products for which approvals or clearances are obtained are not commercially
successful, the Company's business, financial condition and results of
operations would be materially adversely affected.
In addition, a substantial amount of the research and development work
required to develop the Company's products is either performed or funded by the
Company's collaborative partners. There can be no assurance that the Company's
collaborative partners will be willing or able to continue to perform and to
fund this research and development work. Any failure by one or more of the
Company's collaborative partners to continue to perform or fund such work could
significantly delay or prevent the development or commercialization of the
Company's products, which could have a material adverse effect upon the
Company's business, financial condition and results of operations. See
"-- Collaborative Arrangements" and "-- Licensing Arrangements" and "Risk
Factors -- Dependence on Collaborative Arrangements."
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MANUFACTURING AND SOURCES OF SUPPLY
One element of the Company's business strategy is to manufacture certain of
its products and to outsource the production of other, high volume products and
associated disposables. To date, the Company's manufacturing activities have
consisted only of building certain prototype devices. If the Company
successfully develops its diabetes screening and infant jaundice products and,
together with Boehringer Mannheim and Healthdyne, obtains FDA clearance and
other regulatory approvals to market these products, the Company will undertake
to manufacture these products. The Company has no experience manufacturing such
products in the volumes that would be necessary for the Company to achieve
significant commercial sales. Currently four individuals are employed by the
Company to accomplish the pre-production planning, quality system development,
facility development and production scaling that will be needed to bring
production to commercial levels. There can be no assurance that the Company will
be able to establish and maintain reliable, full scale manufacturing of these
products at commercially reasonable costs. Although the Company has leased space
that it plans to use to manufacture its products, it may encounter various
problems in establishing and maintaining its manufacturing operations, resulting
in inefficiencies and delays. Specifically, companies often encounter
difficulties in scaling up production, including problems involving production
yield, quality control and assurance, and shortages of qualified personnel. In
addition, the Company's manufacturing facilities will be subject to GMP
regulations, including possible preapproval inspection, international quality
standards and other regulatory requirements. Difficulties encountered by the
Company in manufacturing scale-up or failure by the Company to implement and
maintain its manufacturing facilities in accordance with GMP regulations,
international quality standards or other regulatory requirements could result in
a delay or termination of production, which could have a material adverse effect
on the Company's business, financial condition and results of operations.
Numerous components of the Company's diabetes screening and infant jaundice
products are currently available from only one supplier. Any significant problem
experienced by one of the Company's sole source suppliers may result in a delay
or interruption in the supply of components to the Company until such supplier
cures the problem or an alternative source of the component is located and
qualified. Any such delay or interruption would likely lead to a delay or
interruption in the Company's manufacturing operations, which could have a
material adverse effect upon the Company's business, financial condition and
results of operations.
SALES, MARKETING AND DISTRIBUTION
The Company has elected to focus the sales and distribution of its current
products through its collaborative partners. The Company believes that by
aligning with larger, more established partners, in specific market segments, it
can utilize its partners' already developed strengths and more effectively and
quickly penetrate the market place. The Company's primary efforts to date have
been to build the skill and information base to identify and quantify market
segments to which the Company's technologies can be economically developed and
marketed.
Abbott has the exclusive right to market and sell the Company's glucose
monitoring product in all countries except Singapore and the Netherlands, where
the license is non-exclusive. Boehringer Mannheim has the exclusive worldwide
right to market and sell the Company's diabetes screening product. Healthdyne
has the exclusive right to market and sell the Company's infant jaundice product
in the United States and Canada. Thus, if the Company, together with its
collaborative partners successfully develops its products and obtains FDA
clearance or approval and other regulatory approvals to market these products,
the Company will be heavily dependent upon the willingness and ability of its
collaborative partners to market the products. There can be no assurance that
the Company's collaborative partners will be willing and able to devote
sufficient financial, administrative and personnel resources to successfully
market the Company's products. Any failure by one or more the Company's
collaborative partners to commit sufficient resources to the marketing and sales
of the Company's products could significantly adversely affect the sales, and
revenues from the sales, of these products, which could have a material adverse
effect upon the Company's business, financial condition and results of
operations.
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If the Company, together with Healthdyne, successfully develops the
Company's infant jaundice product and obtains, in countries other than the
United States and Canada, necessary regulatory approvals and clearances to
market this product, the Company will be responsible for marketing this product
in these countries. The Company has no experience in marketing or selling
medical device products and only has a three-person marketing and sales staff.
In order to successfully market and sell its infant jaundice product outside the
United States and Canada, the Company must either develop a marketing and sales
force or enter into arrangements with third parties to market and sell this
product. There can be no assurance that the Company will be able to successfully
develop a marketing and sales force or that it will be able to enter into
marketing and sales agreements with third parties on acceptable terms, if at
all. If the Company develops its own marketing and sales capabilities, it will
compete with other companies that have experienced and well-funded marketing and
sales operations. If the Company enters into a marketing arrangement with a
third party for the marketing and sale of its infant jaundice product outside of
the United States and Canada, any revenues to be received by the Company from
this product will be dependent on this third party, and the Company will likely
be required to pay a sales commission or similar amount to this party.
Furthermore, the Company is currently dependent on the efforts of Abbott and
Boehringer Mannheim for any revenues to be received from its glucose monitoring
and diabetes screening products, respectively. There can be no assurance that
the efforts of these third parties for the marketing and sale of the Company's
products will be successful. See "-- Collaborative Arrangements" and "Risk
Factors -- Dependence on Collaborative Arrangements."
PATENTS
The Company has pursued a strategy of developing and acquiring patents and
patent rights and licensing technology. SpectRx's success depends in large part
upon its ability to establish and maintain the proprietary nature of its
technology through the patent process and to license from others patents and
patent applications necessary to develop its products. The Company has licensed
from Altea one granted patent and know how related to its glucose monitoring
product, jointly applied with Altea for a U.S. patent and an international
patent related to this device and has licensed this granted patent and these
patent applications to Abbott pursuant to the parties' collaborative
arrangements. SpectRx has license agreements with GTRC that give the Company the
right to use two patents related to its diabetes screening product, and the
Company has licensed this proprietary technology to Boehringer Mannheim pursuant
to the Company's collaborative arrangement with Boehringer Mannheim. The Company
has license agreements with M.D. Anderson that give SpectRx access to one patent
related to the Company's infant jaundice product, and the Company has applied
for two patents related to this product. SpectRx has licensed the one patent and
two patent applications to Healthdyne pursuant to its collaborative arrangement
with that company. In addition, SpectRx has licensed from Dr. Joseph Lakowicz of
the University of Maryland several granted patents and patent applications
related to fluorescence spectroscopy that it intends to use in its research and
development efforts.
There can be no assurance that one or more of the patents held directly by
the Company or licensed by the Company from third parties, including the
disposable components to be used in connection with its glucose monitoring and
infant jaundice products, or processes used in the manufacture of the Company's
products, will not be successfully challenged, invalidated or circumvented or
that the Company will otherwise be able to rely on such patents for any reason.
In addition, there can be no assurance that competitors, many of whom have
substantial resources and have made substantial investments in competing
technologies, will not seek to apply for and obtain patents that prevent, limit
or interfere with the Company's ability to make, use and sell its products
either in the United States or in foreign markets. If any of the Company's
patents are successfully challenged, invalidated or circumvented or the
Company's right or ability to manufacture its products were to be proscribed or
limited, the Company's ability to continue to manufacture and market its
products could be adversely affected, which would likely have a material adverse
effect upon the Company's business, financial condition and results of
operations.
The medical device industry has been characterized by extensive litigation
regarding patents and other intellectual property rights. Certain companies in
the medical device industry have instituted intellectual property litigation,
including patent infringement actions, for legitimate and, in certain cases,
competitive reasons. In addition, the United States Patent and Trademark Office
("USPTO") may institute litigation or
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interference proceedings. There can be no assurance that the Company will not
become subject to patent infringement claims or litigation or interference
proceedings instituted by the USPTO to determine the priority of inventions. The
defense and prosecution of intellectual property suits, USPTO interference
proceedings and related legal and administrative proceedings are both costly and
time consuming. Litigation may be necessary to enforce patents issued to the
Company, to protect trade secrets or know how owned by the Company or to
determine the enforceability, scope and validity of the proprietary rights of
others. Any litigation or interference proceedings brought against, initiated by
or otherwise involving the Company may require the Company to incur substantial
legal and other fees and expenses and may require some of the Company's
employees to devote all or a substantial portion of their time to the
prosecution or defense of such litigation or proceedings. An adverse
determination in litigation or interference proceedings to which the Company may
become a party, including any litigation that may arise against the Company,
could subject the Company to significant liabilities to third parties, require
the Company to seek licenses from third parties or prevent the Company from
selling its products in certain markets, or at all. Although patent and
intellectual property disputes regarding medical devices are often settled
through licensing or similar arrangements, there can be no assurance that the
Company would be able to reach a satisfactory settlement of such a dispute that
would allow it to license necessary patents or other intellectual property. Even
if such a settlement were reached, the settlement process may be expensive and
time consuming and the terms of the settlement may require the Company to pay
substantial royalties. An adverse determination in a judicial or administrative
proceeding or the failure to obtain a necessary license could prevent the
Company from manufacturing and selling its products, which would have a material
adverse effect on the Company's business, financial condition and results of
operations.
In addition to patents, the Company relies on trade secrets and proprietary
know how, which it seeks to protect, in part, through confidentiality and
proprietary information agreements. There can be no assurance that such
confidentiality or proprietary information 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 to or be independently developed
by competitors.
COMPETITION
The medical device industry in general, and the markets for glucose
monitoring and diabetes screening devices and processes in particular, are
intensely competitive. If successful in its product development, the Company
will compete with other providers of personal glucose monitors, diabetes
screening tests and infant jaundice products. A number of competitors, including
Johnson & Johnson, Inc. (which owns Lifescan, Inc.), Boehringer Mannheim, Bayer
AG (which owns Miles Laboratories, Inc.) and Abbott (which owns MediSense, Inc.)
are currently marketing traditional glucose monitors. These monitors are widely
accepted in the health care industry and have a long history of accurate and
effective use. Furthermore, a number of companies have announced that they are
developing products that permit non-invasive and less invasive glucose
monitoring. Accordingly, competition in this area is expected to increase.
Many of the Company's competitors have substantially greater financial,
research, technical, manufacturing, marketing and distribution resources than
the Company and have greater name recognition and lengthier operating histories
in the health care industry. There can be no assurance that the Company will be
able to effectively compete against these and other competitors. In addition,
there can be no assurance that the Company's glucose monitoring, diabetes
screening or infant jaundice products will replace any currently used devices or
systems, which have long histories of safe and effective use. Furthermore, there
can be no assurance that the Company's competitors will not succeed in
developing, either before or after the development and commercialization of the
Company's products, devices and technologies that permit more efficient, less
expensive non-invasive and less invasive glucose monitoring, diabetes screening
and infant jaundice monitoring. It is also possible that one or more
pharmaceutical or other health care companies will develop therapeutic drugs,
treatments or other products that will substantially reduce the prevalence of
diabetes or infant jaundice or otherwise render the Company's products obsolete.
Such competition could have a material adverse effect on the Company's business,
financial condition and results of operation.
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In addition, there can be no assurance that one or more of the Company's
collaborative partners will not, for competitive reasons, reduce its support of
its collaborative arrangement with the Company or support, directly or
indirectly, a company or product that competes with the Company's product that
is the subject of the collaborative arrangement.
GOVERNMENT REGULATION
All of the Company's products are regulated as medical devices. Medical
device products are subject to rigorous FDA and other governmental agency
regulations in the United States and may be subject to regulations of relevant
foreign agencies. The FDA regulates the clinical testing, manufacture, labeling,
packaging, marketing, distribution and record keeping for such products in order
to ensure that medical products distributed in the United States are safe and
effective for their intended uses. Noncompliance with applicable requirements
can result in import detentions, fines, civil penalties, injunctions,
suspensions or losses of regulatory approvals or clearances, recall or seizure
of products, operating restrictions, refusal of the government to approve
product export applications or allow the Company to enter into supply contracts,
and criminal prosecution. Failure to obtain regulatory approvals, the
restriction, suspension or revocation of regulatory approvals or clearances, if
obtained, or any other failure to comply with regulatory requirements would a
have a material adverse effect on the Company's business, financial condition
and results of operations.
The Clinical Chemistry Branch of the FDA's Division of Clinical Laboratory
Devices (the "Branch") has traditionally been the reviewing branch for
blood-based personal glucose monitoring products. The Clinical Chemistry and
Clinical Toxicology Devices Panel (the "Panel") is an external advisory panel
that provides advice to the Branch regarding devices that are reviewed by the
Branch. A meeting of the Panel is scheduled for March 20-21, 1997, and an agenda
item for the meeting is a discussion of invasive and non-invasive
self-monitoring blood glucose devices, including a discussion of current
technology and its performance capabilities and limitations. The Panel's input
may be used by the FDA to revise its 510(k) guidance document for blood glucose
monitoring devices. There can be no assurance that this meeting will not result
in a FDA policy or change in FDA policy that is materially adverse to the
Company's regulatory position.
In the United States, medical devices are classified into one of three
classes (Class I, II or III), on the basis of the controls deemed necessary by
the FDA to reasonably assure their safety and effectiveness. Under FDA
regulations, Class I devices are subject to general controls (for example,
labeling, premarket notification and adherence to GMP), and Class II devices are
subject to general and special controls (for example, performance standards,
postmarket surveillance, patient registries, and FDA guidelines). Generally,
Class III devices are those which must receive premarket approval from the FDA
to ensure their safety and effectiveness (for example, life-sustaining,
life-supporting and implantable devices, or new devices which have not been
found substantially equivalent to legally marketed Class I or II devices).
A medical device manufacturer may seek clearance to market a medical device
by filing a 510(k) premarket notification with the FDA if a medical device
manufacturer establishes that a newly developed device is "substantially
equivalent" to either a device that was legally marketed prior to May 28, 1976,
the date upon which the Medical Device Amendments of 1976 were enacted, or to a
device that is currently legally marketed and has received 510(k) premarket
clearance from the FDA. The 510(k) premarket notification must be supported by
appropriate information, including, where appropriate, data from clinical
trials, establishing the claim of substantial equivalence to the satisfaction of
the FDA. Commercial distribution of a device for which a 510(k) premarket
notification is required can begin only after the FDA issues an order finding
the device to be "substantially equivalent" to a predicate device. The FDA has
recently been requiring a more rigorous demonstration of substantial equivalence
than in the past. It generally takes from four to 12 months from the date of
submission to obtain clearance of a 510(k) submission, but it may take
substantially longer. The FDA may determine that a proposed device is not
substantially equivalent to a legally marketed device, or that additional
information is needed before a substantial equivalence determination can be
made. The Company believes that its products will qualify for 510(k) premarket
notification.
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A "not substantially equivalent" determination, or a request for additional
information, could delay the market introduction of new products that fall into
this category and could have a material adverse effect on the Company's
business, financial condition and results of operations. For any of the
Company's products that are cleared through the 510(k) process, modifications or
enhancements that could significantly affect the safety or efficacy of the
device or that constitute a major change to the intended use of the device will
require new 510(k) submissions or approval of a PMA. Any modified device for
which a new 510(k) premarket notification is required cannot be distributed
until 510(k) clearance is obtained for the modified device. There can be no
assurance that the Company will obtain 510(k) clearance in a timely manner, if
at all, for any devices or modifications to devices for which it may submit a
510(k) notification.
A PMA application must be submitted if a proposed device is not
substantially equivalent to a legally marketed Class I or Class II device, or
for a Class III device for which FDA has called for PMAs. The PMA application
must contain valid scientific evidence to support the safety and effectiveness
of the device which includes the results of clinical trials, all relevant bench
tests, and laboratory and animal studies. The PMA must also contain a complete
description of the device and its components, and a detailed description of the
methods, facilities and controls used for manufacture, including, where
appropriate, the method of sterilization and its assurance. In addition, the
submission must include proposed labeling, advertising literature and training
methods (if required). If human clinical trials of a device are required in
connection with a PMA application, and the device presents a "significant risk,"
the sponsor of the trial (usually the manufacturer or the distributor of the
device) is required to file an investigational device exemption ("IDE")
application prior to commencing human clinical trials. The IDE application must
be supported by data, typically including the results of animal and laboratory
testing, and a description of how the device will be manufactured. If the IDE
application is reviewed and approved by the FDA and one or more appropriate
institutional review boards ("IRBs"), human clinical trials may begin at a
specific number of investigational sites with a specific number of patients, as
approved by the FDA. If the device presents a "nonsignificant risk" to the
patient, a sponsor may begin clinical trials after obtaining approval for the
study by one or more appropriate IRBs, but FDA approval for the commencement of
the study is not required. Sponsors of clinical trials are permitted to sell
those devices distributed in the course of the study provided such compensation
does not exceed recovery of costs of manufacture, research, development and
handling. An IDE supplement must be submitted to and approved by FDA before a
sponsor or an investigator may make a significant change to the investigational
plan that may affect the plan's scientific soundness or the rights, safety or
welfare of human subjects.
Upon receipt of a PMA application, the FDA makes a threshold determination
as to whether the application is sufficiently complete to permit a substantive
review. If the FDA determines that the PMA application is sufficiently complete
to permit a substantive review, the FDA will accept the application for filing.
An incomplete application will be returned to the sponsor and must be
resubmitted and accepted for filing before the application will be substantively
reviewed. Once the submission is accepted for filing, the FDA begins an in-depth
review of the PMA. An FDA review of a PMA application generally takes one to two
years from the date the PMA application is accepted for filing, but may take
significantly longer. The review time is often significantly extended by the FDA
asking for more information or clarification of information already provided in
the submission. During the PMA review period, the submission may be sent to an
FDA-selected scientific advisory panel composed of physicians and scientists
with expertise in the particular field. The FDA scientific advisory panel issues
a recommendation to the FDA that may include conditions for approval. The FDA is
not bound by the recommendations of the advisory panel. Toward the end of the
PMA review process, the FDA will conduct an inspection of the manufacturer's
facilities to ensure that the facilities are in compliance with applicable GMP
requirements.
If the FDA evaluations of both the PMA application and the manufacturing
facilities are favorable, the FDA will issue an approvable letter, which usually
contains a number of conditions which must be met in order to secure final
approval of the PMA. When those conditions have been fulfilled to the
satisfaction of the FDA, the agency will issue a PMA approval letter authorizing
commercial marketing of the device for certain indications and intended uses.
The PMA review process can be expensive, uncertain and lengthy. A number of
devices for which a PMA has been sought have never been approved for marketing.
The FDA may also determine that additional clinical trials are necessary, in
which case the PMA may be significantly delayed while such trials are conducted
and data is submitted in an amendment to the PMA. Modifications to the
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design, labeling or manufacturing process of a device that is the subject of an
approved PMA, its labeling, or manufacturing process may require approval by the
FDA of PMA supplements or new PMAs. Supplements to a PMA often require the
submission of the same type of information required for an initial PMA, except
that the supplement is generally limited to that information needed to support
the proposed change from the product covered by the original PMA. The FDA
generally does not call for an advisory panel review for PMA supplements. There
can be no assurance that, if required, the Company will be able to meet the
FDA's PMA requirements or that any necessary approvals will be received. Failure
to comply with regulatory requirements would have a material adverse effect on
the Company's business, financial condition and results of operations.
Regulatory approvals and clearances, if granted, may include significant
labeling limitations and limitations on the indicated uses for which the product
may be marketed. In addition, to obtain such approvals and clearances, the FDA
and certain foreign regulatory authorities impose numerous other requirements
with which medical device manufacturers must comply. FDA enforcement policy
strictly prohibits the marketing of approved medical devices for unapproved
uses. Any products manufactured or distributed by the Company pursuant to FDA
clearances or approvals are subject to pervasive and continuing regulation by
the FDA. The FDA also requires the Company to provide it with information on
death and serious injuries alleged to have been associated with the use of the
Company's products, as well as any malfunctions that would likely cause or
contribute to death or serious injury. Failure to comply with applicable
regulatory requirements can result in, among other things, warning letters,
fines, injunctions, civil penalties, recall or seizure of products, total or
partial suspension of production, refusal by the government to grant premarket
clearance or premarket approval for devices, withdrawals of approvals and
criminal prosecutions.
The Company is required to register with the FDA as a device manufacturer
and list its products with the Agency. The Company also is subject to biannual
inspections, for compliance with GMP, by the FDA and state agencies acting under
contract with the FDA. The GMP regulations require that the Company manufacture
its products and maintain its documents in a prescribed manner with respect to
manufacturing, testing, quality assurance and quality control activities. The
FDA also has promulgated final regulatory changes to the GMP regulations that
require, among other things, design controls and maintenance of service records,
and which will increase the cost of complying with GMP requirements.
Labeling and promotional activities are subject to scrutiny by the FDA and
in certain instances, by the Federal Trade Commission. The FDA actively enforces
regulations prohibiting marketing of products for unapproved users. The Company
and its products are also subject to a variety of state and local laws and
regulations in those states and localities where its products are or will be
marketed. Any applicable state or local regulations may hinder the Company's
ability to market its products in those states or localities. Manufacturers are
also subject to numerous federal, state and local laws relating to such matters
as safe working conditions, manufacturing practices, environmental protection,
fire hazard control and disposal of hazardous or potentially hazardous
substances. There can be no assurance that the Company will not be required to
incur significant costs to comply with such laws and regulations now or in the
future or that such laws or regulations will not have a material adverse effect
upon the Company's ability to do business.
International sales of the Company's products are subject to the regulatory
requirements of each target country. The regulatory review process varies from
country to country. The ISO 9000 series of standards for quality operations have
been developed to ensure that companies know the standards of quality to which
they must adhere to receive certification. The European Union has promulgated
rules which require that medical products receive by mid-1998 the right to affix
the CE mark, an international symbol of adherence to quality assurance standards
and compliance with applicable European medical device directives. The ISO 9001
certification will be one of the CE mark certification requirements required by
mid-1998. Failure to receive the right to affix the CE mark will prohibit the
Company from selling its products in member countries of the European Union.
The Company will rely upon its corporate partners to obtain certain United
States and foreign regulatory approvals and if such approvals are obtained the
Company will rely upon its corporate partners to remain in compliance with
ongoing United States and foreign regulatory restrictions. The inability or
failure of such third parties to comply with the varying regulations or the
imposition of new regulations would materially adversely effect the Company's
business, financial condition and results of operations.
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THIRD-PARTY REIMBURSEMENT
In the United States, patients, hospitals and physicians who purchase
medical devices such as the Company's products, generally rely on third-party
payors, principally federal Medicare, state Medicaid and private health
insurance plans, to reimburse them for all or a portion of the cost of the
medical device. Reimbursement for devices that have received FDA approval has
generally been available in the United States. In addition, certain health care
providers are gradually adopting a managed care system in which such providers
contract to provide comprehensive health care services for a fixed cost per
person. The Company is unable to predict what changes will be made in the
reimbursement methods utilized by third-party health care payors. Although the
Company anticipates that patients, hospitals and physicians will justify the use
of the Company's products by the attendant cost savings and clinical benefits
that the Company believes will be derived from the use of its products, there
can be no assurance that this will be the case. Furthermore, the Company could
be adversely affected by changes in reimbursement policies of governmental or
private health care payors. Any inability of patients, hospitals, physicians and
other users of the Company's products to obtain sufficient reimbursement from
health care payors for the Company's products or adverse changes in relevant
governmental policies or the policies of private third-party payors regarding
reimbursement for such products could have a material adverse effect on the
Company's business, financial condition and results of operations.
If the Company obtains the necessary foreign regulatory approvals, market
acceptance of the Company's products in international markets will be dependent,
in part, upon the availability of reimbursement within prevailing health care
payment systems. Reimbursement and health care payment systems in international
markets vary significantly by country and include both government sponsored
health care and private insurance. Although the Company intends to seek
international reimbursement approvals, there can be no assurance that such
approvals will be obtained in a timely manner, if at all. Any failure to receive
international reimbursement approvals could have an adverse effect on market
acceptance of the Company's products in the international markets in which such
approvals are sought.
PRODUCT LIABILITY AND INSURANCE
The development, manufacture and sale of medical products entail
significant risks of product liability claims. The Company currently has no
product liability insurance coverage beyond that provided by its general
liability insurance. Accordingly, there can be no assurance that the Company is
adequately protected from any liabilities, including any adverse judgments or
settlements, it might incur in connection with the development, clinical
testing, manufacture and sale of its products. In addition, product liability
insurance is expensive and may not be available to the Company on acceptable
terms, if at all. A successful product liability claim or series of claims
brought against the Company that results in an adverse judgment against or
settlement by the Company in excess of any insurance coverage could have a
material adverse effect on the Company's business, financial condition and
results of operations.
EMPLOYEES
As of December 31, 1996, the Company had 41 employees and consulting or
other contract arrangements with 24 additional persons to provide services to
the Company on a full- or part-time basis. Of the 65 people so employed or
engaged by the Company, 41 are engaged in research and development activities,
three are engaged in sales and marketing activities, three are engaged in
regulatory affairs and quality assurance, eight are engaged in manufacturing and
development, and 10 are engaged in administration and accounting. No employees
are covered by collective bargaining agreements, and the Company believes it
maintains good relations with its employees. The Company's ability to operate
successfully and manage its potential future growth depends in significant part
upon the continued service of certain key scientific, technical, managerial and
finance personnel, and its ability to attract and retain additional highly
qualified scientific, technical, managerial and finance personnel. None of these
key employees has an employment contract with the Company nor are any of these
employees covered by key person or similar insurance. In addition, if the
Company, together with its collaborative partners, is able to successfully
develop and commercialize the Company's products, the Company will need to hire
additional scientific, technical, managerial and finance
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personnel. The Company faces intense competition for qualified personnel in
these areas, many of whom are often subject to competing employment offers, and
there can be no assurance that the Company will be able to attract and retain
such personnel. The loss of key personnel or inability to hire and retain
additional qualified personnel in the future could have a material adverse
effect on the Company's business, financial condition and results of operations.
FACILITIES
The Company leases approximately 30,000 square feet in Norcross, Georgia,
which comprise the Company's administrative, research and development, marketing
and production facilities and the Company's planned manufacturing facility. The
Company's lease for the portion of this facility housing the finance department
and certain planned manufacturing operations extends through 1999, the portion
housing certain research and development operations expires in June 2000 and the
portion housing administration, sales and marketing, engineering and certain
other planned manufacturing operations expires in March 2001.
LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings.
44
<PAGE> 46
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Executive officers and directors of the Company, and their ages as of February
26, 1997:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------- --- -------------------------------------------
<S> <C> <C>
Mark A. Samuels............................ 39 President, Chief Executive Officer and
Director
Keith D. Ignotz............................ 49 Executive Vice President, Chief Operating
Officer and Director
Thomas H. Muller, Jr....................... 55 Executive Vice President, Chief Financial
Officer and Secretary
Robert G. Rothfritz........................ 48 Vice President, Operations
Jonathan A. Eppstein....................... 44 Vice President, Transdermal Systems
Richard L. Fowler.......................... 40 Vice President, Engineering
Charles G. Hadley(1)(2).................... 40 Director
Jack R. Kelly, Jr.(1)(2)................... 62 Director
</TABLE>
- ---------------
(1) Member of the Compensation Committee of the Board of Directors.
(2) Member of the Audit Committee of the Board of Directors.
Mark A. Samuels has served as a member of the Company's Board of Directors,
President and CEO since co-founding the Company in 1992. Prior to that time, Mr.
Samuels was a founder of Laser Atlanta Optics, Inc., an optical sensor company,
where he held the position of President and Chief Executive Officer until 1992,
and was a director until October 1996. While at Laser Atlanta Optics, Mr.
Samuels focused on the development of commercial and medical applications of
electro-optics. Mr. Samuels earned a B.S. in Physics and an M.S. (Electrical
Engineering) from Georgia Institute of Technology.
Keith D. Ignotz has served as a member of the Company's Board of Directors
and Chief Operating Officer since co-founding the Company in 1992. Formerly, Mr.
Ignotz was President of Humphrey Instruments SmithKline Beckman (Japan),
President of Humphrey Instruments GMBH (Germany), and Senior Vice President of
Allergan Humphrey Inc., a $100 million per year ophthalmic diagnostic company.
Mr. Ignotz is a member of the board of directors of Vismed, Inc. (Dicon), an
ophthalmic diagnostic products company, and Pennsylvania College of Optometry.
Mr. Ignotz earned a B.A. in Sociology from San Jose State University and an
M.B.A. from Pepperdine University.
Thomas H. Muller, Jr. has served as the Company's Chief Financial Officer
since joining the Company in December 1996. Prior to that time, Mr. Muller was
President of Muller & Associates, an operational and financial management
services company and Chief Financial Officer of Nurse On Call, Inc. From 1984 to
1992, Mr. Muller was Chief Financial Officer of HBO & Company, a provider of
information systems and services to the health care industry. Mr. Muller earned
a B.I.E. in Industrial Engineering from Georgia Institute of Technology and an
M.B.A. from Harvard Business School.
Robert G. Rothfritz, has served as the Company's Vice President of
Operations since joining the Company in July 1996. From 1994 to 1996, Mr.
Rothfritz was Director of Manufacturing for Atlantic Envelope Company, a
National Service Industries, Inc. division, and from 1993 to 1994, he was a
Senior Manager, Manufacturing Systems Leader for Ethicon EndoSurgery, a Johnson
& Johnson division. From 1988 to 1992, Mr. Rothfritz was Vice President,
Operations for the Oral Care Division of Bausch & Lomb, Inc. Mr. Rothfritz
earned a B.S. in Mechanical Engineering from Georgia Institute of Technology.
Jonathan A. Eppstein has served as the Company's Vice President of
Transdermal Systems since December 1996, and was Vice President of Research and
Development since co-founding the Company in 1992. Prior to that time, Mr.
Eppstein was Systems Engineering Manager and Director of Medical Programs for
Laser Atlanta Optics, Inc. Mr. Eppstein earned a B.S. in Electrical Engineering
and a M.S. in
45
<PAGE> 47
Mathematics from Western Michigan University. Mr. Eppstein, together with his
sister, controls Altea and Nimco.
Richard L. Fowler has served as the Company's Vice President of Engineering
since joining the Company in February 1996. Prior to that time, Mr. Fowler
worked for Laser Atlanta Optics, Inc., where he held the positions of President
and Chief Executive Officer from August 1994 to February 1996. As Vice President
of Engineering for Laser Atlanta Optics from 1992 to 1994, Mr. Fowler managed
the development of three laser sensor products. Mr. Fowler earned a B.S. in
Electrical Engineering from University of Texas.
Charles G. Hadley has served as a member of the Company's Board of
Directors since 1993. Since 1988, Mr. Hadley has been general partner of Cashon
Biomedical Associates, L.P., which is the managing general partner of the
Hillman Medical Ventures Partnerships. These venture capital funds focus on
early stage medical technology. Mr. Hadley earned a B.A. from George Washington
University and a J.D. and M.B.A. from Stanford University.
Jack R. Kelly, Jr. has served as a member of the Company's Board of
Directors since February, 1993. Since 1983, Mr. Kelly has been a general partner
of Noro-Moseley Partners, a venture capital fund. Prior to 1983, Mr. Kelly was
the Chief Operating Officer for Scientific Atlanta. Mr. Kelly is a director of
Syntellect, Inc. and Novoste Corporation. Mr. Kelly earned a B.S. in Physics
from Georgia State University.
All directors hold their offices until the next stockholder meeting of the
Company and until their successors are elected and qualified or until their
earlier resignation or removal. The Company's executive officers are appointed
by the Board of Directors and serve until their successors are elected or
appointed.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors of the Company makes
recommendations concerning salaries, incentives and other forms of compensation
for directors, officers and other employees of the company, subject to
ratification by the full Board of Directors. The Compensation Committee also
administers the Company's various stock plans. In 1996, the Compensation
Committee consisted of Jack R. Kelly, Jr. and Mark A. Samuels, the Company's
President and Chief Executive Officer, until December 10, 1996. While a member
of the Compensation Committee, Mr. Samuels borrowed approximately $228,000 from
the Company pursuant to two separate promissory notes. Presently, Charles G.
Hadley and Jack R. Kelly, Jr. comprise the Compensation Committee. See
"Management--Stock Plans" and "Certain Transactions."
DIRECTOR COMPENSATION
Directors currently receive no cash fees for services provided in that
capacity but are reimbursed for out-of-pocket expenses they incur in connection
with their attendance at meetings of the Board. Upon closing of the offering,
nonemployee directors ("Outside Directors") will receive payments of $3,000 per
quarter, $1,000 per meeting attended in person ($500 if attended by telephone)
and $500 per committee meeting attended, up to a maximum of $20,000 per year,
and all directors will be reimbursed for expenses actually incurred in attending
meetings of the Board of Directors and its committees. Upon closing of the
offering, Outside Directors may be granted options to purchase Common Stock
under the 1995 Stock Option Plan.
46
<PAGE> 48
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company during
the fiscal year ended December 31, 1996 to the Chief Executive Officer and its
five other most highly compensated executive officers (the Chief Executive
Officer and such other executive officers are hereinafter referred to as the
"Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
------------------------------- STOCK OPTION
NAME AND PRINCIPAL POSITION SALARY BONUS OTHER(1) SHARES
- ---------------------------------------------------- -------- ------ -------- ------------
<S> <C> <C> <C> <C>
Mark A. Samuels..................................... $150,000 $ -- -- 114,287
President and Chief Executive Officer
Keith D. Ignotz..................................... 150,000 -- -- 89,287
Chief Operating Officer
Thomas H. Muller, Jr................................ 3,918(2) -- -- 60,715
Executive Vice President, Chief Financial Officer
and Secretary
Robert G. Rothfritz................................. 43,846(3) -- -- 21,429
Vice President, Operations
Jonathan A. Eppstein................................ 95,385 -- -- --
Vice President, Transdermal Systems
Richard L. Fowler................................... 78,872 3,046 -- 21,429
Vice President, Engineering
</TABLE>
- ---------------
(1) Other annual compensation in the form of perquisite and other personal
benefits, securities or property has been omitted in those cases where the
aggregate amount of such compensation is the lesser of either $50,000 or
10% of the total of annual salary and bonus reported for the named
Executive Officer.
(2) Includes salary from December 20, 1996 upon commencement of employment. Mr.
Muller's current annual compensation is $130,000.
(3) Includes salary from July 8, 1996 upon commencement of employment. Mr.
Rothfritz's current annual compensation is $95,000.
47
<PAGE> 49
STOCK OPTION INFORMATION
The following table sets forth certain information for the fiscal year
ended December 31, 1996, with respect to each grant of stock options to the
Executive Officers:
OPTION GRANTS DURING YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT
INDIVIDUAL GRANTS ASSUMED ANNUAL
----------------------------------------------- RATES OF
% OF TOTAL STOCK PRICE
OPTIONS APPRECIATION FOR
GRANTED EXERCISE OPTION TERM(2)
OPTIONS TO EMPLOYEES PRICE PER EXPIRATION ------------------
NAME GRANTED IN 1996(1) SHARE DATE 5% 10%
- ------------------------------------ ------- ------------ --------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Mark A. Samuels..................... 114,287 34% $ .70 2006 $50,312 $127,500
Keith D. Ignotz..................... 89,287 26% .70 2006 39,306 99,610
Thomas H. Muller, Jr................ 60,715 18% 2.45 2006 93,549 237,072
Robert G. Rothfritz................. 21,429 6% .70 2006 9,434 23,907
Jonathan A. Eppstein................ -- -- -- -- -- --
Richard L. Fowler................... 21,429 6% .70 2006 9,434 23,907
</TABLE>
- ---------------
(1) In 1996, the Company granted employees and consultants options to purchase
an aggregate of 338,940 shares of Common Stock.
(2) In accordance with the rules of the Securities and Exchange Commission (the
"Commission"), shown are the gains or "option spreads" that would exist for
the respective options granted. These gains are based on the assumed rates
of annual compound stock price appreciation of 5% and 10% applied to the
grant price from the date the option was granted over the full option term.
These assumed annual compound rates of stock price appreciation are
mandated by the rules of the Commission and do not represent the Company's
estimate or projection of future Common Stock prices.
AGGREGATED OPTION EXERCISES IN 1996 AND DECEMBER 31, 1996 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT VALUE OF UNEXERCISED IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1996 IN-THE-MONEY OPTIONS (1) THE IPO PRICE (2)
--------------------------- --------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------- ----------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mark A. Samuels........... 31,027 136,832 $ 157,133 $ 674,841 $ 327,781 $ 1,427,417
Keith D. Ignotz........... 27,901 114,958 142,128 569,846 295,583 1,202,115
Thomas H. Muller, Jr...... -- 60,715 -- 185,181 -- 519,113
Robert G. Rothfritz....... 2,232 19,197 10,714 92,146 22,990 197,729
Jonathan A. Eppstein...... 109,657 62,488 580,086 330,562 1,183,119 674,246
Richard L. Fowler......... 4,018 17,411 19,286 83,573 41,385 179,333
</TABLE>
- ---------------
(1) Based upon an assumed fair market value of $5.50 per share as of December
31, 1996 less the exercise price per share.
(2) Based upon an assumed initial public offering price of $11.00 less the
exercise price per share.
STOCK PLANS
1995 Stock Plan. A total of 1,428,572 shares of Common Stock have been
reserved for issuance under the Company's 1995 Stock Plan (the "Stock Plan").
Under the Stock Plan, as of December 31, 1996, options to purchase an aggregate
663,362 shares were outstanding, 403 shares of Common Stock had been purchased
pursuant to exercises of stock options and stock purchase rights and 764,807
shares were available for future grant.
48
<PAGE> 50
The Stock Plan provides for the grant of incentive stock options within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), nonqualified stock options and stock purchase rights to employees and
consultants of the Company. Incentive stock options may be granted only to
employees. The Stock Plan is administered by the Board of Directors or a
committee appointed by the Board of Directors, which determines the terms of
options granted, including the exercise price and the number of shares subject
to each option. The Board of Directors also determines the schedule upon which
options become exercisable. The exercise price for employees generally of
incentive stock options granted under the Stock Plan must be at least equal to
the fair market value of the Company's Common Stock on the date of grant.
However, for any employee holding more than 10% of the voting power of all
classes of the Company's stock, the exercise price will be no less than 110% of
the fair market value. The exercise price of nonqualified stock options is set
by the administrator of the Stock Plan. The maximum term of options granted
under the Stock Plan is ten years. In the event of a merger, reorganization or
change in the ownership of the Company, all options outstanding under the Plan
shall be fully vested.
In the event a consultant or an employee is terminated, such employee or
consultant will have at least 30 days after such termination to exercise any
vested non-qualified option and any vested incentive stock option. After the
applicable exercise period, all unexercised options will be canceled. All
unvested options will be canceled as of the date of the employee's termination.
In the event of a merger, sale of substantially all of the Company's assets or
change in the ownership of the Company, all options outstanding under the Stock
Plan shall be fully vested. Each such vested option will remain exercisable in
accordance with the terms under which such option was granted.
Employee Stock Purchase Plan. The Company's Employee Stock Purchase Plan
(the "Purchase Plan") was adopted by the Company's Board of Directors and
approved by the Company's stockholders in January 1997. The Purchase Plan is
intended to qualify under Section 423 of the Code. The Company has reserved
214,286 shares of Common Stock for issuance under the Purchase Plan. Under the
Purchase Plan, an eligible employee will be granted an option to purchase shares
of Common Stock from the Company through payroll deductions of up to 10% of his
or her compensation, at a price per share equal to 85% of the lower of (i) the
fair market value of the Company's Common Stock on the first day of an offering
period under the Purchase Plan or (ii) the fair market value of the Company's
Common Stock on the last day of an offering period. Except for the first
offering period, each offering period will last for six months and will commence
the first day on which the national stock exchanges and the Nasdaq National
Market System are open for trading on or after May 1 and November 1 of each
year. The first offering period will begin upon the effective date of this
offering and will end on October 31, 1997. On the last day of each offering
period, the option to purchase the shares will be exercised automatically, and
the maximum number of full shares subject to the option will be purchased for
the employee with the accumulated payroll deductions in his or her account. Any
employee who is customarily employed for at least 20 hours per week and more
than five months per calendar year and who has been so employed for at least
three consecutive months on or before the commencement date of an offering
period is eligible to participate in the Purchase Plan. An employee may elect to
withdraw from the Purchase Plan by withdrawing all, but not less than all,
payroll deductions from his account prior to the exercise date, and a
termination of employment will be treated as a withdrawal from the Purchase
Plan.
In the event of merger of the Company with or into another corporation, all
outstanding options will either be assumed or an equivalent option will be
substituted by the successor corporation, unless the Board in its discretion
accelerates the exercise date of such options or cancels the options and refunds
all payroll deductions collected from the employees. If the Board accelerates
the exercise date, it must give the employees ten days' notice of the new
exercise date.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Amended and Restated Certificate of Incorporation limits the
liability of directors to the maximum extent permitted by Delaware law. Delaware
law provides that directors of a corporation will not be personally liable for
monetary damages for breach of their fiduciary duties as directors, except
liability for (i) breach of their duty of loyalty to the corporation or its
stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) unlawful payments of
dividends or
49
<PAGE> 51
unlawful stock repurchases or redemptions, or (iv) any transaction from which
the director derived an improper personal benefit. Such limitation of liability
does not apply to liabilities arising under the federal or state securities laws
and does not affect the availability of equitable remedies such as injunctive
relief or rescission.
The Company's Bylaws provide that the Company shall indemnify its
directors, officers, employees and other agents to the fullest extent permitted
by law. The Company believes that indemnification under its Bylaws covers at
least negligence and gross negligence on the part of indemnified parties. The
Company's Bylaws also permit it to secure insurance on behalf of any officer,
director, employee or other agent for any liability arising out of his or her
actions in such capacity, regardless of whether the Bylaws permit such
indemnification.
The Company has entered into agreements to indemnify its directors and
executive officers, in addition to the indemnification provided for in the
Company's Bylaws. These agreements, among other things, indemnify the Company's
directors and executive officers for certain expenses (including attorneys'
fees), judgments, fines and settlement amounts incurred by any such person in
any action or proceeding, including any action by or in the right of the Company
arising out of such person's services as a director, officer, employee, agent or
fiduciary of the Company, any subsidiary of the Company or any other company or
enterprise to which the person provides services at the request of the Company.
The Company believes that these provisions and agreements are necessary to
attract and retain qualified persons as directors and executive officers.
At present, there is no pending litigation or proceeding involving a
director or officer of the Company in which indemnification is required or
permitted, and the Company is not aware of any threatened litigation or
proceeding that may result in a claim for such indemnification.
50
<PAGE> 52
CERTAIN TRANSACTIONS
On October 31, 1996, the Company loaned Mark A. Samuels, President, Chief
Executive Officer and a director of the Company, $200,000. The loan, which is
evidenced by a promissory note secured by Common Stock of the Company and other
securities, bears interest at the rate of 6.72% per year and becomes due and
payable on the earlier of October 31, 2001 or 120 days after the date when he
ceases to be an employee of the Company. The outstanding balance, including
interest, as of January 31, 1997 was approximately $203,000. Mark A. Samuels'
largest aggregate amount of indebtedness outstanding to the Company in 1996 was
approximately $235,000.
On October 31, 1996, the Company loaned Keith D. Ignotz, Chief Operating
Officer and a director of the Company, $200,000. The loan, which is evidenced by
a promissory note secured by Series B Preferred Stock of the Company and other
securities, bears interest at the rate of 6.72% per year and becomes due and
payable on the earlier of October 31, 2001 or 120 days after the date when he
ceases to be an employee of the Company. The outstanding balance, including
interest, as of January 31, 1997 was approximately $203,000. Keith D. Ignotz's
largest aggregate amount of indebtedness outstanding to the Company in 1996 was
approximately $227,000.
On June 30, 1994, the Company loaned Mark A. Samuels, President, Chief
Executive Officer and a director of the Company, approximately $28,000 in
connection with his purchase of Common Stock of the Company. The loan is
evidenced by a promissory note secured by the underlying stock, bears interest
at the rate of 6% per year and becomes due and payable on June 30, 1999. The
outstanding balance, including interest, as of January 31, 1997 was
approximately $32,000.
On June 30, 1994, the Company loaned Keith D. Ignotz, Chief Operating
Officer and a director of the Company, approximately $21,000 in connection with
his purchase of Common Stock of the Company. The loan, which is evidenced by a
promissory note secured by the underlying stock, bears interest at the rate of
6% per year and becomes due and payable on June 30, 1999. The outstanding
balance, including interest, as of January 31, 1997 was approximately $24,000.
On September 16, 1996, the Company loaned Laser Atlanta Optics, Inc.
("LAO") $30,000. Mark A. Samuels was treasurer and a director of LAO until
October 1996, and owns more than 10% of LAO's equity securities. Richard L.
Fowler, Vice President, Engineering of the Company, was secretary and a director
of LAO until November 1996. Keith D. Ignotz was a director of LAO until October
1996, and owns more than 10% of LAO equity securities. The loan bore interest at
a rate of 6% per year and was repaid in full as of December 31, 1996.
On March 1, 1996, the Company issued 28,572 shares of Common Stock to LAO
in connection with the settlement of LAO's disputed claim to certain rights,
title and interest in and to any technology, patents, products, uses and
applications related to transdermal monitoring and delivery.
On December 5, 1996, the Company purchased 129,000 shares of FluorRx, Inc.
Series A Preferred Stock, thereby acquiring a 64.8% interest in FluorRx, Inc.
Mark A. Samuels is a director of FluorRx, Inc., and Keith D. Ignotz is Vice
President, Secretary and a director of FluorRx, Inc. In addition, the Company
has a third seat on the Board of Directors, which is currently vacant. In
connection with the purchase of this stock, the Company has agreed to loan
FluorRx, Inc. up to $100,000. This loan, which has not been made, would be
evidenced by a convertible promissory note, would bear interest at the rate of
8% per year and would become due and payable on December 5, 1997.
On March 1, 1996, the Company entered into a License and Joint Development
Agreement (the "Altea/Nimco Agreement") with Altea Technologies, Inc. ("Altea")
and Non-Invasive Monitoring Company, Inc. ("Nimco"). Jonathan Eppstein, Vice
President, Transdermal Systems of the Company, and Deborah Eppstein, Jonathan
Eppstein's sister, are principals of Altea and Nimco. On March 8, 1996, the
Company issued 71,429 shares of Common Stock to Altea pursuant to section 3.1 of
the Altea/Nimco Agreement. Also pursuant to the Altea/Nimco Agreement, in June
1995, March 1996, September 1996 and October 1996, the Company paid, $5,000,
$1,100, $19,000, and $150,000, respectively, to Altea. See
"Business -- Licensing Arrangements."
51
<PAGE> 53
On October 10, 1996, the Company entered into a Research & Development and
License Agreement (the "Abbott Agreement") with Abbott. In connection with the
Abbott Agreement, on October 21, 1996, Abbot purchased $3,000,000 of equity in
the Company in the form of Series C Preferred Stock, and thereby became a holder
of 6.4% of the Company's outstanding equity prior to this offering. See
"Business -- Collaborative Arrangements."
On November 6, 1995 and April 15, 1996, the Company sold Convertible
Subordinated Promissory Notes ("Notes"), which automatically converted into
278,548 aggregate shares of Series B Preferred Stock on an as converted basis,
and Stock Purchase Warrants ("Warrants") to purchase 317,614 aggregate shares of
Common Stock. On August 30, 1996, the Company sold shares of Series B Preferred
Stock which automatically convert to 908,621 shares of Common Stock upon the
closing of this offering at an as-converted price of $5.60 per share. On October
21, 1996, the Company sold shares of Series C Preferred Stock which
automatically convert to 357,143 shares of Common Stock upon the closing of this
offering at an as-converted price of $8.40 per share. The purchasers of the
Notes, Warrants, Series B Preferred Stock, and Series C Preferred Stock included
the following directors, entities affiliated with directors and 5% shareholders.
<TABLE>
<CAPTION>
NUMBER OF SHARES
SHARES OF SHARES OF
WARRANT PURCHASED SERIES B SERIES C
NOTE PURCHASE UNDER PREFERRED PREFERRED
NAME AMOUNT PRICE WARRANT STOCK STOCK
- ----------------------------------------------- -------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
DIRECTORS AND ENTITIES AFFILIATED WITH
DIRECTORS:
Entity Affiliated with Charles G. Hadley(1)
(Hillman Medical Ventures Partnerships(2))... $348,040 $6,960 74,581 450,381 --
Entity Affiliated with Jack Kelly(1)
(Noro-Moseley Partners, L.P.(3))............. 348,040 6,960 74,581 137,882 --
Keith D. Ignotz(4)............................. 59,804 1,196 12,815 20,009 --
OTHER 5% SHAREHOLDERS:
Abbott Laboratories(5)......................... -- -- -- -- 357,143
</TABLE>
- ---------------
(1) Charles G. Hadley and Jack Kelly each sit on the Board of Directors of the
Company pursuant to the Series A Preferred Stock Purchase Agreement which
provides that as of February 5, 1993, "the Company's Board of Directors
will consist of Mark A. Samuels and Keith D. Ignotz, two persons chosen by
the Purchasers and a fifth person to be chosen by the holders of Common
Stock."
(2) Hillman Medical Ventures 1995 L.P. held a $250,000 Note that converted into
Series B Preferred Stock, holds a Warrant for 53,572 shares of Common Stock
purchased for $5,000 and holds 48,288 shares of Series B Preferred Stock on
an as converted basis; Hillman Medical Ventures 1996 L.P. held a $98,040
Note that converted into Series B Preferred Stock, holds a Warrant for
21,009 shares of Common Stock purchased for $1,960 and holds 402,093 shares
of Series B Preferred Stock on an as converted basis. The Hillman Medical
Ventures partnerships hold 27.2% of the Company's outstanding equity prior
to this offering. The general partners of the Hillman Medical Ventures
partnerships are Cashon Biomedical Associates L.P. and Hillman/Dover
Limited Partnership. The general partner of Hillman/Dover Limited
Partnership is a wholly-owned subsidiary of The Hillman Company, a firm
engaged in diversified investments and operations. The Hillman Company is
controlled by Henry L. Hillman, Elsie Hilliard Hillman and C.G.
Grefenstette, Trustees of the Henry L. Hillman Trust, which Trustees may be
deemed the beneficial owners of the 1,515,201 shares owned by the Hillman
Medical Ventures partnerships.
(3) Noro-Moseley Partners, L.P. holds 18.9% of the Company's outstanding equity
prior to this offering.
(4) Keith Ignotz sits on the Board of Directors of the Company, is the Executive
Vice President and Chief Operating Officer, and holds 6.9% of the Company's
outstanding equity prior to this offering.
(5) Abbott holds 6.4% of the Company's outstanding equity prior to this
offering.
52
<PAGE> 54
PRINCIPAL STOCKHOLDERS
The following table sets forth as of December 31, 1996, and as adjusted to
reflect the sale of the shares of Common Stock offered hereby, certain
information with respect to the beneficial ownership of the Common Stock as to
(i) each person known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock, (ii) each director of the Company, (iii)
each of the Executive Officers named in the Summary Compensation Table, and (iv)
all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
PERCENT OF SHARES
NUMBER OF OUTSTANDING
SHARES ------------------------
BENEFICIALLY BEFORE THE AFTER THE
BENEFICIAL OWNER OWNED(1) OFFERING OFFERING(2)
- ---------------------------------------------------------- --------- ---------- -----------
<S> <C> <C> <C>
Hillman Medical Ventures Partnerships(3).................. 1,515,201 27.2% 20.0%
824 Market Street
Suite 900
Wilmington, DE 19801
Noro-Moseley Partners(4).................................. 1,050,631 18.9% 13.9%
4200 Northside Parkway
Building 9
Atlanta, GA 30327
Mark A. Samuels(5)........................................ 459,523 8.2% 6.0%
c/o SpectRx, Inc.
6025A Unity Drive
Norcross, GA 30071
Keith D. Ignotz(6)........................................ 420,599 7.5% 5.5%
c/o SpectRx, Inc.
6025A Unity Drive
Norcross, GA 30071
Abbott Laboratories....................................... 357,143 6.4% 4.7%
100 Abbott Park Road
Abbott Park, IL 60064
Jonathan A. Eppstein(7)................................... 200,671 3.5% 2.6%
Richard L. Fowler(8)...................................... 29,833 * *
Thomas H. Muller, Jr.(9).................................. 2,530 * *
Robert G. Rothfritz(10)................................... 3,125 * *
Charles G. Hadley(11)..................................... 1,515,201 27.2% 20.0%
Jack R. Kelly, Jr.(12).................................... 1,050,631 18.9% 13.9%
All directors and executive officers as a group (8
persons)(13)............................................ 3,682,113 63.8% 47.4%
</TABLE>
- ---------------
(*) Less than 1%
(1) Applicable percentage ownership based on 5,567,590 shares of Common Stock
as of December 31, 1996, together with applicable options for such
stockholder. Beneficial ownership is determined in accordance with the
rules of the Commission, based on factors including voting and investment
power with respect to shares. Shares of Common Stock subject to the options
currently exercisable, or exercisable within 60 days after December 31,
1996, and any warrants to purchase shares of Common Stock are deemed
outstanding for computing the percentage ownership of any other person.
(2) After giving effect to the issuance of 2,000,000 shares of Common Stock
offered hereby.
(3) Consists of 402,093 shares owned by Hillman Medical Ventures 1996 L.P.,
48,288 shares owned by Hillman Medical Ventures 1995 L.P., 214,728 shares
owned by Hillman Medical Ventures 1994 L.P., 714,286 shares owned by
Hillman Medical Ventures 1993 L.P., a warrant exercisable for 21,009 shares
owned by Hillman Medical Ventures 1996 L.P., a warrant exercisable for
53,572 shares owned by Hillman Medical Ventures 1995 L.P., and a warrant
exercisable for 61,225 shares owned by Hillman Medical Ventures 1993 L.P.
The general partners of the Hillman Medical Ventures partnerships are
Cashon Biomedical Associates L.P. and Hillman/Dover Limited Partnership.
The general partner of
53
<PAGE> 55
Hillman/Dover Limited Partnership is a wholly-owned subsidiary of The
Hillman Company, a firm engaged in diversified investments and operations.
The Hillman Company is controlled by Henry L. Hillman, Elsie Hilliard
Hillman and C.G. Grefenstette, Trustees of the Henry L. Hillman Trust,
which Trustees may be deemed the beneficial owners of the 1,515,201 shares
owned by the Hillman Medical Ventures partnerships.
(4) Consists of 908,702 shares held by Noro-Moseley Partners and 141,929 shares
issuable pursuant to four warrants to purchase shares of Common Stock. Mr.
Kelly disclaims beneficial ownership of the shares held by Noro-Moseley
Partners.
(5) Consists of 420,386 shares held by Mr. Samuels and 39,137 shares subject to
stock options that are exercisable within 60 days of December 31, 1996.
(6) Consists of 362,099 shares held by Mr. Ignotz, 34,970 shares subject to
stock options that are exercisable within 60 days of December 31, 1996 and
23,530 shares issuable pursuant to two warrants to purchase shares of
Common Stock.
(7) Consists of 11,296 shares held by Mr. Eppstein, 71,429 shares held by Altea
of which Mr. Eppstein has beneficial ownership and 117,946 shares subject
to stock options that are exercisable within 60 days of December 31, 1996.
(8) Consists of 24,476 shares held by Mr. Fowler and 5,357 shares subject to
stock options that are exercisable within 60 days of December 31, 1996.
(9) Consists of 2,530 shares subject to options exercisable within 60 days of
December 31, 1996.
(10) Consists of 3,125 shares subject to stock options that are exercisable
within 60 days of December 31, 1996.
(11) Consists of 402,093 shares owned by Hillman Medical Ventures 1996 L.P.,
48,288 shares owned by Hillman Medical Ventures 1995 L.P., 214,728 shares
owned by Hillman Medical Ventures 1994 L.P., 714,286 shares owned by
Hillman Medical Ventures 1993, a warrant exercisable for 21,009 shares
owned by Hillman Medical Venture 1996 L.P., a warrant exercisable for
53,572 shares owned by Hillman Medical Venture 1995 L.P., and a warrant
exercisable for 61,225 shares owned by Hillman Medical Venture 1993 L.P.
The general partners of the Hillman Medical Ventures partnerships are
Cashon Biomedical Associates L.P. and Hillman/Dover Limited Partnership.
The general partner of Hillman/Dover Limited Partnership is a wholly-owned
subsidiary of The Hillman Company, a firm engaged in diversified
investments and operations. The Hillman Company is controlled by Henry L.
Hillman, Elsie Hilliard Hillman and C.G. Grefenstette, Trustees of the
Henry L. Hillman Trust, which Trustees may be deemed the beneficial owners
of the 1,515,201 shares owned by the Hillman Medical Ventures partnerships.
(12) Consists of 908,702 shares held by Noro-Moseley Partners and 141,929 shares
issuable pursuant to four warrants to purchase shares of Common Stock. Mr.
Kelly disclaims beneficial ownership of the shares held by Noro-Moseley
Partners.
(13) Includes an aggregate 203,065 shares issuable pursuant to options and
warrants exercisable within 60 days of December 31, 1996.
54
<PAGE> 56
DESCRIPTION OF CAPITAL STOCK
Upon completion of the offering, the total number of shares of all classes
of stock which the Company has authority to issue will be 50,000,000 shares of
Common Stock, $0.001 par value, and 5,000,000 shares of undesignated preferred
stock, $0.001 par value. As of December 31, 1996, there were 5,567,590 shares of
Common Stock outstanding which were held of record by 53 shareholders, and no
shares of undesignated Preferred Stock outstanding. Upon completion of this
offering and assuming no exercise of options after December 31, 1996, the
Company will have outstanding 7,567,590 shares of Common Stock, 7,867,590 shares
if the Underwriter's over-allotment option is exercised.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of shareholders. Subject to
preferences that may be applicable to any outstanding preferred stock, holders
of Common Stock are entitled to receive ratably such dividends as may be
declared by the Board of Directors of the Company out of funds legally available
therefor and in liquidation proceedings. Holders of Common Stock have no
preemptive or subscription rights and there are no redemption rights with
respect to such shares. The outstanding shares of Common Stock are, and the
shares of Common Stock offered hereby will be, fully paid and nonassessable.
PREFERRED STOCK
The Company's Board of Directors is authorized, without further shareholder
action, to issue preferred stock in one or more series and to fix the voting
rights, liquidation preferences, dividend rights, repurchase rights, conversion
rights, redemption rights and terms, including sinking fund provisions, and
certain other rights and preferences, of the preferred stock.
Although there is no current intention to do so, the Board of Directors of
the Company may, without shareholder approval, issue shares of a class or series
of preferred stock with voting and conversion rights which could adversely
affect the voting power or dividend rights of the holders of Common Stock and
may have the effect of delaying, deferring or preventing a change in control of
the Company.
NOTES, WARRANTS AND OPTIONS
The Company has issued a Convertible Promissory Note ("Note") convertible
into shares of its Common Stock on or at any time following the closing of this
offering and on or before June 19, 1998. The number of shares issuable under the
Note is equal to the outstanding principal and accrued interest divided by
one-half of the per share purchase price paid by the public in this offering. As
of December 31, 1996, and assuming an initial public offering price of $11.00
per share, the Note could convert to 47,398 shares of Common Stock.
The Company has issued warrants to purchase its Common Stock from time to
time in connection with certain financing arrangements. Warrants to purchase a
total of 561,698 shares of Common Stock have been issued by the Company at a
weighted average exercise price of $1.25 per share in connection with certain
transactions. All warrants except one for 8,572 shares of Common Stock are
currently exercisable and expire upon the closing of this offering. All
outstanding warrant agreements provide for antidilution adjustments in the event
of certain mergers, consolidations, reorganizations, recapitalizations, stock
dividends, stock splits or other changes in the corporate structure of the
Company. Holders of these warrants will be entitled to certain rights to cause
the Company to register the sale of such shares under the Securities Act. See
"Shares Eligible for Future Sale."
As of December 31, 1996, the Company had issued options to purchase a total
of 663,362 shares of Common Stock pursuant to the Company's 1995 Stock Plan (the
"Stock Plan") at a weighted average exercise price of $0.64 per share.
Recommendations for option grants under the Stock Plan are made by the
Compensation Committee, subject to ratification by the full Board of Directors.
The Compensation Committee may issue options with varying vesting schedules, but
all options granted pursuant to the Stock Plan must be exercised within ten
years from the date of grant.
55
<PAGE> 57
REGISTRATION RIGHTS OF CERTAIN HOLDERS
The holders of 4,035,888 shares of Common Stock (the "Registrable
Securities") or their transferees are entitled to certain registration rights
with respect to the registration of such shares under the Securities Act of
1933, as amended (the "Securities Act"). These rights are provided under the
terms of the Amended and Restated Registration Rights Agreement between the
Company and the holders of the Registrable Securities. The holders of at least
80% of the Registrable Securities (or any lesser number of shares of Registrable
Securities having an expected aggregate offering price greater than $7.5
million) may require, respectively, subject to certain limitations in the Stock
Purchase Agreements, on one or two occasions, after the later of September 1,
1998 or six months after the effective date of this Prospectus, that the Company
use its best efforts to register the Registrable Securities for public resale.
In addition, if, following this offering, the Company registers any of its
Common Stock either for its own account or for the account of other security
holders, the holders of Registrable Securities are entitled to include their
shares of Common Stock in the registration. These shares will not form a part of
the shares of the Common Stock registered in this offering. A holder's right to
include shares in an underwritten registration statement is subject to the
ability of the underwriters to limit the number of shares included in the
offering. The holder or holders of Registrable Securities may also require the
Company to register all or a portion of their Registrable Securities on Form S-3
when use of such form becomes available to the Company, provided, among other
limitations, that the proposed aggregate selling price, net of underwriting
discounts and commissions, is at least $500,000. All registration expenses must
be borne by the Company and all selling expenses relating to Registrable
Securities must be borne by the holders of the securities being requested. If
such holders, by exercising their demand registration rights, cause a large
number of securities to be registered and sold in the public market, such sales
could have an adverse effect on the market price for the Company's Common Stock.
If the Company were to initiate a registration and include Registrable
Securities pursuant to the exercise of piggyback registration rights, the sale
of such Registrable Securities may have an adverse effect on the Company's
ability to raise capital.
CERTAIN CHARTER AND BYLAW PROVISIONS AND DELAWARE ANTI-TAKEOVER STATUTE
Certain provisions of the Restated Certificate of Incorporation and the
Company's Bylaws may have the effect of making it more difficult for a third
party to acquire, or of discouraging a third party from attempting to acquire,
control of the Company. Such provisions could limit the price that certain
investors might be willing to pay in the future for shares of Common Stock.
Certain of these provisions allow the Company to issue Preferred Stock without
any vote or further action by the stockholders and eliminate the right of
stockholders to act by written consent without a meeting. These provisions may
make it more difficult for stockholders to take certain corporate actions and
could have the effect of delaying or preventing a change in control of the
Company. In addition, the Company is subject to Section 203 of the Delaware
General Corporation Law which, subject to certain exceptions, prohibits a
Delaware corporation from engaging in any business combination with any
interested stockholder for a period of three years following the date that such
stockholder became an interested stockholder, unless: (1) prior to such date,
the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder, or (2) upon consummation of the transaction which
resulted in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding of those shares owned (i) by
persons who are directors and also officers and (ii) employee stock plans in
which employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange
offer, or (iii) on or subsequent to such time the business combination is
approved by the board of directors and authorized at an annual or special
meeting of stockholders, and not by written consent, by the affirmative vote of
at least 66 2/3% of the outstanding voting stock which is not owned by the
interested stockholder.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar with respect to the Common Stock will be
Suntrust Bank in Atlanta, Georgia, and its telephone number is (404) 724-3762.
56
<PAGE> 58
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering and assuming no exercise of options after
December 31, 1996, the Company will have outstanding 7,567,590 shares of Common
Stock (7,867,590 shares if the Underwriter's over-allotment option is
exercised). Of these shares, the 2,000,000 shares (2,300,000 shares if the
Underwriters' over-allotment option is exercised in full) sold in this offering
will be freely tradable without restriction or further registration under the
Securities Act unless purchased by "affiliates" of the Company as that term is
defined in Rule 144 of the Securities Act ("Rule 144"). The remaining 5,567,590
shares outstanding upon completion of this offering will be "restricted
securities" as that term is defined under Rule 144 (the "Restricted Shares").
Each of the officers, directors and certain other stockholders of the Company
that beneficially own or have dispositive power over substantially all of the
Restricted Shares have agreed with the Underwriters not to sell or otherwise
dispose of any shares of Common Stock for a period of 180 days after the date of
this Prospectus (the "Lock-up Period") without the written consent of Hambrecht
& Quist LLC. Hambrecht & Quist LLC, in its sole discretion at any time and
without notice, may release any or all shares from the lock-up agreements and
permit holders of the shares to resell all or any portion of their shares at any
time prior to the expiration of the Lock-up Period. See "Underwriting." The
number of shares of Common stock available for sale in the public market is
further limited by restrictions under the Securities Act.
Because of the restrictions noted above, on the date of this Prospectus, no
shares other than the 2,000,000 shares (2,300,000 shares if the Underwriter's
over-allotment option is exercised) offered hereby will be eligible for sale.
Beginning 180 days after the date of this Prospectus (or earlier with the prior
written consent of Hambrecht & Quist LLC), 1,374,273 shares, including 284,446
shares issuable upon exercise of currently outstanding vested options, will be
eligible for sale in the public market without restriction. In addition,
3,446,493 shares will be eligible for sale subject to certain volume
limitations. The remaining 1,031,270 shares held by existing stockholders will
become eligible for sales from time to time upon the expiration of the minimum
holding period prescribed by Rule 144.
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 two years from the later of the date such
Restricted Shares are acquired from the Company and (if applicable) the date
they were acquired from an affiliate, is entitled to sell, within any
three-month period, a number of shares that does not exceed the greater of 1% of
the then outstanding shares of Common Stock or the average weekly trading volume
in the Nasdaq National Market System during the four calendar weeks preceding
the filing of Form 144 with respect to such sale. Sales under Rule 144 are also
subject to certain requirements as to the manner and notice of sales and the
availability of public information concerning the Company. All shares, including
Restricted Shares, held by affiliates of the Company eligible for sale in the
public market under Rule 144 are subject to the foregoing volume limitations and
other restrictions. In addition, an individual that is not deemed to have been
an affiliate of the Company at any time during the 90 days preceding a sale, and
who has beneficially owned for at least three years the shares proposed to be
sold, would be entitled to sell such shares under paragraph(k) thereof without
regard to the requirements described above.
The Commission has adopted an amendment to Rule 144 and paragraph(k)
thereof that would reduce the applicable requisite holding periods to one year
and two years, respectively. This amendment will be effective 60 days after its
publication in the Federal Register. The figures listed in this prospectus
assume the effectiveness of this amendment.
In general, Rule 701 permits resales of shares issued pursuant to certain
compensatory benefit plans and contracts commencing 90 days after the issuer
becomes subject to the reporting requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), in reliance upon Rule 144 but without
compliance with certain restrictions, including the holding period requirements,
contained in Rule 144. Prior to the expiration of the Lock-up Period, the
Company intends to register on a registration statement on Form S-8, (i) a total
of 214,286 shares of Common Stock reserved for issuance under the Purchase Plan
and (ii) assuming no exercise of options after December 31, 1996, 663,362 shares
of Common Stock subject to outstanding options under the Stock Plan and 764,807
shares reserved for future issuance pursuant to such
57
<PAGE> 59
plan. Such registration will permit the resale of shares so registered by
non-affiliates in the public market without restriction under the Securities
Act.
Prior to this offering, there has been no public market for the Common
Stock of the Company, and any sale of substantial amounts of Common Stock in the
open market may adversely affect the market price of the Common Stock offered
hereby. See "Risk Factors -- Potential Adverse Effect of Shares Eligible for
Future Sale."
58
<PAGE> 60
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below, through their Representatives, Hambrecht & Quist LLC
and Volpe, Welty & Company L.L.C., have severally agreed to purchase from the
Company the following respective number of shares of Common Stock:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
------------------------------------------------------------------ ---------
<S> <C>
Hambrecht & Quist LLC.............................................
Volpe, Welty & Company L.L.C......................................
-------
Total...................................................
=======
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, including the absence
of any material adverse change in the Company's business and the receipt of
certain certificates, opinions and letters from the Company, its counsel and
independent auditors. The nature of the Underwriters' obligation is such that
they are committed to purchase all shares of Common Stock offered hereby if any
of such shares are purchased.
The Underwriters propose to offer the shares of Common Stock directly 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. The Underwriters may allow and such dealers may
reallow a concession not in excess of $ per share to certain other dealers.
After the initial public offering of the shares, the offering price and other
selling terms may be changed by the Representatives of the Underwriters. The
Representatives have informed the Company that the Underwriters do not intend to
confirm sales to accounts over which they exercise discretionary authority.
The Company has granted to the Underwriters an option, exercisable no later
than 30 days after the date of this Prospectus, to purchase up to 300,000
additional shares of Common Stock at the initial public offering price, less the
underwriting discount, set forth on the cover page of this Prospectus. To the
extent that the Underwriters exercise this option, each of the Underwriters will
have a firm commitment to purchase approximately the same percentage thereof
which the number of shares of Common Stock to be purchased by it shown in the
above table bears to the total number of shares of Common Stock offered hereby.
The Company will be obligated, pursuant to the option, to sell shares to the
Underwriters to the extent the option is exercised. The Underwriters may
exercise such option only to cover over-allotments made in connection with the
sale of shares of Common Stock offered hereby.
The offering of the shares is made for delivery when, as and if accepted by
the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The Underwriters reserve the right
to reject an order for the purchase of shares in whole or in part.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, and to contribute
to payments the Underwriters may be required to make in respect thereof.
The Company, including the executive officers and directors, who will own
in the aggregate 3,772,994 shares of Common Stock after the offering, have
agreed that they will not, without the prior written consent of Hambrecht &
Quist LLC, offer, sell, or otherwise dispose of any shares of Common Stock,
options or warrants to acquire shares of Common Stock or securities exchangeable
for or convertible into shares of Common Stock owned by them during the 180-day
period following the date of this Prospectus. The Company has agreed that it
will not, without prior written consent of Hambrecht & Quist LLC, offer, sell or
otherwise
59
<PAGE> 61
dispose of any shares of Common Stock, options or warrants to acquire shares of
Common Stock or securities exchangeable for or convertible into shares of Common
Stock during the 180-day period following the date of this Prospectus, except
that the Company may issue shares upon the exercise of options granted prior to
the date hereof, and may grant additional options under its stock option plans,
provided that, without the prior written consent of Hambrecht & Quist LLC, such
additional options shall not be exercisable during such period.
Prior to the offering, there has been no public market for the Common
Stock. The initial public offering price for the Common Stock will be determined
by negotiation among the Company and the Representatives. Among the factors to
be considered in determining the initial public offering price are prevailing
market and economic conditions, revenues and earnings of the Company, market
valuations of other companies engaged in activities similar to the Company,
estimates of the business potential and prospects of the Company, the present
state of the Company's business operations, the Company's management and other
factors deemed relevant. The estimated initial public offering price range set
forth on the cover of this preliminary prospectus is subject to change as a
result of market conditions and other factors.
In connection with this Offering, the Representatives, on behalf of the
Underwriters, other underwriters and certain other persons participating in this
Offering may over-allot or effect transactions which stabilize or maintain the
market price of the Common Stock of the Company at a level above that which
might otherwise prevail in the open market. Such transactions may be effected on
the Nasdaq National Market, in the over-the-counter market or otherwise. Such
stabilizing, if commenced, may be discontinued at any time.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Wilson Sonsini Goodrich & Rosati, P.C. Certain legal matters relating
to patents in connection with this offering will be passed on by Fleshner & Kim;
Kilpatrick Stockton LLP; and Thorpe, North & Western. Certain legal matters in
connection with the offering will be passed upon for the Underwriters by White &
Case.
EXPERTS
The financial statements included in this Prospectus and elsewhere in the
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said report.
The statements in this Prospectus (only to the extent such statements
describe the legal status of patents handled, or in the case of Kilpatrick
Stockton LLP prosecuted, by the following counsel) under the caption "Risk
Factors -- Dependence on Licensed Patent Applications and Proprietary
Technology" and "Business -- Patents" have been reviewed and approved by
Fleshner & Kim; Kilpatrick Stockton LLP; and Thorpe, North & Western.
The statements in this Prospectus under the caption "Risk Factors -- No
Assurance of Regulatory Approvals" and "Business -- Government Regulation" have
been reviewed and approved by Medical Device Consultants, Inc.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement, of
which this Prospectus constitutes a part, under the Securities Act with respect
to the shares of Common Stock offered hereby. This Prospectus omits certain
information contained in the Registration Statement, and reference is made to
the Registration Statement and the exhibits thereto for further information with
respect to the Company and the Common Stock offered hereby. Statements contained
herein concerning the provisions of any documents are not necessarily an
exhaustive description of such documents, and reference is made to the copy of
each such document filed as an exhibit to the Registration Statement. Each such
statement is qualified in its entirety by
60
<PAGE> 62
such reference. The Registration Statement, including exhibits filed therewith,
may be inspected without charge at the public reference facilities maintained by
the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the regional offices of the Commission located at
Seven World Trade Center, 13th Floor, New York, New York 10048 and Citicorp
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials may be obtained from the Public Reference Section of
the Commission, Room 1034, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and its public reference facilities in New York, New York and
Chicago, Illinois, at prescribed rates. In addition, the Commission maintains a
World Wide Web site that contains reports, proxy and information statements that
are filed electronically with the Commission. The address of the site is
http://www.sec.gov.
61
<PAGE> 63
SPECTRX, INC.
(A DEVELOPMENT STAGE COMPANY)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.............................................. F-2
Consolidated Balance Sheets as of December 31, 1995 and 1996.......................... F-3
Consolidated Statements of Operations for the Years ended December 31, 1994, 1995,
1996, and the Period From Inception (October 27, 1992) to December 31, 1996......... F-4
Consolidated Statements of Stockholders' (Deficit) Equity for the Period from
Inception (October 27, 1992) to December 31, 1996................................... F-5
Consolidated Statements of Cash Flows for the Years ended December 31, 1994, 1995,
1996 and the Period From Inception (October 27, 1992) to December 31, 1996.......... F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE> 64
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To SpectRx, Inc.:
We have audited the accompanying consolidated balance sheets of SPECTRX,
INC. (a Delaware corporation in the development stage) as of December 31, 1995
and 1996 and the related consolidated statements of operations, stockholders'
(deficit) equity, and cash flows for each of the three years in the period ended
December 31, 1996 and for the period from inception (October 27, 1992) to
December 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of SpectRx, Inc. as of December
31, 1995 and 1996 and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1996 and for the period from
inception (October 27, 1992) to December 31, 1996 in conformity with generally
accepted accounting principles.
Arthur Andersen LLP
Atlanta, Georgia
February 24, 1997
F-2
<PAGE> 65
SPECTRX, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
DECEMBER 31, EQUITY AT
----------------- DECEMBER 31,
1995 1996 1996
------- ------- ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents...................................... $ 107 $ 4,721
Accounts receivable............................................ 216 1
Other current assets........................................... 20 90
------- -------
Total current assets................................. 343 4,812
------- -------
Property and equipment, net of accumulated depreciation of $148
and $274 in 1995 and 1996, respectively...................... 300 596
------- -------
OTHER ASSETS, net:
Purchased technology........................................... 108 126
Due from related parties....................................... -- 412
------- -------
Total other assets................................... 108 538
------- -------
$ 751 $ 5,946
======= =======
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
CURRENT LIABILITIES:
Accounts payable............................................... $ 166 $ 557
Accrued liabilities............................................ 146 385
Convertible subordinated promissory notes...................... 475 --
------- -------
Total current liabilities............................ 787 942
------- -------
CONVERTIBLE SUBORDINATED PROMISSORY NOTES...................... -- 250
------- -------
COMMITMENTS AND CONTINGENCIES (Note 6)
STOCKHOLDERS' (DEFICIT) EQUITY:
Series A convertible preferred stock, $0.001 par value;
3,560,000 shares authorized, 3,103,784 shares issued and
outstanding in 1995 and 1996................................. 3 3 --
Series B convertible preferred stock, $0.001 par value;
1,375,000 shares authorized, 0 and 1,272,051 shares issued
and outstanding in 1995 and 1996, respectively............... -- 1 --
Series C convertible preferred stock, $0.001 par value; 500,000
shares authorized, 0 and 500,000 shares issued and
outstanding in 1995 and 1996, respectively................... -- 1 --
Common stock, $0.001 par value; 15,000,000 shares authorized,
1,409,643 and 1,531,702 shares issued and outstanding in 1995
and 1996, respectively....................................... 1 2 6
Additional paid-in capital..................................... 3,138 11,330 12,196
Deferred Compensation.......................................... -- (286) (286)
Notes receivable from officers................................. (48) (48) (48)
Warrants....................................................... 114 173 --
Deficit accumulated during development stage................... (3,244) (6,422) (6,422)
------- ------- -------
Total stockholders' (deficit) equity................. (36) 4,754 $ 5,446
=======
------- -------
$ 751 $ 5,946
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-3
<PAGE> 66
SPECTRX, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
AND THE PERIOD FROM INCEPTION (OCTOBER 27, 1992) TO DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(OCTOBER 27,
YEAR ENDED DECEMBER 31, 1992) TO
--------------------------------- DECEMBER 31,
1994 1995 1996 1996
------- ------- --------- ------------
<S> <C> <C> <C> <C>
REVENUES....................................... $ 122 $ 1,179 $ 452 $ 1,753
------- ------- ------- -------
EXPENSES:
Research and development....................... 869 1,189 1,815 4,511
Sales and marketing............................ 126 146 221 689
General and administrative..................... 350 637 1,526 2,916
------- ------- ------- -------
1,345 1,972 3,562 8,116
------- ------- ------- -------
Operating loss....................... (1,223) (793) (3,110) (6,363)
INTEREST EXPENSE, NET.......................... 144 5 132 281
OTHER (INCOME)................................. (20) (118) (64) (222)
------- ------- ------- -------
NET LOSS....................................... $(1,347) $ (680) $ (3,178) $ (6,422)
======= ======= ======= =======
PRO FORMA NET LOSS PER COMMON AND COMMON
EQUIVALENT SHARE............................. $ (1.03)
=======
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING........................... 3,093,583
=======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE> 67
SPECTRX, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' (DEFICIT) EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
SERIES A SERIES B SERIES C
PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK COMMON STOCK
------------------ ------------------ ---------------- ------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ------ --------- ------ ------- ------ --------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, October 27, 1992
(inception)........................... -- $ -- -- $ -- -- $ -- -- $ --
Initial stockholders' contribution at
$0.001 per share...................... -- -- -- -- -- -- 1,178,584 1
Net loss............................... -- -- -- -- -- -- -- --
-- -- -- --
--------- --------- ------- ---------
BALANCE, December 31, 1992............. -- -- -- -- -- -- 1,178,584 1
Issuance of Series A preferred stock at
$1 per share, net of issuance costs of
$12................................... 1,850,000 2 -- -- -- -- -- --
Net loss............................... -- -- -- -- -- -- -- --
-- -- -- --
--------- --------- ------- ---------
BALANCE, December 31, 1993............. 1,850,000 2 -- -- -- -- 1,178,584 1
Issuance of common stock at $0.21 per
share................................. -- -- -- -- -- -- 231,074 --
Conversion of subordinated notes at $1
per share............................. 1,253,784 1 -- -- -- -- -- --
Series A Preferred stock warrants
issued in connection with convertible
subordinated promissory notes......... -- -- -- -- -- -- -- --
Net loss............................... -- -- -- -- -- -- -- --
-- -- -- --
--------- --------- ------- ---------
BALANCE, December 31, 1994............. 3,103,784 3 -- -- -- -- 1,409,658 1
Common stock warrants issued in
connection with convertible
subordinated promissory notes......... -- -- -- -- -- -- -- --
Net loss............................... -- -- -- -- -- -- -- --
-- -- -- --
--------- --------- ------- ---------
BALANCE, December 31, 1995............. 3,103,784 3 -- -- -- -- 1,409,658 1
Common stock warrants issued in
connection with convertible
subordinated promissory notes......... -- -- -- -- -- -- -- --
Conversion of subordinated notes....... -- -- 389,951 -- -- -- -- --
Issuance of Series B preferred stock at
$4 per share, net of issuance costs of
$23................................... -- -- 882,100 1 -- -- -- --
Issuance of Series C preferred stock at
$6 per share, net of issuance costs of
$24 and royalty payments of $223...... -- -- -- -- 500,000 1 -- --
Exercise of stock options at $0.21 per
share................................. -- -- -- -- -- -- 403 --
Issuance of common stock in settlement
of a dispute valued at $0.49 per
share................................. -- -- -- -- -- -- 28,572 --
Issuance of common stock for purchased
technology valued at $0.49 per
share................................. -- -- -- -- -- -- 71,429 1
Exercise of common stock warrant at
$1.12 per share....................... -- -- -- -- -- -- 21,640 --
Issuance of stock options at $0.70 and
$2.45 per share, valued at $1.05 and
$5.50 per share, respectively......... -- -- -- -- -- -- -- --
Amortization of deferred
compensation.......................... -- -- -- -- -- -- -- --
Net loss............................... -- -- -- -- -- -- -- --
-- -- -- --
--------- --------- ------- ---------
BALANCE, December 31, 1996............. 3,103,784 $ 3 1,272,051 $ 1 500,000 $ 1 1,531,702 $ 2
========= == ========= == ======= == ========= ==
<CAPTION>
DEFICIT
NOTES ACCUMULATED TOTAL
ADDITIONAL RECEIVABLE DURING STOCKHOLDERS'
PAID-IN DEFERRED FROM DEVELOPMENT (DEFICIT)
CAPITAL COMPENSATION OFFICERS WARRANTS STAGE EQUITY
---------- ------------ ---------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, October 27, 1992
(inception)........................... $ -- $ -- $ -- $ -- $ -- $ --
Initial stockholders' contribution at
$0.001 per share...................... 1 -- -- -- -- 2
Net loss............................... -- -- -- -- (36) (36)
------ ----- ---- ---- ------- ------
BALANCE, December 31, 1992............. 1 -- -- -- (36) (34)
Issuance of Series A preferred stock at
$1 per share, net of issuance costs of
$12................................... 1,836 -- -- -- -- 1,838
Net loss............................... -- -- -- -- (1,181) (1,181)
------ ----- ---- ---- ------- ------
BALANCE, December 31, 1993............. 1,837 -- -- -- (1,217) 623
Issuance of common stock at $0.21 per
share................................. 48 -- (48) -- -- --
Conversion of subordinated notes at $1
per share............................. 1,253 -- -- -- -- 1,254
Series A Preferred stock warrants
issued in connection with convertible
subordinated promissory notes......... -- -- -- 79 -- 79
Net loss............................... -- -- -- -- (1,347) (1,347)
------ ----- ---- ---- ------- ------
BALANCE, December 31, 1994............. 3,138 -- (48) 79 (2,564) 609
Common stock warrants issued in
connection with convertible
subordinated promissory notes......... -- -- -- 35 -- 35
Net loss............................... -- -- -- -- (680) (680)
------ ----- ---- ---- ------- ------
BALANCE, December 31, 1995............. 3,138 -- (48) 114 (3,244) (36)
Common stock warrants issued in
connection with convertible
subordinated promissory notes......... -- -- -- 59 -- 59
Conversion of subordinated notes....... 1,560 -- -- -- -- 1,560
Issuance of Series B preferred stock at
$4 per share, net of issuance costs of
$23................................... 3,504 -- -- -- -- 3,505
Issuance of Series C preferred stock at
$6 per share, net of issuance costs of
$24 and royalty payments of $223...... 2,752 -- -- -- -- 2,753
Exercise of stock options at $0.21 per
share................................. -- -- -- -- -- --
Issuance of common stock in settlement
of a dispute valued at $0.49 per
share................................. 14 -- -- -- -- 14
Issuance of common stock for purchased
technology valued at $0.49 per
share................................. 34 -- -- -- -- 35
Exercise of common stock warrant at
$1.12 per share....................... 24 -- -- -- -- 24
Issuance of stock options at $0.70 and
$2.45 per share, valued at $1.05 and
$5.50 per share, respectively......... 304 (304) -- -- -- --
Amortization of deferred
compensation.......................... -- 18 -- -- -- 18
Net loss............................... -- -- -- -- (3,178) (3,178)
------ ----- ---- ---- ------- ------
BALANCE, December 31, 1996............. $ 11,330 $ (286) $(48) $173 $(6,422) $ 4,754
====== ===== ==== ==== ======= ======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE> 68
SPECTRX, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
AND THE PERIOD FROM INCEPTION (OCTOBER 27, 1992) TO DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(OCTOBER 27,
YEAR ENDED DECEMBER 31, 1992) TO
--------------------------- DECEMBER 31,
1994 1995 1996 1996
------- ------- ------- ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................................................ $(1,347) $ (680) $(3,178) $ (6,422)
------- ------- ------- -------
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization............................... 83 111 182 396
Amortization of debt discount............................... 67 5 66 138
Issuance of stock in settlement of dispute.................. -- -- 14 14
Amortization of deferred compensation....................... -- -- 18 18
Changes in assets and liabilities:
Accounts receivable....................................... (16) (200) 215 (1)
Other assets.............................................. (10) 14 (60) (98)
Due from related parties.................................. -- -- (412) (412)
Accounts payable.......................................... 100 158 391 557
Accrued liabilities....................................... -- -- 317 517
Deferred revenue.......................................... 534 (534) -- --
------- ------- ------- -------
Total adjustments...................................... 758 (446) 731 1,129
------- ------- ------- -------
Net cash used in operating activities.................. (589) (1,126) (2,447) (5,293)
------- ------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment........................... (80) (177) (422) (870)
Payment of royalties.......................................... -- -- (223) (223)
Other Assets.................................................. (3) (32) (49) (205)
------- ------- ------- -------
Net cash used in investing activities.................. (83) (209) (694) (1,298)
------- ------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Under revolving credit facility............................... (25) -- -- --
Issuance of common stock...................................... -- -- -- 2
Issuance of Series A preferred stock.......................... -- -- -- 1,850
Issuance of Series B preferred stock.......................... -- -- 3,528 3,528
Issuance of Series C preferred stock.......................... -- -- 3,000 3,000
Issuance of stock warrants.................................... 12 5 18 35
Exercise of warrant........................................... -- -- 24 24
Payment of stock issuance costs............................... -- -- (47) (59)
Issuance of convertible subordinated promissory notes......... 1,200 500 1,232 2,932
------- ------- ------- -------
Net cash provided by financing activities.............. 1,187 505 7,755 11,312
------- ------- ------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............ 515 (830) 4,614 4,721
CASH AND CASH EQUIVALENTS, beginning of period.................. 422 937 107 --
------- ------- ------- -------
CASH AND CASH EQUIVALENTS, end of period........................ $ 937 $ 107 $ 4,721 $ 4,721
======= ======= ======= =======
CASH PAID FOR:
Interest...................................................... $ -- $ -- $ -- $ --
Income taxes.................................................. $ -- $ -- $ -- $ --
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Conversion of subordinated promissory notes to preferred
stock....................................................... $ 1,254 $ -- $ 1,560 $ 2,814
Stock issued for subscription receivable...................... $ 48 $ -- $ -- $ 48
Warrants issued in connection with convertible subordinated
notes....................................................... $ 67 $ 30 $ 41 $ 138
Issuance of common stock for purchased technology............. $ -- $ -- $ 35 $ 35
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE> 69
SPECTRX, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1995 AND 1996
1. ORGANIZATION AND BACKGROUND
SpectRx, Inc. ("SpectRx" or the "Company") is engaged in the research and
development of products that offer less invasive and painless alternatives to
blood tests currently used for glucose monitoring, diabetes screening and infant
jaundice. The Company's goal is to introduce products that reduce or eliminate
pain, are convenient to use and provide rapid results at the point of care,
thereby improving patient well being and reducing health care costs. The
Company's glucose monitoring, diabetes screening and infant jaundice products
are based on proprietary electro-optical and microporation technology that can
eliminate the pain and inconvenience of a blood sample. The Company has entered
into collaborative arrangements with Abbott Laboratories ("Abbott"), Boehringer
Mannheim Corporation ("Boehringer Mannheim") and Healthdyne Technologies, Inc.
("Heathdyne") to facilitate the development, commercialization and introduction
of its glucose monitoring, diabetes screening and infant jaundice products,
respectively.
The developmental nature of the Company's activities is such that inherent
risks exist in its operations. The Company is subject to a number of risks
including, successful product development, dependence on collaborative
arrangements, fixed royalty rates and manufacturing profits, dependence on
licensed patent applications and proprietary technology, completion of
regulatory approvals, a market for its products, competition from well
established larger companies and the potential for other non-invasive products,
the potential need for additional financing, a lack of sales experience, product
liability and a dependence upon key personnel. While management believes that
the Company will be successful, there are no assurances of successful future
operations.
In the first quarter of 1997, the Company is planning an initial public
offering (the "Offering") of its Common Stock (Note 12). In connection with the
Offering, the Board of Directors approved a reverse stock split of 1-for-1.4 for
the Company's Common Stock effective February 19, 1997. Accordingly, all share,
per share, weighted average share, stock option, and common stock warrant
information has been restated to reflect the split. The reverse stock split will
have no effect upon the number of shares of preferred stock issued and
outstanding, just the number of shares of common stock into which the preferred
stock will convert. Accordingly, all preferred stock, preferred stock warrants,
and preferred stock price amounts have not been adjusted for the reverse stock
split. Upon completion of the planned offering, the total of shares of all
classes of stock which the Company has authority to issue will be 50,000,000
shares of Common Stock, $0.001 par value, and 5,000,000 shares of undesignated
preferred stock, $0.001 par value.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
SpectRx, Inc. and, since December 5, 1996, its 65%-owned subsidiary, FluorRx,
Inc. ("FluorRx") (Note 3). All significant intercompany amounts have been
eliminated.
PRESENTATION
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of 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-7
<PAGE> 70
SPECTRX, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash and cash equivalents.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is computed using
the straight-line method over estimated useful lives of five to seven years.
Expenditures for repairs and maintenance are expensed as incurred. Property and
equipment are summarized as follows at December 31, 1995 and 1996 (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1995 1996
---- ----
<S> <C> <C>
Equipment............................................................. $381 $689
Furniture and fixtures................................................ 67 181
---- ----
448 870
Less accumulated depreciation......................................... 148 274
---- ----
Property and equipment, net................................. $300 $596
==== ====
</TABLE>
OTHER ASSETS
Other assets include purchased technology of $108,000 and $126,000 at
December 31, 1995 and 1996, respectively, which is being amortized using the
straight-line method over its estimated useful life of five years.
PATENT COSTS
Costs incurred in filing, prosecuting and maintaining patents are expensed
as incurred. Such costs aggregated approximately $3,000, $71,000 and $165,000 in
1994, 1995 and 1996, respectively.
REVENUE RECOGNITION
Revenue from collaborative research and development agreements is recorded
when earned. Other periodic license fee payments under collaborative agreements
related to future performance are deferred and recognized as income when earned.
RESEARCH AND DEVELOPMENT
Research and development expenses consist of expenditures for research
conducted by the Company and payments made under contracts with consultants. All
research and development costs are expensed as incurred.
INCOME TAXES
Income taxes have been provided using the liability method in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting
for Income Taxes."
PRO FORMA NET LOSS PER SHARE
Pro forma net loss per share is computed using the weighted average number
of shares of Common Stock and dilutive Common Stock equivalent shares ("CSEs")
issuable upon the conversion of convertible preferred stock (using the
if-converted method) and stock options and warrants (using the treasury stock
method). Pursuant to the Securities and Exchange Commission Staff Accounting
Bulletin No. 83, common stock and
F-8
<PAGE> 71
SPECTRX, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CSEs issued at prices below the expected public offering price during the
12-month period prior to the Offering have been included in the calculation as
if they were outstanding for all periods presented prior to the Offering,
regardless of whether they are dilutive.
Historical net loss per share has not been presented in view of anticipated
change in capital structure upon the closing of the Offering.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The book values of cash, trade accounts receivable, trade accounts payable,
and other financial instruments approximate their fair values principally
because of the short-term maturities of these instruments. The fair value of the
Company's long term debt is estimated based on the current rates offered to the
Company for debt of similar terms and maturities. Under this method, the fair
value of the Company's long term debt was not significantly different than the
stated value at December 31, 1996.
LONG-LIVED ASSETS
The Company periodically reviews the values assigned to long-lived assets,
such as property and equipment and purchased technology, to determine if any
impairments are other than temporary. Management believes that the long-lived
assets in the accompanying balance sheets are appropriately valued.
3. FORMATION OF FLUORRX, INC.
In December 1996, the Company sublicensed certain technology to and
acquired a 64.8% interest in FluorRx, a newly organized Delaware corporation
formed for the purpose of developing and commercializing technology related to
lifetime fluorescence spectroscopy. The Company's interest is represented by
three seats on FluorRx's board of directors, one of which is currently vacant,
and 129,000 shares of FluorRx's Series A Convertible Preferred Stock purchased
for $250,000. Concurrently, the Company agreed to provide a series of
convertible promissory notes of up to $100,000. The notes bear interest at 8%
and are due and payable December 5, 1997. The Company has the option to convert
any outstanding balance under the facility into Series A Convertible Preferred
Stock at a price per share of $1.94. As of December 31, 1996, FluorRx had not
borrowed any amounts under the facility.
For the year ended December 31, 1996, FluorRx incurred an operating loss of
$58,000, which the Company has fully consolidated.
4. CONVERTIBLE SUBORDINATED PROMISSORY NOTES
In April and June 1994, the Company issued 8% convertible subordinated
promissory notes for $1,000,000 and $200,000 respectively. Pursuant to the terms
of these notes, all outstanding principal and accrued interest were converted in
December 1994 into 1,253,784 shares of Series A Convertible Preferred Stock.
Warrants to purchase 360,000 shares of Series A Preferred Stock were issued with
the promissory notes in consideration for additional proceeds of $12,000 (Note
8). The value of these warrants was determined to be $79,000 based on the
difference between the stated interest rate and the Company's estimated
effective borrowing rate for the term of the notes. The noncash allocation to
the warrants of $67,000 was accounted for as a debt discount and was expensed as
additional interest expense during 1994.
In November 1995 and April 1996, the Company issued 10% convertible
subordinated promissory notes for $500,000 and $982,000, respectively. Pursuant
to the terms of these notes, all outstanding principal and accrued interest were
converted in August 1996 into 389,951 shares of Series B Convertible Preferred
Stock. Warrants to purchase 107,143 and 210,470 shares of common stock were
issued with the promissory notes in consideration for additional proceeds of
$5,000 and $18,000, respectively, in November 1995 and April 1996,
F-9
<PAGE> 72
SPECTRX, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
respectively (Note 8). The value of the warrants issued in November 1995 and
April 1996 was determined to be $35,000 and $59,000, respectively, based on the
difference between the stated interest rate and the Company's estimated
effective borrowing rate for the terms of the notes. The noncash allocation to
the warrants of $30,000 and $41,000 in November 1995 and April 1996,
respectively, was accounted for as a debt discount. The unamortized debt
discount was expensed as additional interest expense upon the conversion of the
notes in August 1996. At December 31, 1995, the unamortized debt discount
amounted to $25,000.
In June 1996, the Company issued an 8% convertible subordinated promissory
note for $250,000. Principal and interest are payable June 1998. Upon an initial
public offering, as defined, the holder of the note may convert outstanding
principal and interest into common stock at a conversion rate equal to one-half
of the per share initial public offering price.
5. STOCKHOLDERS' (DEFICIT) EQUITY
The Company's Series A, B and C convertible preferred stock (collectively,
"Preferred Stock") is convertible at the option of the holder at any time into
0.7143 shares of Common Stock, adjusted for the reverse stock split discussed in
Note 1. In the event of a public offering, as defined, the shares of Preferred
Stock are automatically converted into 0.7143 share of Common Stock. The holders
of the Series A, B, and C preferred stock are entitled to annual noncumulative
dividends, if declared, at a rate of $0.10, $0.40 and $0.60 per share,
respectively. No dividends have been declared to date. In addition, the holders
of the Series A, B and C Preferred Stock have certain liquidation preferences of
an amount equal to $1.00, $4.00 and $6.00 per share, respectively. The holders
of Preferred Stock are entitled to the number of votes equal to the number of
shares of Common Stock into which each share of Preferred Stock could be
converted on the record date. The holders of the Series A, B and C Preferred
Stock have been issued certain demand registration rights.
The Company has also authorized 3,560,000, 1,375,000 and 500,000 shares of
Series A-1, B-1 and C-1 convertible preferred stock (collectively, "Shadow
Preferred"), respectively. Shadow Preferred is issuable in the case of certain
dilutive events. A dilutive event is generally defined as a sale of Common
Stock, or equivalent, at a per share price less than that originally paid by the
preferred stockholders. Generally, the number of issuable Shadow Preferred
shares is equivalent to the number of outstanding shares of the corresponding
Preferred Stock. Upon the occurrence of a dilutive event, Preferred Stock
converts into an equivalent number of Shadow Preferred shares plus additional
common shares that has the effect of mitigating any dilution to the Preferred
Stockholders. Upon the issuance of a class of Shadow Preferred, the
corresponding class of Preferred Stock is canceled. As of December 31, 1996,
there have been no dilutive events.
In June 1994, 231,072 shares of Common Stock were sold, in exchange for
promissory notes, to certain founding officers at estimated fair market value of
$0.21 per share (Note 9). These shares were deemed restricted stock and, in
certain termination related circumstances, were subject to repurchase by the
Company at fair market value, as defined. All restrictions on these shares
expired by January 1997.
6. INCOME TAXES
The Company has incurred net operating losses since inception. As of
December 31, 1996, the Company had net operating loss ("NOL") carryforwards of
approximately $6,300,000 available to offset its future income tax liability.
The NOL carryforwards begin to expire in the year 2007. The Company has recorded
a valuation allowance for all NOL carryforwards. Utilization of existing NOL
carryforwards may be limited in future years, if significant ownership changes
have occurred.
F-10
<PAGE> 73
SPECTRX, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Components of deferred tax assets are as follows at December 31, 1995 and
1996:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1996
----------- -----------
<S> <C> <C>
NOL carryforwards........................................... $ 1,225,000 $ 2,394,000
Valuation allowance......................................... (1,225,000) (2,394,000)
----------- -----------
Deferred tax assets......................................... $ 0 $ 0
=========== ===========
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
Future minimum rental payments at December 31, 1996 under noncancelable
operating leases for office space and equipment are as follows:
<TABLE>
<S> <C>
1997.............................................................. $229,000
1998.............................................................. 230,000
1999.............................................................. 203,000
2000.............................................................. 136,000
2001.............................................................. 24,000
</TABLE>
Rental expense was $42,000, $49,000 and $92,000 in 1994, 1995 and 1996,
respectively.
In the past, the Company has been subject to certain asserted and
unasserted claims against certain intellectual property rights owned and
licensed by the Company. A successful claim against intellectual property rights
owned or licensed by the Company could subject the Company to significant
liabilities to third parties, require the Company to seek licenses from third
parties, or prevent the Company from selling its products in certain markets or
at all. In the opinion of management, there are no known claims against the
Company's owned or licensed intellectual property rights that will have a
material adverse impact on the Company's financial position or results of
operations.
8. STOCK OPTIONS AND WARRANTS
STOCK OPTIONS
In May 1995, the Company adopted the 1995 Stock Option Plan (as amended the
"Plan"), under which 1,428,572 shares of Common Stock are authorized and
reserved for use in the Plan. The Plan allows the issuance of incentive stock
options, nonqualified stock options and stock purchase rights. The exercise
price of options is determined by the Company's Board of Directors, but
incentive stock options must be granted at an exercise price equal to the fair
market value of the Company's Common Stock as of the grant date. Options
generally become exercisable over four years and expire ten years from the date
of grant. At December 31, 1996, options to purchase 764,807 shares of Common
Stock were available for future grant under the Plan.
F-11
<PAGE> 74
SPECTRX, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Stock option activity is as follows at December 31, 1996:
<TABLE>
<CAPTION>
NUMBER OF EXERCISE PRICE
OPTIONS PER SHARE
--------- --------------
<S> <C> <C>
Plan inception, May 1995...................................... -- $ --
Granted..................................................... 329,834 $0.21
Canceled.................................................... (3,983) $0.21
-------
Outstanding, December 31, 1995................................ 325,851 $0.21
Granted..................................................... 338,940 $0.70-$2.45
Exercised................................................... (403) $0.21
Canceled.................................................... (1,026) $0.21
-------
Outstanding, December 31, 1996................................ 663,362 $0.21-$2.45
=======
Exercisable, December 31, 1996................................ 212,957
=======
</TABLE>
In June 1996, November 1996 and December 1996, the Company granted options
to purchase 269,652, 8,573 and 60,715, respectively, shares of Common Stock at
exercise prices of $0.70, $2.45 and $2.45 per share, respectively. In connection
with the issuance of these options, the Company recognized $304,000 as deferred
compensation for the excess of the deemed value for accounting purposes of the
Common Stock issuable upon exercise of such options over the aggregate exercise
price of such options. This deferred compensation is amortized ratably over the
vesting period of the options.
During 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation," which defines a fair value-based
method of accounting for an employee stock option plan or similar equity
instrument and encourages all entities to adopt that method of accounting for
all of their employee stock compensation plans. However, it also allows an
entity to continue to measure compensation cost for those plans using the method
of accounting prescribed by Accounting Principles Board Opinion ("APB") No. 25,
"Accounting for Stock Issued to Employees." Entities electing to remain with the
accounting in APB No. 25 must make pro forma disclosures of net income and, if
presented, earnings per share, as if the fair value-based method of accounting
defined in the statement had been applied.
The Company has elected to account for its stock-based compensation plan
under APB No. 25; however, the Company has computed for pro forma disclosure
purposes the value of all options granted during 1995 and 1996 using the Black
Scholes option pricing model as prescribed by SFAS No. 123 and using the
following weighted average assumptions used for grants in 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Risk-free interest rate............................................. 6.0% 6.6%
Expected dividend yield............................................. --% --%
Expected lives...................................................... 4 years 4 years
Expected volatility................................................. 90% 90%
</TABLE>
The total values of the options granted during the years ended December 31,
1995 and 1996 were computed as approximately $46,000 and $511,000, respectively,
which would be amortized over the vesting period of the options. If the Company
had accounted for these plans in accordance with SFAS No. 123, the
F-12
<PAGE> 75
SPECTRX, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company's reported net loss and pro forma net loss per share for the years ended
December 31, 1995 and 1996 would have increased by the following pro forma
amounts:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1995 1996
----- -------
<S> <C> <C>
Net loss:
As reported....................................................... $(680) $(3,178)
Pro forma......................................................... (694) (3,226)
Primary EPS:
As reported....................................................... -- (1.03)
Pro forma......................................................... -- (1.04)
</TABLE>
WARRANTS
In connection with establishing a revolving line of credit in 1993, a bank
received warrants giving the bank the right to purchase 8,572 shares of Common
Stock of the Company at $1.40 per share. These warrants expire in 2003. None of
the proceeds from the original draw on the line of credit were allocated to the
warrants. During 1994, the Company terminated the revolving line of credit.
In connection with the April and June 1994 note sale (Note 4), the Company
issued warrants to purchase 360,000 shares of Series A Convertible Preferred
Stock at an exercise price of $1.00 per share. These warrants are exercisable
through June 1999.
In connection with the November 1995 and April 1996 note sales (Note 4),
the Company issued warrants to purchase 317,613 shares of Common Stock at an
exercise price per share of 20% of the price per share paid in the next equity
financing of $5,000,000 or more, inclusive of the notes and warrants subject to
conversion. In August 1996, the exercise price was set at $1.12 per share. These
warrants are exercisable through November 2000 and April 2001.
A summary of the warrants to purchase Common Stock and Preferred Stock
which remain outstanding (and for which Common and Preferred Stock are reserved
for issuance) is as follows as of December 31, 1996:
<TABLE>
<CAPTION>
NUMBER OF SHARES
- -------------------- PRICE
COMMON SERIES A PER SHARE EXPIRATION
- ------- -------- --------- ----------
<S> <C> <C> <C>
8,572 $1.40 2003
360,000 1.00 1999
107,143 1.12 2000
188,830 1.12 2001
</TABLE>
Under the terms of a certain license and technology agreement (Note 10),
the Company issued a right to Altea Technologies, Inc. ("Altea") obtain a
warrant for the purchase of up to 588,572 shares of Common Stock at $.21 per
share. Upon a liquidity event (for which the Offering would qualify), as
defined, Altea had the option to sell all rights to the licensed technology in
exchange for a warrant to purchase up to 588,572 shares of Common Stock,
depending on the achievement of certain milestones with respect to the licensed
technology. Altea has not elected to exercise its right to obtain the warrant;
and the Company will continue with the existing royalty arrangement.
Upon the close of the Offering, all warrants except a warrant exercisable
for 8,572 shares of Common Stock become immediately exercisable and expire if
not exercised.
F-13
<PAGE> 76
SPECTRX, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. RELATED-PARTY TRANSACTIONS
In connection with a June 1994 sale of restricted stock, the Company loaned
two officers of the Company $48,525. These loan were secured by Common Stock of
the Company held by the officers, bear interest at 6% per annum and become
payable on June 30, 1999.
On March 1996, the Company issued 28,572 shares of Common Stock to Laser
Atlanta Optics, Inc. ("LAO") in settlement of a dispute. The Company and LAO are
related through a common group of shareholders. The shares were valued at
$14,000, which was expensed upon issuance. In September 1996 the Company loaned
LAO $30,000, which was repaid in December 1996.
In October 1996, the Company loaned two officers a total of $400,000. The
loans are secured by Common Stock and Series B Preferred Stock of the Company
and common stock of LAO held by the officers. The loans bear interest at 6.72%
per annum and are due and payable October 2001.
During 1996, the Company entered into a license and joint development
agreement with Altea, a company equally owned by Jonathan Eppestein, an officer
and principal stockholder of the Company, and his sister (Notes 8 and 10). Under
the terms of the agreement, the Company issued 71,429 shares of Common Stock at
the par value, which were valued at $35,000, and made cash payments totaling
$25,000 for the rights to the technology. The Company also paid royalties to
Altea totaling $273,000 during 1996.
10. LICENSE AND TECHNOLOGY AGREEMENTS
As part of the Company's efforts to conduct research and development
activities and to commercialize potential products, the Company, from time to
time, enters into agreements with certain organizations and individuals that
further those efforts but also obligate the Company to make future minimum
payments or to remit royalties ranging from 1% to 3% of revenue from sale of
commercial products developed from the research.
The Company generally has the option not to make required minimum royalty
payments, in which case the Company loses the exclusive license to develop
applicable technology. Minimum required payments to maintain exclusive rights to
licensed technology are as follows at December 31, 1996:
<TABLE>
<S> <C>
1997............................................. $ 360,000
1998............................................. 410,000
1999............................................. 510,000
2000............................................. 760,000
2001............................................. 1,110,000
</TABLE>
No royalty payments were made during 1994 or 1995. During 1996, the Company
paid $273,000 in royalties in connection with the sale of the Series C Preferred
Stock, of which $50,000 was expensed as required minimum payments and $223,000
was netted with the proceeds of the related stock sale.
Additionally, the Company is obligated to obtain and maintain certain
patents, as defined by the agreements.
11. REVENUES FROM COLLABORATIVE AGREEMENTS
The Company has entered into collaborative research and development
agreements (the "Agreements") with collaborative partners for the joint
development, regulatory approval, manufacturing, marketing, distribution and
sales of products. The Agreements generally provide for nonrefundable payments
upon contract signing and additional payments upon reaching certain milestones
with respect to technology. The Abbott Agreement requires Abbott to remit
royalties to the Company based on net product sales and to
F-14
<PAGE> 77
SPECTRX, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
reimburse certain direct expenses incurred by the Company. Reimbursed expenses
of $0, $0 and $490,000 for the years ended December 31, 1994, 1995 and 1996 have
been netted with research and development expenses in the accompanying
statements of operations. In connection with the Healthdyne and Boehringer
Mannheim Agreements, the partners are required to purchase products manufactured
by the Company at a predetermined profit margin subject to renegotiation between
the parties in certain instances.
Major customers who contributed 10% or more of the Company's total revenues
from collaborative agreements were as follows for the years ended December 31,
1994, 1995, and 1996:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Boehringer Mannheim.................... 98.4% 68.8% -- %
Healthdyne............................. -- 10.7 100.0
Teijin................................. -- 20.5 --
</TABLE>
12. SUBSEQUENT EVENTS (UNAUDITED)
INITIAL PUBLIC OFFERING
In the first quarter of 1997, the Company is planning an initial public
offering of its Common Stock (the "Offering"). The Company plans to issue
2,000,000 (plus an additional 300,000 if the Underwriter's over-allotment option
is exercised in full) shares at an estimated initial public offering price of
between $10.00 and $12.00 per share. There can be, however, no assurance that
the Offering will be completed at a per share price within the estimated range
or at all.
PRO FORMA STOCKHOLDERS' (DEFICIT) EQUITY
The pro forma stockholders' equity at December 31, 1996 gives effect to the
conversion of all outstanding shares of Preferred Stock into 3,482,762 shares of
Common Stock and warrants exercisable for 553,126 shares of Common Stock, upon
the close of the Company's Offering.
PREFERRED STOCK
In January 1997, the Company authorized 5,000,000 shares of Preferred Stock
with a $0.001 par value. The Board of Directors has the authority to issue these
shares and to fix dividends, voting and conversion rights, redemption
provisions, liquidation preferences, and other rights and restrictions.
EMPLOYEE STOCK PURCHASE PLAN
In connection with the Offering, the Company intends to adopt an employee
stock purchase plan under which the Company may issue up 214,286 shares of
Common Stock. Eligible employees may use up to 10% of their compensation to
purchase through payroll deductions the Company's Common Stock at the end of
each plan year for 85% of the lower of the beginning or ending stock price in
the plan year.
F-15
<PAGE> 78
APPENDIX -- DESCRIPTION OF GRAPHICS
INSIDE FRONT COVER OF THE PROSPECTUS
The inside of the Prospectus front cover contains three artists renditions of
the Company's glucose monitoring microporation technology and the page is
entitled "SpectRx Glucose Monitoring Microporation Technology."
OVERALL DESCRIPTION AT TOP OF PAGE: Above the artwork on the inside front cover
of the Prospectus is the following language:
"The SpectRx glucose monitoring product is intended as a painless
alternative to current blood glucose monitoring products that require a
blood sample drawn from an incision created by a lancet."
DESCRIPTION #1: This illustration in the upper left hand corner of the page
depicts the diameter of the micropore created by the SpectRx Glucose Monitoring
product. For size comparison, a human hair is depicted next to the micropore.
CAPTION: "The micropore magnified 200 times. Note the size of the micropore in
relation to the human hair to the right."
DESCRIPTION #2: This illustration is being pointed to by the box that is around
the micropore in the illustration in the bottom left of the page and is a blowup
of the micropore. The illustration depicts the depth that the micropore
penetrates the skin. Moreover, the diameter of the micropore is compared to that
of a human hair depicted on the left of the illustration.
CAPTION: "The SpectRx micropore is approximately the diameter of a human hair
and penetrates through a layer of skin about the thickness of a piece of paper."
DESCRIPTION #3: This illustration depicts a cross section of the skin and
labels the location of the stratum corneum, the free nerve endings (pain
receptors), the blood vessels and the sweat glands. The illustration also
depicts the depth that a lancet must penetrate to reach the capillary bed in
order to obtain a blood sample. Finally, the illustration depicts the depth that
the micropore penetrates the skin. There is a box around the micropore with an
arrow attached to it that points to the illustration on the upper right of the
page (see Description #2).
CAPTION: "A cross section showing the relationship between a micropore
painlessly created to access interstitial fluid with the Company's proprietary
technology and an incision used to draw blood using a standard lancet."
OVERALL CAPTION AT BOTTOM OF PAGE: Under all the artwork on this page set out
within a box is the following caption:
"The Company must receive pre-market approval or clearance from the U.S.
Food and Drug Administration before any of the Company's products can be
distributed commercially in the United States. Such approval or clearance
has not yet been applied for and there can be no assurance that such an
application will be made or if made, will be obtained. See "Risk
Factors -- No Assurance of Regulatory Approvals."
The diagram presented on page 27 depicts a drawing of a cross section of
human skin.
DESCRIPTION #1: This illustration depicts the cross section of human skin.
Words around the drawing label the layers of skin with and without pain sensors
and label a micropore and hairshaft and other levels of the skin.
CAPTION #1: The title above this illustration reads: "Cross Section of the
Human Skin."
INSIDE BACK COVER OF THE PROSPECTUS
The inside of the Prospectus back cover is divided into two sections. The top
half of the page is entitled "Diabetes Screening Product" and contains two
photographs, which depict this product. The bottom half of
<PAGE> 79
the page is entitled "Infant Jaundice Product" and contains three photographs,
which depict blood tests currently used and the Company's infant jaundice
product.
DIABETES SCREENING PRODUCT
OVERALL DESCRIPTION AT TOP OF PAGE: Above the artwork on the inside back cover
of the Prospectus is the following language:
"The SpectRx diabetes screening product is designed to identify diabetics
by painlessly measuring the fluorescence in the lens of the eye."
DESCRIPTION #1: The illustration in the upper right hand corner of the page
depicts a close-up of the lens of a human eye with the reflective fluorescence
created by the SpectRx diabetes screening product.
CAPTION: The Company's diabetes screening product makes measurements in the
lens of the eye.
DESCRIPTION #2: The illustration in the mid-left hand side of the page depicts
a prototype of the SpectRx Diabetes screening product on a counter top with a
test subject gazing into the prototype to illustrate the manner in which a
subject would be screened.
CAPTION: Prototypes of the Company's diabetes screening product undergoing
pilot studies.
INFANT JAUNDICE PRODUCT
OVERALL DESCRIPTION IN THE MIDDLE OF THE PAGE: Above the artwork related to the
infant jaundice product is the following language:
"The Company's infant jaundice product is intended to offer an alternative
to conventional blood tests."
DESCRIPTION #1: The illustration on the far left depicts an infant undergoing a
heel stick currently used to test for jaundice.
CAPTION: "A representation of the heel stick blood test currently used on
infants."
DESCRIPTION #2: The illustration in the center of this section depicts a
prototype of the Company's infant jaundice product.
CAPTION: "A prototype of the Company's infant jaundice instrument in a hospital
pilot study."
DESCRIPTION #3: The illustration on the far right of this section depicts an
industrial model of the Company's infant jaundice product.
CAPTION: "An industrial model of the Company's handheld infant jaundice product
and disposable."
OVERALL CAPTION AT BOTTOM OF PAGE: Under all the artwork on this page set out
within a box is the following caption:
"The Company must receive pre-market approval or clearance from the U.S.
Food and Drug Administration before any of the Company's products can be
distributed commercially in the United States. Such approval or clearance
has not yet been applied for and there can be no assurance that such an
application will be made or if made, will be obtained. See "Risk
Factors -- No Assurance of Regulatory Approvals."
<PAGE> 80
[CRC DIABETES SCREENING]
<PAGE> 81
============================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM IT
IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 6
Use of Proceeds....................... 16
Dividend Policy....................... 16
Capitalization........................ 17
Dilution.............................. 18
Selected Consolidated Financial
Data................................ 19
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 20
Business.............................. 24
Management............................ 45
Certain Transactions.................. 51
Principal Stockholders................ 53
Description of Capital Stock.......... 55
Shares Eligible for Future Sale....... 57
Underwriting.......................... 59
Legal Matters......................... 60
Experts............................... 60
Additional Information................ 60
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
UNTIL , 1997, ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON
STOCK, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS 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.
============================================================
============================================================
2,000,000 SHARES
SPECTRX(LOGO)
COMMON STOCK
-----------------------
PROSPECTUS
-----------------------
HAMBRECHT & QUIST
VOLPE, WELTY & COMPANY LLC
, 1997
============================================================
<PAGE> 82
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of Common Stock being registered. All amounts are estimates except
the registration fee, the NASD filing fee and the Nasdaq National Market System
listing fee.
<TABLE>
<CAPTION>
AMOUNT
TO BE PAID
----------
<S> <C>
Registration Fee.......................................................... $ 8,400
NASD Filing Fee........................................................... 3,260
The Nasdaq National Market System Listing Fee............................. 36,500
Printing.................................................................. 100,000
Legal Fees and Expenses................................................... 350,000
Accounting Fees and Expenses.............................................. 130,000
Blue Sky Fees and Expenses................................................ 13,000
Registrar and Transfer Agent Fees......................................... 6,000
Miscellaneous............................................................. 2,840
--------
Total........................................................... $650,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law permits a corporation
to include in its charter documents, and in agreements between the corporation
and its directors and officers, provisions expanding the scope of
indemnification beyond that specifically provided by the current law.
Article VII of the Registrant's Certificate of Incorporation provides for
the indemnification of directors to the fullest extent permissible under
Delaware law.
Article VII of the Registrant's Bylaws provides for the indemnification of
officers, directors and third parties acting on behalf of the corporation if
such person acted in good faith and in a manner reasonably believed to be in and
not opposed to the best interest of the corporation, and, with respect to any
criminal action or proceeding, the indemnified party had no reason to believe
his conduct was unlawful.
The Registrant has entered into indemnification agreements with its
directors and executive officers, in addition to indemnification provided for in
the Registrant's Bylaws, and intends to enter into indemnification agreements
with any new directors and executive officers in the future.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
(a) From January 1, 1994 through December 31, 1996, the Registrant has
issued and sold the following unregistered securities (all numbers are adjusted
to reflect the Company's 1-for-1.4 reverse stock split):
(1) On June 30, 1994, the Registrant sold 131,711 and 99,361 shares of
its Common Stock to Mark A. Samuels and Keith D. Ignotz, respectively. Mr.
Samuels and Mr. Ignotz each purchased the above shares in exchange for
Promissory Notes executed in favor of the Registrant in the aggregate
amounts of $27,659.25 and $20,865.75, respectively. Both Promissory Notes
have maturity dates of June 30, 1999. The entire amount payable on each
Promissory Note in respect of principal and interest remains outstanding.
(2) On November 6, 1995, the Registrant sold to two investors
Convertible Promissory Notes for an aggregate purchase price of $500,000
which automatically converted to Series B Preferred Stock at an as
converted price of $5.60 per share.
II-1
<PAGE> 83
(3) On November 6, 1995, the Registrant sold to two investors Warrants
to purchase 107,144 shares of Common Stock at an as converted exercise
price of $1.12 per share.
(4) On April 15, 1996, the Registrant sold to 20 investors Convertible
Promissory Notes for an aggregate purchase price of $982,141 which
automatically converted to Series B Preferred Stock at an as converted
price of $5.60 per share.
(5) In March of 1996, two entities were issued an aggregate of 71,429
shares of the Common Stock of the Registrant as payment for a license.
(6) On April 15, 1996, the Registrant sold to 20 investors Warrants to
purchase 210,470 shares of Common Stock at an as converted exercise price
of $1.12 per share.
(7) On August 14, 1996, one option holder exercised an option to
purchase 403 shares of the Common Stock of the Registrant at a per share
exercise price of approximately $0.21.
(8) On August 30, 1996, the Registrant sold shares of Series B
Preferred Stock, which automatically convert into 908,621 shares of Common
Stock upon the closing of this offering, to 29 investors at an as converted
price of $5.60 per share, payable in cash or conversion of debt.
(9) On October 21, 1996, the Registrant sold 357,143 shares of Series
C Preferred Stock, which automatically convert into 357,143 shares of
Common Stock upon the closing of this offering, to one investor at an as
converted price of $8.40 per share.
(10) On October 26, 1996, one warrant holder exercised a warrant to
purchase 21,640 Shares of the Common Stock of the Registrant at a per share
exercise price of approximately $1.12.
(b) There were no underwriters, brokers or finders employed in connection
with any of the transactions set forth above.
(c) The sales of the above securities were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act, or Regulation D promulgated thereunder, or Rule 701 promulgated
under Section 3(b) of the Securities Act as transactions by an issuer not
involving a public offering or transactions pursuant to compensatory benefit
plans and contracts relating to compensation as provided under such Rule 701.
The recipients of securities in each such transaction represented their
intentions to acquire the securities for investment only and not with a view to
or for sale in connection with any distribution thereof and appropriate legends
were affixed to the instruments representing such securities issued in such
transactions. All recipients had adequate access, through their relationships
with the Company, to information about the Registrant.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<C> <C> <S>
1.1 -- Form of Underwriting Agreement.
3.1 -- Certificate of Incorporation of the Company, as amended, as currently in
effect.
3.2 -- Form of Restated Certificate of Incorporation of the Company, to be
filed immediately following the closing of the offering made under this
Registration Statement.
3.3 -- Bylaws of the Company.
4.1* -- Specimen Common Stock Certificate.
5.1 -- Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
10.1 -- 1997 Employee Stock Purchase Plan and form of agreement thereunder.
10.2 -- 1995 Stock Plan, as amended, and form of Stock Option Agreement
thereunder.
10.3 -- Series A Preferred Stock Purchase Agreement, dated February 5, 1993,
between the Company and certain investors.
10.4 -- Note and Warrant Purchase Agreement, dated November 6, 1995 and April
15, 1996, between the Registrant and certain investors.
</TABLE>
II-2
<PAGE> 84
<TABLE>
<C> <C> <S>
10.5 -- Series B Preferred Stock Purchase Agreement, dated August 30, 1996,
between the Company and certain investors.
10.6 -- Series C Preferred Stock Purchase Agreement, dated October 21, 1996,
between the Company and Abbott Laboratories (included in Exhibit 10.23).
10.7 -- Stock Purchase Agreement, dated June 30, 1994, between Mark A. Samuels
and the Company.
10.8 -- Stock Purchase Agreement, dated June 30, 1994, between Keith D. Ignotz
and the Company.
10.9 -- Assignment and Bill of Sale, dated February 29, 1996, between LAO and
the Company.
10.10 -- Security Agreement, dated October 31, 1996, between Mark A. Samuels and
the Company.
10.11 -- Security Agreement, dated October 31, 1996, between Keith D. Ignotz and
the Company.
10.12A+ -- License Agreement, dated May 7, 1991, between GTRC and LAO.
10.12B -- Agreement for Purchase and Sale of Technology, Sale, dated January 16,
1993, between LAO and the Company.
10.12C -- First Amendment to License Agreement, dated October 19, 1993, between
GTRC and the Company.
10.13 -- Clinical Research Study Agreement, dated July 22, 1993, between Emory
University and the Company.
10.14A+ -- Development and License Agreement, dated December 2, 1994, between
Boehringer Mannheim Corporation and the Company.
10.14B+ -- Supply Agreement, dated January 5, 1996, between Boehringer Mannheim and
the Company.
10.15 -- Sponsored Research Agreement, No. SR95-006, dated May 3, 1995, between
University of Texas, M.D. Anderson Cancer Center and the Company.
10.16 -- Sole Commercial Patent License Agreement, dated May 4, 1995, between
Martin Marietta Energy Systems, Inc. and the Company.
10.17 -- Joint Development Agreement, dated July 10, 1995, between Teijin and the
Company.
10.18A -- License Agreement, dated November 22, 1995, between Joseph R. Lakowicz,
Ph.D. and the Company.
10.18B -- Amendment of License Agreement, dated November 28, 1995, between Joseph
R. Lakowicz, Ph.D. and the Company.
10.19 -- License and Joint Development Agreement, dated March 1, 1996, between
NonInvasive-Monitoring Company, Inc., Altea Technologies, Inc. and the
Company.
10.20+ -- Patent License Agreement, dated March 12, 1996, between the Board of
Regents of the University of Texas System, M.D. Anderson and the
Company.
10.21+ -- Purchasing and Licensing Agreement, dated June 19, 1996, between
Healthdyne and the Company.
10.22 -- Research Services Agreement, dated September 3, 1996, between Sisters of
Providence in Oregon doing business as the Oregon Medical Laser Center,
Providence St. Vincent Medical Center and the Company.
10.23+ -- Research and Development and License Agreement, dated October 10, 1996,
between Abbott Laboratories and the Company.
10.24 -- Lease, dated September 21, 1993, between National Life Insurance Company
d/b/a Plaza 85 Business Park and the Company, together with amendments
1, 2 and 3 thereto and Tenant Estoppel Certificate, dated September 20,
1994.
11.1 -- Calculation of earnings per share.
21.1 -- List of Subsidiaries of the Company.
23.1 -- Consent of Arthur Andersen LLP, Independent Public Accountants.
</TABLE>
II-3
<PAGE> 85
<TABLE>
<C> <C> <S>
23.2 -- Consent of Counsel (included in Exhibit 5.1).
23.3 -- Consent of Fleshner & Kim, patent counsel for the Company.
23.4 -- Consent of Kilpatrick Stockton LLC, patent counsel for the Company.
23.5 -- Consent of Thorpe, North & Western, patent counsel for the Company.
23.6 -- Consent of Medical Device Consultants.
24.1 -- Power of Attorney (see page II-5).
27.1 -- Financial Data Schedule
</TABLE>
- ---------------
+ Confidential treatment requested for portions of these agreements.
* To be filed by amendment.
(b) Financial Statement Schedules
Schedules have been omitted because the information required to be set
forth therein is not applicable or is shown in the financial statements or notes
thereto.
ITEM 17. UNDERTAKINGS
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 provisions described in Item 14, 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
Securities 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 Securities
Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to provide to the Underwriter
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the Underwriter to
permit prompt delivery to each purchaser.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
the form of prospectus filed by the registrant pursuant to Rule 424(b)(1)
or (4) or 497 (h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 86
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Norcross,
State of Georgia, on the 27th day of February, 1997.
SPECTRX, INC.
By: /s/ MARK A. SAMUELS
--------------------------------------
Mark A. Samuels
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints, jointly and severally, Mark A.
Samuels, each of them acting individually, as his or her attorney-in-fact, each
with full power of substitution, for him or her any and all capacities, to sign
any and all amendments (including, without limitation, post-effective Amendments
and any amendments or abbreviated registration statements increasing the amount
of securities for which registration is being sought) to this Registration
Statement, with all exhibits and any and all documents required to be filed with
respect thereto, with the Securities and Exchange Commission or any regulatory
authority, granting unto such 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 order to effectuate the same as fully to
all intents and purposes as he or she might or could do if personally present,
hereby ratifying and confirming all that such attorneys-in-fact and agents, or
any of them, or their substitute or substitutes, may lawfully do or cause to be
done.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ----------------------------- ------------------
<C> <S> <C>
/s/ MARK A. SAMUELS President, Chief Executive February 27, 1997
- --------------------------------------------- Officer and Director
Mark A. Samuels
/s/ KEITH D. IGNOTZ Executive Vice President, February 27, 1997
- --------------------------------------------- Chief Operating Officer and
Keith D. Ignotz Director
/s/ THOMAS H. MULLER, JR. Executive Vice President, February 27, 1997
- --------------------------------------------- Chief Financial Officer and
Thomas H. Muller, Jr. Secretary
/s/ CHARLES G. HADLEY Director February 27, 1997
- ---------------------------------------------
Charles G. Hadley
/s/ JACK R. KELLY, JR. Director February 27, 1997
- ---------------------------------------------
Jack R. Kelly, Jr.
</TABLE>
II-5
<PAGE> 87
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ----- ----------------------------------------------------------------------
<C> <C> <S> <C>
1.1 -- Form of Underwriting Agreement........................................
3.1 -- Certificate of Incorporation of the Company, as amended, as currently
in effect.............................................................
3.2 -- Form of Restated Certificate of Incorporation of the Company, to be
filed immediately following the closing of the offering made under
this Registration Statement...........................................
3.3 -- Bylaws of the Company.................................................
4.1* -- Specimen Common Stock Certificate.....................................
5.1 -- Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation...........................................................
10.1 -- 1997 Employee Stock Purchase Plan and form of agreement thereunder.
10.2 -- 1995 Stock Plan, as amended, and form of Stock Option Agreement
thereunder............................................................
10.3 -- Series A Preferred Stock Purchase Agreement, dated February 5, 1993,
between the Company and certain investors.............................
10.4 -- Note and Warrant Purchase Agreement, dated November 6, 1995 and April
15, 1996, between the Registrant and certain investors................
10.5 -- Series B Preferred Stock Purchase Agreement, dated August 30, 1996,
between the Company and certain investors.............................
10.6 -- Series C Preferred Stock Purchase Agreement, dated October 21, 1996,
between the Company and Abbott Laboratories (included in Exhibit
10.23)................................................................
10.7 -- Stock Purchase Agreement, dated June 30, 1994, between Mark A. Samuels
and the Company.......................................................
10.8 -- Stock Purchase Agreement, dated June 30, 1994, between Keith D. Ignotz
and the Company.......................................................
10.9 -- Assignment and Bill of Sale, dated February 29, 1996, between LAO and
the Company...........................................................
10.10 -- Security Agreement, dated October 31, 1996, between Mark A. Samuels
and the Company.......................................................
10.11 -- Security Agreement, dated October 31, 1996, between Keith D. Ignotz
and the Company.......................................................
10.12A+ -- License Agreement, dated May 7, 1991, between GTRC and LAO............
10.12B -- Agreement for Purchase and Sale of Technology, Sale, dated January 16,
1993, between LAO and the Company.....................................
10.12C -- First Amendment to License Agreement, dated October 19, 1993, between
GTRC and the Company..................................................
10.13 -- Clinical Research Study Agreement, dated July 22, 1993, between Emory
University and the Company............................................
10.14A+ -- Development and License Agreement, dated December 2, 1994, between
Boehringer Mannheim Corporation and the Company.......................
10.14B+ -- Supply Agreement, dated January 5, 1996, between Boehringer Mannheim
and the Company.......................................................
10.15 -- Sponsored Research Agreement, No. SR95-006, dated May 3, 1995, between
University of Texas, M.D. Anderson Cancer Center and the Company......
10.16 -- Sole Commercial Patent License Agreement, dated May 4, 1995, between
Martin Marietta Energy Systems, Inc. and the Company..................
10.17 -- Joint Development Agreement, dated July 10, 1995, between Teijin and
the Company...........................................................
10.18A -- License Agreement, dated November 22, 1995, between Joseph R.
Lakowicz, Ph.D. and the Company.......................................
10.18B -- Amendment of License Agreement, dated November 28, 1995, between
Joseph R. Lakowicz, Ph.D. and the Company.............................
</TABLE>
<PAGE> 88
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ----- ----------------------------------------------------------------------
<C> <C> <S> <C>
10.19 -- License and Joint Development Agreement, dated March 1, 1996, between
NonInvasive-Monitoring Company, Inc., Altea Technologies, Inc. and the
Company...............................................................
10.20+ -- Patent License Agreement, dated March 12, 1996, between the Board of
Regents of the University of Texas System, M.D. Anderson and the
Company...............................................................
10.21+ -- Purchasing and Licensing Agreement, dated June 19, 1996, between
Healthdyne and the Company............................................
10.22 -- Research Services Agreement, dated September 3, 1996, between Sisters
of Providence in Oregon doing business as the Oregon Medical Laser
Center, Providence St. Vincent Medical Center and the Company.........
10.23+ -- Research and Development and License Agreement, dated October 10,
1996, between Abbott Laboratories and the Company.....................
10.24 -- Lease, dated September 21, 1993, between National Life Insurance
Company d/b/a Plaza 85 Business Park and the Company, together with
amendments 1, 2 and 3 thereto and Tenant Estoppel Certificate, dated
September 20, 1994....................................................
11.1 -- Calculation of earnings per share.....................................
21.1 -- List of Subsidiaries of the Company...................................
23.1 -- Consent of Arthur Andersen LLP, Independent Public Accountants........
23.2 -- Consent of Counsel (included in Exhibit 5.1)..........................
23.3 -- Consent of Fleshner & Kim, patent counsel for the Company.............
23.4 -- Consent of Kilpatrick & Stockton, patent counsel for the Company......
23.5 -- Consent of Thorpe, North & Western, patent counsel for the Company....
23.6 -- Consent of Medical Device Consultants.................................
24.1 -- Power of Attorney (see page II-5).....................................
27.1 -- Financial Data Schedule...............................................
</TABLE>
- ---------------
+ Confidential treatment requested for portions of these agreements.
* To be filed by amendment.
<PAGE> 1
EXHIBIT 1.1
SPECTRX, INC.
2,000,000 SHARES(1)
COMMON STOCK
UNDERWRITING AGREEMENT
_____ __, 1997
HAMBRECHT & QUIST LLC
One Bush Street
San Francisco, CA 94104
Ladies and Gentlemen:
SpectRx, Inc., a Delaware corporation (herein called the Company),
proposes to issue and sell 2,000,000 shares of its authorized but unissued
Common Stock, $.001 par value (herein called the Common Stock and such shares
being issued herein called the Underwritten Stock). The Company proposes to
grant to the Underwriters (as hereinafter defined) an option to purchase up to
300,000 additional shares of Common Stock (herein called the Option Stock and
with the Underwritten Stock herein collectively called the Stock). The Common
Stock is more fully described in the Registration Statement and the Prospectus
hereinafter mentioned.
The Company hereby confirms the agreements made with respect to the
purchase of the Stock by the several underwriters, for whom you are acting,
named in Schedule I hereto (herein collectively called the Underwriters, which
term shall also include any underwriter purchasing Stock 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.
1. REGISTRATION STATEMENT. The Company has filed with the Securities
and Exchange Commission (herein called 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 (herein called
the Securities Act) of the Stock. 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
________________________________
(1) Plus an option to purchase from the Company up to 300,000 additional shares
to cover over-allotments.
-1-
<PAGE> 2
pursuant to Rule 462(b) of the rules and regulations of the Commission with
respect to the Stock (herein called a Rule 462(b) registration statement), and,
in the event of any amendment thereto after the effective date of such
registration statement (herein called 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 Stock 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.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants as follows:
(i) The Company has 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,
properties, financial condition or results of operations of the
Company and its subsidiaries, taken as a whole).
(ii) 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,
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, 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 transaction not referred to in the Registration Statement
and the Prospectus.
(iii) The Registration Statement and the Prospectus comply, and
on the Closing Date (as hereinafter defined) and any later date on
which Option Stock is to be purchased, the Prospectus will comply,
in all material respects, with the provisions of the Securities Act
[and the Securities Exchange Act of 1934, as amended (herein called
the Exchange 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 Option Stock is 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 (iii) shall
apply to statements in, or omissions from, the Registration
Statement or the Prospectus made in reliance upon
-2-
<PAGE> 3
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.
(iv) The Stock is duly and validly authorized, will be, when
issued and sold to the Underwriters as provided herein, duly and
validly issued, fully paid and nonassessable and conforms 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 issuance and sale of the Stock as
contemplated herein.
(v) This Agreement has been duly executed and delivered by the
Company and constitutes the valid and binding obligation of the
Company, enforceable against the Company in accordance with its
terms, except as enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights
generally and general principles of equity and the discretion of the
court before which any proceeding therefor may be brought. The
execution, delivery and performance of this Agreement by the
Company, the consummation by the Company of the transactions
contemplated herein and the compliance by the Company with the terms
of this Agreement have been duly authorized by all necessary
corporate action on the part of the Company and do not and will not,
with or without the giving of notice or the lapse of time, or both,
(1) result in any violation of the Certificate of Incorporation or
By-laws of the Company; (2) result in a breach of the terms or
provisions of, or constitute a default under, or result in the
modification or termination of, or result in the creation or
imposition of any lien, security interest, charge or encumbrance
upon any of the properties or assets of the Company pursuant to any
indenture, mortgage, note, contract, commitment or other agreement
or instrument to which the Company is a party or by which the
Company or any of its properties or assets is or may be bound or
affected; (3) violate any existing applicable law, rule, regulation,
judgment, order or decree of any governmental agency or court,
domestic or foreign, having jurisdiction over the Company or any of
its properties or business; or (4) have any effect on any permit,
certification, registration, approval, consent, order, license,
franchise or other authorization necessary for the Company to own or
lease and operate its properties and to conduct its business or the
ability of the Company to make use thereof, which, in the case of
clauses (2), (3) and (4) of this Section 2(v), would have material
adverse effect on the business, properties, financial condition or
result of operations of the Company and its subsidiaries, taken as a
whole.
(vi) Neither the Commission nor, to the best of the Company's
knowledge, any state regulatory authority has issued any order
preventing or suspending the use of any Preliminary Prospectus or
has instituted or, to the best of the Company's knowledge,
threatened to institute any proceedings with respect to such an
order.
(vii) The Company had at the date or dates indicated in the
Prospectus a duly authorized and outstanding capitalization as set
forth in the Registration Statement and Prospectus. Based on the
assumptions stated in the Registration Statement and the Prospectus,
the Company will have on the Closing Date the adjusted stock
capitalization set forth therein. Except as set forth in the
Registration Statement or the Prospectus, on the Effective Date and
on the Closing Date, there will be no options to purchase, warrants
or other rights to subscribe for, or any securities or obligations
convertible into, or any contracts or commitments to issue or sell
shares of the Company's capital stock or any such warrants,
convertible securities or obligations. Except as set forth in the
Prospectus, no holders of any of the Company's securities has any
rights, "demand," "piggyback" or otherwise, to have such securities
registered under the Securities Act.
-3-
<PAGE> 4
(viii) The descriptions in the Registration Statement and the
Prospectus of contracts and other documents are in all material
respects accurate and present fairly the information required to be
disclosed, and there are no contracts or other documents required to
be described in the Registration Statement or the Prospectus or to
be filed as exhibits to the Registration Statement under the
Securities Act or the regulations promulgated thereunder which have
not been so described or filed as required.
(ix) The financial statements and schedules and the notes
thereto filed as part of the Registration Statement and
included in the Prospectus are complete, correct and present fairly
in all material respects the financial position of the Company as of
the dates thereof, and the results of operations and changes in
financial position of the Company for the periods indicated therein,
all in conformity with generally accepted accounting principles
applied on a consistent basis throughout the periods involved except
as otherwise stated in the Registration Statement and Prospectus.
The selected financial data set forth in the Registration Statement
and the Prospectus present fairly in all material respects the
information shown therein and have been compiled on a basis
consistent with that of the audited financial statements included in
the Registration Statement and the Prospectus.
(x) The Company has filed with the appropriate federal,
state and local governmental agencies, and all appropriate
foreign countries and political subdivisions thereof, all tax
returns, including franchise tax returns, which are required to be
filed or has duly obtained extensions of time for the filing thereof
and has paid all taxes shown on such returns and all assessments
received by it to the extent that the same have become due; and the
provisions for income taxes payable, if any, shown on the financial
statements filed with or as part of the Registration Statement are
sufficient for all accrued and unpaid foreign and domestic taxes,
whether or not disputed, and for all periods to and including the
dates of such financial statements. Except as previously disclosed
in writing, the Company has not executed or filed with any taxing
authority, foreign or domestic, any agreement extending the period
for assessment or collection of any income taxes and is not a party
to any pending action or proceeding by any foreign or domestic
governmental agency for assessment or collection of taxes; and no
claims for assessment or collection of taxes have been asserted
against the Company the adverse determination of which would have
material adverse effect on the business, properties, financial
condition or results of operations of the Company and its
subsidiaries, taken as a whole.
(xi) The outstanding equity securities of the Company and
outstanding options and warrants to purchase equity securities
of the Company have been duly authorized and validly issued. The
outstanding equity securities of the Company are fully paid and
nonassessable. The outstanding options and warrants to purchase
equity securities of the Company constitute the valid and binding
obligations of the Company, enforceable in accordance with their
terms, except as enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights
generally and general principles of equity and the discretion of the
court before which any proceeding therefor may be brought. None of
the outstanding equity securities of the Company or options or
warrants to purchase such equity securities has been issued in
violation of the preemptive rights of any shareholder of the
Company. None of the holders of the outstanding equity securities
of the Company is subject to personal liability solely by reason of
being such a holder. The offers and sales of the outstanding equity
securities of the Company and outstanding options and warrants to
purchase such equity securities were at all relevant times either
registered under the Securities Act and the applicable state
securities or blue sky laws or exempt from such registration
requirement. The authorized equity securities of the Company and
outstanding options and warrants to purchase such equity securities
conform in all material respects to the descriptions thereof
contained in the Registration Statement and Prospectus. Except as
set forth in the Registration Statement and the Prospectus, on the
Effective Date and the Closing Date, there will be no outstanding
options or warrants
-4-
<PAGE> 5
for the purchase of, or other outstanding rights to purchase,
Common Stock or securities convertible into Common Stock.
(xii) No securities of the Company have been sold by the
Company or by or on behalf of, or for the benefit of,
any person or persons controlling, controlled by, or under
common control with the Company within the three years prior
to the date hereof, except as disclosed in the Registration
Statement.
(xiii) The Company is not in violation of, nor in default
under, (1) any term or provision of its Articles of
Incorporation or By-Laws; (2) any term or provision or any
financial covenants of any indenture, mortgage, contract,
commitment or other agreement or instrument to which it is a
party or by which it or any of its property or business is or
may be bound or affected; or (3) any existing applicable law,
rule, regulation, judgment, order or decree of any
governmental agency or court, domestic or foreign, having
jurisdiction over the Company or any of the Company's
properties or business, which, in the case of clause (2) and
clause (3), would have material adverse effect on the
business, properties, financial condition or results of
operations of the Company and its subsidiaries, taken as a
whole. The Company owns, possesses or has obtained all
governmental and other (including those obtainable from third
parties) permits necessary to own or lease, as the case may
be, and to operate its properties, whether tangible or
intangible, and to conduct any of the business or operations
of the Company as presently conducted. All such permits are
outstanding and in good standing and there are no proceedings
pending or, to the best of the Company's knowledge,
threatened (nor, to the Company's knowledge, is there any
basis therefor) seeking to cancel, terminate or limit such
permits.
(xiv) Except as set forth in the Prospectus, there are
no claims, actions, suits, proceedings, arbitrations,
investigations, or inquiries before any governmental agency,
court or tribunal, domestic or foreign, or before any private
arbitration tribunal, pending, or, to the best of the
Company's knowledge, threatened against the Company or
involving its properties or business which, if determined
adversely to the Company would, individually or in the
aggregate, result in a material adverse effect on the
business, properties, financial condition or results of
operations of the Company and its subsidiaries, taken as a
whole, or which question the validity of the capital stock of
the Company or this Agreement or of any action taken or to be
taken by the Company pursuant to, or in connection with, this
Agreement; nor to the best of the Company's knowledge, is
there any basis for any such claim, action, suit, proceeding,
arbitration, investigation or inquiry. There are no
outstanding orders, judgments or decrees of any court,
governmental agency or other tribunal naming the Company and
enjoining the Company from taking, or requiring the Company
to take, any action, or to which the Company or the Company's
properties or business is bound or subject.
(xv) To the best of the Company's knowledge, except as
described in the Prospectus no parties other than the
Company has any right or license to make or sell the
Company's glucose marketing product, its diabetes screening
product or its infant jaundice monitoring product, each as
described in the Prospectus.
(xvi) The Company has good and marketable title in fee
simple to all real property and good title to all
personal property (tangible and intangible) owned by it, free
and clear of all security interests, charges, mortgages,
liens, encumbrances and defects, except such as are described
in the Registration Statement and Prospectus or such as do
not materially affect the value or transferability of such
property and do not interfere with the use of such property
made, or proposed to be made, by the Company. The leases,
licenses or other contracts or instruments under which the
Company leases, holds or is entitled to use any property,
real or personal, are valid, subsisting and enforceable only
with such exceptions
-5-
<PAGE> 6
as are not material and do not interfere with the use of such
property made, or proposed to be made, by the Company, and
except as enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to
creditors' rights generally and general principles of equity
and the discretion of the court before which any proceeding
therefor may be brought, and all rentals, royalties or other
payments accruing thereunder which became due prior to the
date of this Agreement have been duly paid, and neither the
Company nor, to the best of the Company's knowledge, any
other party is in default thereunder and, to the best of the
Company's knowledge, no event has occurred which, with the
passage of time or the giving of notice, or both, would
constitute a default thereunder, in each case which would
have a material adverse effect on the business, properties,
financial condition or results of operations of the Company
and its subsidiaries, taken as a whole. The Company has not
received notice of any violation of any applicable law,
ordinance, regulation, order or requirement relating to its
owned or leased properties. The Company has insured its
properties against loss or damage by fire or other casualty
and maintains such casualty and other insurance as is usually
maintained by companies engaged in the same or similar
businesses.
(xvii) Each contract or other instrument (however
characterized or described) to which the Company is a
party or by which its property or business is or may be bound
or affected and to which reference is made in the Prospectus
has been duly and validly executed, is in full force and
effect in all respects and is enforceable against the
Company, and, to the best of the Company's knowledge, the
other parties in accordance with its terms, except as
enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights
generally and general principles of equity and the discretion
of the court before which any proceeding therefor may be
brought, and none of such contracts or instruments has been
assigned by the Company, and neither the Company nor, to the
best of the Company's knowledge, any other party is in
default thereunder and, to the best of the Company's
knowledge, no event has occurred which, with the lapse of
time or the giving of notice, or both, would constitute a
default hereunder, which, in each case, would have a material
adverse effect on the business, properties, financial
condition or results of operations of the Company and its
subsidiaries, taken as a whole.
None of the provisions of such contracts or
instruments violates any existing applicable law, rule,
regulation, judgment, order or decree of any governmental
agency or court having jurisdiction over the Company or any
of its assets or businesses, including, without limitation,
those relating to the production, development, research,
marketing or commercialization of medical devices, which, in
each case, would have a material adverse effect on the
business, properties, financial condition or results of
operations of the Company and its subsidiaries, taken as a
whole.
(xviii) Except as set forth in the Prospectus, the Company
has no employee benefit plans (including, without
limitation, profit sharing and welfare benefit plans) or
deferred compensation arrangements that are subject to the
provisions of the Employee Retirement Income Security Act of
1974.
(xix) To the best of the Company's knowledge, no labor
problem exists with any of the Company's employees or
is imminent which could result in a material adverse effect
on the business, properties, financial condition or results
of operations of the Company and its subsidiaries, taken as a
whole.
(xx) The Company has not, directly or indirectly, at
any time (i) made any contributions to any candidate
for political office, or failed to disclose fully any such
contribution in violation of law or (ii) made any payment to
any state, federal or foreign governmental officer or
official, or other person charged with similar public or
quasi-public duties, other than payments or contributions
required or allowed by applicable law. The Company's
internal accounting controls and procedures are sufficient
-6-
<PAGE> 7
to cause the Company to comply in all material respects with
the Foreign Corrupt Practices Act of 1977, as amended.
(xxi) The Company owns, or possesses adequate rights to
use, all patents, patent rights, inventions, trade
secrets, licenses, know-how, proprietary techniques,
including processes and substances, trademarks, service
marks, trade names and copyrights described or referred to in
the Prospectus as owned or used by it or which are necessary
for the conduct of its business as described in the
Prospectus, except as otherwise disclosed in the Prospectus.
To the best knowledge of the Company, all such patents,
patent rights, licenses, trademarks, service marks and
copyrights are (a) valid and enforceable and (b) not being
infringed by any third parties which infringement could,
whether singly or in the aggregate, materially and adversely
affect the business, properties, operations, condition
(financial or otherwise), income, business prospects or
results of operations of the Company, as presently being
conducted or as proposed to be conducted in the Prospectus.
The Company has no knowledge of, nor has it received any
notice of, infringement of or conflict with, asserted rights
of others with respect to any patents, patent rights,
inventions, trade secrets, licenses, know-how, proprietary
techniques, including processes and substances, trademarks,
service marks, trade names or copyrights which, singly or in
the aggregate, if the subject of an unfavorable decision,
ruling or finding could materially and adversely affect the
business, properties, operations, condition (financial or
otherwise), income, business prospects or results of
operations of the Company as presently being conducted or as
proposed to be conducted in the Prospectus.
(xxii) Prior to the Closing Date the Stock to be issued
and sold by the Company will be authorized for listing
by the Nasdaq National Market upon official notice of
issuance.
Any certificate signed by an officer of the Company and
delivered to Hambrecht & Quist LLC or to White & Case, counsel to the
Underwriters, shall be deemed to be a representation and warranty by the
Company to Hambrecht & Quist LLC as to the matters covered thereby.
3. PURCHASE OF THE STOCK 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
2,000,000 shares of the Underwritten Stock to the several Underwriters, and
each of the Underwriters agrees to purchase from the Company the respective
aggregate number of shares of Underwritten Stock set forth opposite its name in
Schedule I. The price at which such shares of Underwritten Stock shall be sold
by the Company and purchased by the several Underwriters shall be $___ per
share. The obligation of each Underwriter to the Company shall be to purchase
from the Company that number of shares of the Underwritten Stock which
represents the same proportion of the total number of shares of the
Underwritten Stock to be sold by the Company pursuant to this Agreement as the
number of shares of the Underwritten Stock set forth opposite the name of such
Underwriter in Schedule I hereto represents of the total number of shares of
the Underwritten Stock 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 Underwritten Stock specified in Schedule I.
(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 8 or 9 hereof) to purchase and
pay for the number of shares of the Stock agreed to be purchased by such
Underwriter or Underwriters, the Company shall immediately give notice thereof
to you, and the non-defaulting Underwriters shall have the right
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<PAGE> 8
within 24 hours after the receipt by you of such 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 the shares of the Stock
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 of the Stock 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 shares and portion which the defaulting
Underwriter or Underwriters agreed to purchase if the aggregate number of such
shares of the Stock exceeds 10% of the total number of shares of the Stock
which all Underwriters agreed to purchase hereunder. If the total number of
shares of the Stock which the defaulting Underwriter or Underwriters agreed to
purchase shall not be purchased or absorbed in accordance with the two
preceding sentences, the Company 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 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 said 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 shall make arrangements within the 24-hour periods
stated above for the purchase of all the shares of the Stock 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 to any non-defaulting Underwriter and
without any liability on the part of any non-defaulting Underwriter to the
Company. 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 grants an option to the several Underwriters to purchase, severally and
not jointly, up to 300,000 shares in the aggregate of the Option Stock from the
Company at the same price per share as the Underwriters shall pay for the
Underwritten Stock. Said option may be exercised only to cover over-allotments
in the sale of the Underwritten Stock by the Underwriters and may be exercised
in whole or in part at any time (but not more than once) on or before the
thirtieth day after the date of this Agreement upon written or telegraphic
notice by you to the Company setting forth the aggregate number of shares of
the Option Stock as to which the several Underwriters are exercising the
option. Delivery of certificates for the shares of Option Stock, and payment
therefor, shall be made as provided in Section 5 hereof. The number of shares
of the Option Stock to be purchased by each Underwriter shall be the same
percentage of the total number of shares of the Option Stock to be purchased by
the several Underwriters as such Underwriter is purchasing of the Underwritten
Stock, as adjusted by you in such manner as you deem advisable to avoid
fractional shares.
4. OFFERING BY UNDERWRITERS.
(a) The terms of the initial public offering by the Underwriters of
the Stock 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 set forth in the last paragraph on the front cover
page and under "Underwriting" in any Preliminary Prospectus and the Prospectus
relating to the Stock filed by the Company (insofar as such information relates
to the Underwriters) 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
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<PAGE> 9
behalf of the respective Underwriters represent and warrant to the Company that
the statements made therein are correct.
5. DELIVERY OF AND PAYMENT FOR THE STOCK.
(a) Delivery of certificates for the shares of the Underwritten Stock
and the Option Stock (if the option granted by Section 3(c) hereof shall have
been exercised not later than 10:00 a.m., New York time, on the date two
business days preceding the Closing Date), and payment therefor, shall be made
at the office of, , at 10:00 a.m., New York time, on
the [fourth](2) 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 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 10:00 a.m., New York time, on the date two business days preceding the
Closing Date, delivery of certificates for the shares of Option Stock, and
payment therefor, shall be made at the office of, , at
10:00 a.m., New York time, on the third business after the exercise of such
option.
(c) Payment for the Stock purchased from the Company shall be made to
the Company or its order by one or more certified or official bank check or
checks in same day funds. Such payment shall be made upon delivery of
certificates for the Stock to you for the respective accounts of the several
Underwriters against receipt therefor signed by you. Certificates for the
Stock 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 Underwritten Stock, and at least one
business day prior to the purchase thereof, in the case of the Option Stock.
Such certificates will be made available to the Underwriters for inspection,
checking and packaging at the offices of [Lewco Securities Corporation, 2
Broadway, New York, New York 10004] on the business day prior to the Closing
Date or, in the case of the Option Stock, 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
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 Option Stock is
purchased for the account of such Underwriter. Any such payment by you shall
not relieve such Underwriter from any of its obligations hereunder.
6. FURTHER AGREEMENTS OF THE COMPANY. The Company 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.
_____________________________
(2) This assumes that the transaction will be priced after the close of
market and that T + 4 will apply to the transaction. If the pricing took place
before or during market hours (which will generally not be the case), the
closing would be three business days after the pricing.
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<PAGE> 10
(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 Stock 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 Stock, 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 Stock 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 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 Stock 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 Stock 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 Stock 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
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<PAGE> 11
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
Stock.
(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 (including the Report on Form SR required by Rule 463 of the
Commission under the Securities Act).
(h) Not later than the 45th 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) The Company agrees to pay all costs and expenses incident to the
performance of their 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 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 Section 6 and (vi) the
printing and issuance of stock certificates, including the transfer agent's
fees.
(j) 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 Stock under state securities or blue sky laws and in the
review of the offering by the NASD.
(k) The provisions of paragraphs (i) and (j) 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.
(l) The Company hereby agrees that, without the prior written consent
of Hambrecht & Quist LLC on behalf of the Underwriters, the Company will not,
for a period of 180 days following the commencement of the public offering of
the Stock by the Underwriters, directly or indirectly, (i) sell, offer,
contract to sell, make any short sale, pledge, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase or otherwise transfer or dispose of any shares of Common
Stock or any securities convertible into or exchangeable or exercisable for or
any rights to purchase or acquire Common Stock 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. The foregoing sentence
shall not apply to the Stock to be sold to the Underwriters pursuant to this
Agreement.
(m) 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 Stock 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
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<PAGE> 12
of, and disseminate a press release or other public statement, reasonably
satisfactory to you, responding to or commenting on such rumor, publication or
event.
(n) 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 "investment
company" within the meaning of the Investment Company Act of 1940, as amended,
and the rules and regulations thereunder.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees 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 (herein called
the Exchange Act), or the common law or otherwise, and the Company agrees 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 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 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; provided, however, that (1) the indemnity agreement of
the Company 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 and (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 Stock 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. The indemnity agreement of
the Company contained in this paragraph (a) and the representations and
warranties of the Company contained in Section 2 hereof 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 Stock.
(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 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
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<PAGE> 13
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 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 not misleading or (ii) any untrue statement or alleged untrue statement
of a material fact contained in 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 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 Stock.
(c) Each party indemnified under the provision of paragraphs (a) and
(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 (herein called the Notice) of
such service or notification to the party or parties from whom indemnification
may be sought hereunder; provided, however, that the failure so to notify the
indemnifying party shall not relieve the indemnifying party from any liability
it may have to the indemnified party (y) under this Section 7 except to the
extent that the indemnifying party has been materially prejudiced by such
failure or (z) otherwise than under this Section 7. Any indemnifying party
shall be entitled at its own expense to participate in the defense of 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
(herein called 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. 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
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<PAGE> 14
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 Stock 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 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 Stock received by the Company 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 Stock.
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 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
contributions 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
Stock 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) The Company will not, without the prior written consent of each
Underwriter, 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 Underwriter or any
person who controls such Underwriter 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 such Underwriter and each such controlling
person from all liability arising out of such claim, action, suit or
proceeding.
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<PAGE> 15
8. TERMINATION. This Agreement may be terminated by you at any time
prior to the Closing Date by giving written notice to the Company 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 would, in the Underwriters' reasonable
judgment, make the offering or delivery of the Stock 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, (v)
declaration of a banking moratorium by either federal or New York State
authorities, or (vi) the taking of any action by any federal, state or local
government or agency in respect of its monetary or fiscal affairs which in the
Underwriters' reasonable opinion has a material adverse effect on the
securities markets in the United States. If this Agreement shall be terminated
pursuant to this Section 8, there shall be no liability of the Company to the
Underwriters and no liability of the Underwriters to the Company; provided,
however, that in the event of any such termination the Company agrees to
indemnify and hold harmless the Underwriters from all costs or expenses
incident to the performance of the obligations of the Company under this
Agreement, including all costs and expenses referred to in paragraphs (i) and
(j) of Section 6 hereof.
9. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters to purchase and pay for the Stock shall be subject to the
performance by the Company of all its obligations to be performed hereunder at
or prior to the Closing Date or any later date on which Option Stock is 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 threatened by
the Commission.
(b) The legality and sufficiency of the sale of the Stock
hereunder and the validity and form of the certificates representing
the Stock, 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
White & Case, counsel for the Underwriters.
(c) You shall have received from (i) Wilson Sonsini Goodrich &
Rosati, counsel for the Company, an opinion addressed to the
Underwriters and dated the Closing Date, covering the matters set
forth in Annex A hereto, and if Option Stock is purchased at any date
after the Closing Date, an additional opinion from such counsel,
addressed to the Underwriters and dated such later date, confirming
that the statements expressed as of the Closing Date in such opinion
remain valid as of such later date; (ii) Thorpe, North & Western,
Kilpatrick & Stockton and Fleshner & Associates, each patent counsel
for the Company, opinions, addressed to the Underwriters and dated the
Closing Date, covering the matters set forth in Annex B hereto, with
respect to the Company's glucose monitoring product, diabetes
screening product and infant jaundice monitoring product, each as
described in the Prospectus, and if Option Stock is purchased at any
date after the Closing Date, additional opinions from such counsel,
addressed to the Underwriters' and dated such later date, confirming
that the statements expressed as of the Closing Date in such opinions
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<PAGE> 16
remain valid as of such later date; and (iii) FDA counsel to the
Company, as opinion addressed to the Underwriters and dated the
Closing Date, covering the matters set forth in Annex C hereto, and if
Option Stock is purchased at any date after the Closing Date, an
additional opinion from such counsel, addressed to the Underwriters
and dated such later date, confirming that the statements expressed as
of the Closing Date in such opinion 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) neither the Company nor any of its
subsidiaries has any material contingent obligations which are not
disclosed in the Registration Statement and the Prospectus, (v) there
are no 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, (vi) there are no 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, (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 Option Stock is to be purchased, as the case may be, and
(viii) there has not been any material change in the market for
securities in general or in political, financial or economic
conditions from those reasonably foreseeable as to render it
impracticable in your reasonable judgment to make a public offering of
the Stock, or a material adverse change in market levels for
securities in general (or those of companies in particular) or
financial or economic conditions which render it inadvisable to
proceed.
(e) You shall have received on the Closing Date and on any later
date on which Option Stock is 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 (vii) of paragraph (d) of this Section 9 are true and correct.
(f) You shall have received from Arthur Andersen & Co., a letter
or letters, addressed to the Underwriters and dated the Closing Date
and any later date on which Option Stock is 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 (herein called the Original Letter), but
carried out to a date not more than three business days prior to the
Closing Date or such later date on which Option Stock is 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
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<PAGE> 17
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 Stock or the purchase of the Option Stock 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
qualification referred to in paragraph (f) of Section 6 hereof.
(h) Prior to the Closing Date, the Stock to be issued and sold by
the Company shall have been duly authorized for listing by the Nasdaq
National Market upon official notice of issuance.
(i) On or prior to the Closing Date, you shall have received from
each director, officer, and stockholder agreements, in form reasonably
satisfactory to Hambrecht & Quist LLC, stating that without the prior
written consent of Hambrecht & Quist LLC on behalf of the
Underwriters, each such person or entity will not, for a period of 180
days following the commencement of the public offering of the Stock by
the Underwriters, directly or indirectly, (i) sell, offer, contract to
sell, make any short sale, pledge, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase or otherwise transfer or dispose of any
shares of Common Stock or any securities convertible into or
exchangeable or exercisable for or any rights to purchase or acquire
Common Stock 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.
All the agreements, opinions, certificates and letters mentioned above
or elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if White & Case, counsel for the Underwriters, shall be
satisfied that they comply in form and scope.
In case any of the conditions specified in this Section 9 shall not be
fulfilled, this Agreement may be terminated by you by giving notice to the
Company. Any such termination shall be without liability of the Company to the
Underwriters and without liability of the Underwriters to the Company;
provided, however, that (i) in the event of such termination, the Company
agrees to indemnify and hold harmless the Underwriters from all costs or
expenses incident to the performance of the obligations of the Company under
this Agreement, including all costs and expenses referred to in paragraphs (i)
and (j) 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 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.
10. CONDITIONS OF THE OBLIGATION OF THE COMPANY. The obligation of
the Company to deliver the Stock shall be subject to the conditions that (a)
the Registration Statement shall have become effective and (b) no stop order
suspending 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 10 shall
not be fulfilled, this Agreement may be terminated by the Company by giving
notice to you. Any such termination shall be without liability of the Company
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<PAGE> 18
to the Underwriters and without liability of the Underwriters to the
Company ; provided, however, that in the event of any such termination the
Company agrees to indemnify and hold harmless the Underwriters from all costs
or expenses incident to the performance of the obligations of the Company under
this Agreement, including all costs and expenses referred to in paragraphs (i)
and (j) of Section 6 hereof.
11. REIMBURSEMENT OF CERTAIN EXPENSES. In addition to their other
obligations under Section 7 of this Agreement, the Company hereby agrees to
reimburse on a quarterly basis the Underwriters 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 paragraph (a) of Section 7 of this Agreement, notwithstanding the
absence of a judicial determination as to the propriety and enforceability of
the obligations under this Section 11 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
Company, upon request, reasonable assurances of their ability to effect any
refund, when and if due.
12. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall
inure to the benefit of the Company and the several Underwriters and, with
respect to the provisions of Section 7 hereof, the several parties (in addition
to the Company 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 Stock from any of the several
Underwriters.
13. NOTICES. Except as otherwise provided herein, all communications
hereunder shall be in writing or by telegraph and, if to the Underwriters,
shall be mailed, telegraphed or delivered to Hambrecht & Quist LLC, One Bush
Street, San Francisco, California 94104; and if to the Company, shall be
mailed, telegraphed or delivered to it at its office, 6025A Unity Drive,
Norcross, Georgia 30071, Attention: . All notices given by
telegraph shall be promptly confirmed by letter.
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 its directors or officers, and
(c) delivery and payment for the Stock under this Agreement; provided, however,
that if this Agreement is terminated prior to the Closing Date, the provisions
of paragraphs (l) and (m) of Section 6 hereof shall be of no further force or
effect.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of California.
Please sign and return to the Company the enclosed duplicates of this
letter, whereupon this letter will become a binding agreement among the Company
and the several Underwriters in accordance with its terms.
Very truly yours,
SPECTRX, INC.
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<PAGE> 19
By__________________________
[Name]
[Title]
The foregoing Agreement is hereby confirmed
and accepted as of the date first above written.
HAMBRECHT & QUIST LLC
By _____________________________
Managing Director
Acting on behalf of the several Underwriters,
including themselves, named in Schedule I hereto.
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<PAGE> 20
SCHEDULE I
UNDERWRITERS
NUMBER OF
SHARES
TO BE
UNDERWRITERS PURCHASED
------------ ---------
Hambrecht & Quist LLC . . . . . . . . . . . X
Volpe, Welty & Company . . . . . . . . . . . Y
Total. . . . . . . . . . . . . . . . . . .2,000,000
=========
<PAGE> 21
ANNEX A
MATTERS TO BE COVERED IN THE OPINION OF WILSON SONSINI GOODRICH & ROSATI
COUNSEL FOR THE COMPANY
(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 its
ownership or leasing of property requires such qualification [(except where the
failure to be so qualified would not have a material adverse effect on the
business, properties, financial condition or results of operations of the
Company and its subsidiaries, taken as a whole)], 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 such stock as is owned
by the Company is owned by the Company free and clear of all liens,
encumbrances and security interests, and to the best of such 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, of which there are
outstanding shares, and shares of Common Stock,
$ par value, of which there are outstanding _____________________ shares
(including the Underwritten Stock plus the number of shares of Option Stock
issued on the date hereof); proper corporate proceedings have been taken
validly to authorize such authorized capital stock; all of the outstanding
shares of such capital stock (including the Underwritten Stock and the shares
of Option Stock issued, if any) have been duly and validly issued and are fully
paid and nonassessable; any Option Stock purchased after the Closing Date, when
issued and delivered to and paid for by the Underwriters as provided in the
Underwriting Agreement, will have been duly and validly issued and be fully
paid and nonassessable; and no preemptive rights of, or rights of refusal in
favor of, stockholders exist with respect to the Stock, or the issue and sale
thereof, pursuant to the Certificate of Incorporation or Bylaws of 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 contemplated 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, the Exchange 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 or incorporated by reference therein, 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 not
misleading, or that the Prospectus (except as to the financial statements and
schedules and other financial data contained or incorporated by reference
therein, as to which such counsel need not express any opinion or belief) as of
its date or at the Closing Date (or any later date on which Option Stock is
purchased), contained or contains any untrue statement of a material fact or
omitted or
<PAGE> 22
Annex A
Page 2
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 to the best of such counsel's
knowledge, the description of the Company's stock option plans and the options
granted and which may be granted thereunder and the options granted otherwise
than under such plans 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 issue and sale by the Company of the shares of Stock sold by the
Company as contemplated by the Underwriting Agreement will not conflict with,
or result in a breach of, 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 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;
(x) 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;
(xi) no consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation of the
transactions contemplated in the Underwriting Agreement, except such as have
been obtained under the Securities Act and such as may be required under state
securities or blue sky laws in connection with the purchase and distribution of
the Stock by the Underwriters; and
(xii) the Stock issued and sold by the Company will been duly authorized
for listing on the Nasdaq National Market System 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 or of the State of Delaware, 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
Representative(s) 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.
<PAGE> 23
DRAFT
February 22, 1997
ANNEX B
MATTERS TO BE COVERED IN THE OPINION OF
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 any allegation on the part of any person that the
Company is infringing any patent rights, trade secrets, trademarks, service
marks or other proprietary information or materials of any such person 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) to the best of such counsel's knowledge there are no legal or
governmental proceedings pending relating to patent rights, trade secrets,
trademarks, service marks or other proprietary information or materials of the
Company, and to the best of such counsel's knowledge no such proceedings are
threatened or contemplated by governmental authorities or others;
(iii) such counsel do not know of any contracts or other documents,
relating to 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;
(iv) to the best of such counsel's knowledge, the Company is not
infringing or otherwise violating any patents, trade secrets, trademarks,
service marks or other proprietary information or materials, of others, and 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; and
(v) 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.
<PAGE> 24
ANNEX C
MATTERS TO BE COVERED IN THE OPINION OF
REGULATORY COUNSEL FOR THE COMPANY
During the course of preparation of the Registration Statement, such
counsel participated in discussions with officers of the Company as to the FDA
regulatory matters dealt with under the captions "Risk Factors - Lack of
Regulatory Approvals" and "Business -- Government Regulation" in the
Prospectus. On the basis of these discussions and such counsel's activities as
special FDA regulatory counsel to the Company, no facts have come to such
counsel's attention which cause such counsel to believe that the statements in
the Prospectus under the captions "Risk Factors - Lack of Regulatory Approvals"
and "Business - Government Regulation", insofar as such statements relate to
FDA regulatory matters, at the time the Registration Statement became
effective, contained an 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 not misleading, or as of the Closing Date contain an untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
Based upon, subject to and limited by the foregoing, such counsel are
of the opinion that the statements in the Prospectus under the captions "Risk
Factors - Lack of Government Regulations" and "Business - Government
Regulation" insofar as such statements summarize applicable provisions of the
Federal Food, Drug and Cosmetic Act and the regulations promulgated thereunder,
are accurate summaries in all material respects of the provisions summarized
under such captions in the Prospectus, and do not omit to summarize applicable
provision of the Federal Food, Drug and Cosmetic Act or the regulations
promulgated thereunder necessary to make those statements not misleading.
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF AMENDMENT OF
RESTATED CERTIFICATE OF INCORPORATION OF
SPECTRX, INC.
SpectRx, Inc., a corporation organized and existing under the laws of
the State of Delaware, hereby certifies as follows:
1. That the following amendment to Article IV of the Corporation's Restated
Certificate of Incorporation has been duly adopted by the board of directors in
accordance with the provisions of Section 242 of the General Corporation Law:
"The Corporation is authorized to issue two classes of stock
to be designated Common Stock and Preferred Stock. The total number of
shares of Common Stock, $0.001 par value, which this corporation has
authority to issue is 15,000,000. The total number of shares of
Preferred Stock, $0.001 par value, which this corporation has authority
to issue is 10,870,000. 3,560,000 shares of Preferred Stock are
designated Series A Preferred Stock ("Series A Preferred"), 3,560,000
shares of Preferred Stock are designated Series A1 Preferred Stock
("Series A1 Preferred"), 1,375,000 shares of Preferred Stock are
designated Series B Preferred Stock ("Series B Preferred"), 1,375,000
shares of Preferred Stock are designated Series B1 Preferred Stock
("Series B1 Preferred"), 500,000 shares of Preferred Stock are
designated Series C Preferred Stock ("Series C Preferred") and 500,000
shares of Preferred Stock are designated Series C1 Preferred Stock
("Series C1 Preferred").
Upon the filing of this Certificate of Amendment of
Certificate of Incorporation, each 1.4 outstanding shares of Common
Stock shall be combined and converted into one share of Common Stock.
Such stock combination shall be calculated on a certificate by
certificate basis with fractional shares being rounded up."
2. That the following amendment to Article V(4)(b) of the Corporation's Restated
Certificate of Incorporation has been duly adopted by the board of directors in
accordance with the provisions of Section 242 of the General Corporation Law:
"Automatic Conversion. Each share of Preferred Stock shall
automatically be converted into shares of Common Stock at its then
effective Conversion Rate immediately upon the closing of a firm
commitment underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933,
<PAGE> 2
as amended, covering the offer and sale of Common Stock of which the
aggregate gross proceeds attributable to sales for the account of the
Corporation exceed $10,000,000 at an issuance price per share of at
least $6.00 without regard to any stock splits that may be effected by
the Board of Directors."
3. The foregoing amendments have been duly approved by the stockholders in
accordance with the provisions of section 242 of the General Corporation Law.
IN WITNESS WHEREOF, the corporation has caused this Certificate to be
signed by Mark A. Samuels, its President, and attested by Thomas H. Muller, Jr.,
its Secretary, this 20th day of January, 1997.
SPECTRx, INC.
By: /s/ Mark A. Samuels
------------------------------
Mark A. Samuels, President
ATTEST:
/s/ Thomas H. Muller, Jr.
- ---------------------------------
Thomas H. Muller, Jr., Secretary
-2-
<PAGE> 1
EXHIBIT 3.2
RESTATED CERTIFICATE OF INCORPORATION
OF
SPECTRX, INC.
The following Restated Certificate of Incorporation of SpectRx, Inc.
(i) restates the provisions of the Amended and Restated Certificate of
Incorporation of SpectRx, Inc. filed with the Secretary of State of the State of
Delaware on September 13, 1996 under the name SpectRx, Inc., and (ii) supersedes
the original Certificate of Incorporation and all prior restatements thereof and
amendments thereto in their entirety.
ARTICLE I
The name of the corporation is SpectRx, Inc. (the "Corporation").
ARTICLE II
The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street, City of Wilmington, County of Newcastle,
Delaware 19801. The name of its registered agent at such address is The
Corporation Trust Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
ARTICLE IV
The Corporation is authorized to issue two classes of shares of stock
to be designated, respectively, Common Stock, $0.001 par value, and Preferred
Stock, $0.001 par value. The total number of shares that the Corporation is
authorized to issue is 55,000,000 shares. The number of shares of Common Stock
authorized is 50,000,000. The number of shares of Preferred authorized is
5,000,000.
The Preferred Stock may be issued from time to time in one or more
series pursuant to a resolution or resolutions providing for such issue duly
adopted by the board of directors (authority to do so being hereby expressly
vested in the board). The board of directors is further authorized to determine
or alter the rights, preferences, privileges and restrictions granted to or
imposed upon any wholly unissued series of Preferred Stock and to fix the number
of shares of any series of Preferred Stock and the designation of any such
series of Preferred Stock. The board of directors, within the limits and
<PAGE> 2
restrictions stated in any resolution or resolutions of the board of directors
originally fixing the number of shares constituting any series, may increase or
decrease (but not below the number of shares in any such series then
outstanding) the number of shares of any series subsequent to the issue of
shares of that series.
The authority of the board of directors with respect to each such class
or series shall include, without limitation of the foregoing, the right to
determine and fix:
(a) the distinctive designation of such class or series and
the number of shares to constitute such class or series;
(b) the rate at which dividends on the shares of such class or
series shall be declared and paid, or set aside for payment, whether dividends
at the rate so determined shall be cumulative or accruing, and whether the
shares of such class or series shall be entitled to any participating or other
dividends in addition to dividends at the rate so determined, and if so, on what
terms;
(c) the right or obligation, if any, of the corporation to
redeem shares of the particular class or series of Preferred Stock and, if
redeemable, the price, terms and manner of such redemption;
(d) the special and relative rights and preferences, if any,
and the amount or amounts per share, which the shares of such class or series of
Preferred Stock shall be entitled to receive upon any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation;
(e) the terms and conditions, if any, upon which shares of
such class or series shall be convertible into, or exchangeable for, shares of
capital stock of any other class or series, including the price or prices or the
rate or rates of conversion or exchange and the terms of adjustment, if any;
(f) the obligation, if any, of the corporation to retire,
redeem or purchase shares of such class or series pursuant to a sinking fund or
fund of a similar nature or otherwise, and the terms and conditions of such
obligation;
(g) voting rights, if any, on the issuance of additional
shares of such class or series or any shares of any other class or series of
Preferred Stock;
(h) limitations, if any, on the issuance of additional shares
of such class or series or any shares of any other class or series of Preferred
Stock; and
(i) such other preferences, powers, qualifications, special or
relative rights and privileges thereof as the board of directors of the
corporation, acting in accordance with this Restated Certificate of
Incorporation, may deem advisable and are not inconsistent with law and the
provisions of this Restated Certificate of Incorporation.
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<PAGE> 3
ARTICLE V
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 statute, and all rights conferred upon the
stockholders herein are granted subject to this right.
ARTICLE VI
The Corporation is to have perpetual existence.
ARTICLE VII
1. Limitation of Liability. To the fullest extent permitted by the
General Corporation Law of the State of Delaware as the same exists or as may
hereafter be amended, a director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director.
2. Indemnification. The Corporation may indemnify to the fullest extent
permitted by law any person made or threatened to be made a party to an action
or proceeding, whether criminal, civil, administrative or investigative, by
reason of the fact that such person or his or her testator or intestate is or
was a director, officer or employee of the Corporation, or any predecessor of
the Corporation, or serves or served at any other enterprise as a director,
officer or employee at the request of the Corporation or any predecessor to the
Corporation.
3. Amendments. Neither any amendment nor repeal of this Article VII,
nor the adoption of any provision of the Corporation's Certificate of
Incorporation inconsistent with this Article VII, shall eliminate or reduce the
effect of this Article VII, in respect of any matter occurring, or any action or
proceeding accruing or arising or that, but for this Article VII, would accrue
or arise, prior to such amendment, repeal, or adoption of an inconsistent
provision.
ARTICLE VIII
In the event any shares of Preferred Stock shall be redeemed or
converted pursuant to the terms hereof, the shares so converted or redeemed
shall not revert to the status of authorized but unissued shares, but instead
shall be canceled and shall not be re-issuable by the Corporation.
ARTICLE IX
Holders of stock of any class or series of this corporation shall not
be entitled to cumulate their votes for the election of directors or any other
matter submitted to a vote of the stockholders.
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<PAGE> 4
ARTICLE X
1. Number of Directors. The number of directors which constitutes the
whole Board of Directors of the corporation shall be designated in the Bylaws of
the corporation.
2. Election of Directors. Elections of directors need not be by written
ballot unless the Bylaws of the corporation shall so provide.
ARTICLE XI
In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter, amend or
repeal the Bylaws of the corporation.
ARTICLE XII
Immediately upon the closing of a public offering pursuant to an
effective registration statement under the Securities Act of 1933, as amended,
covering any of the corporation's securities (as that term is defined under the
Securities Act of 1933, as then in effect), no action shall be taken by the
stockholders of the corporation except at an annual or special meeting of the
stockholders called in accordance with the Bylaws of the corporation and no
action shall be taken by the stockholders by written consent.
ARTICLE XIII
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside of the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
This Restated Certificate of Incorporation has been duly adopted by the
board of directors of the Corporation in accordance with the provisions of
Sections 242 and 245 of the General Corporation Law of the State of Delaware, as
amended.
The Restated Certificate of Incorporation restates and integrates and
further amends the provisions of the Corporation's Certificate of Incorporation.
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<PAGE> 5
IN WITNESS WHEREOF, SpectRx, Inc. has caused this certificate to be
signed by Mark A. Samuels, its President, and Thomas H. Muller, Jr., Secretary,
this 20th day of January, 1997.
By: /s/ Mark A. Samuels
---------------------------------------
Mark A. Samuels, President
Attest: /s/ Thomas H. Muller
-----------------------------------
Thomas H. Muller, Jr., Secretary
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<PAGE> 1
EXHIBIT 3.3
BYLAWS
OF
SPECTRX, INC.
(as amended January 11, 1993)
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE I - CORPORATE OFFICES....................................... 1
1.1 REGISTERED OFFICE......................................... 1
1.2 OTHER OFFICES............................................. 1
ARTICLE II - MEETINGS OF STOCKHOLDERS............................... 1
2.1 PLACE OF MEETINGS......................................... 1
2.2 ANNUAL MEETING............................................ 1
2.3 SPECIAL MEETING........................................... 1
2.4 NOTICE OF STOCKHOLDERS' MEETINGS.......................... 2
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE.............. 2
2.6 QUORUM.................................................... 2
2.7 ADJOURNED MEETING; NOTICE................................. 3
2.8 CONDUCT OF BUSINESS....................................... 3
2.9 VOTING.................................................... 3
2.10 WAIVER OF NOTICE.......................................... 4
2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A
MEETING................................................... 4
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING
CONSENTS.................................................. 5
2.13 PROXIES................................................... 5
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE..................... 6
ARTICLE III - DIRECTORS............................................. 6
3.1 POWERS.................................................... 6
3.2 NUMBER OF DIRECTORS....................................... 6
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF
DIRECTORS................................................. 6
3.4 RESIGNATION AND VACANCIES................................. 7
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE.................. 8
3.6 REGULAR MEETINGS.......................................... 8
3.7 SPECIAL MEETINGS; NOTICE.................................. 8
3.8 QUORUM.................................................... 9
3.9 WAIVER OF NOTICE.......................................... 9
3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING......... 9
3.11 FEES AND COMPENSATION OF DIRECTORS........................ 10
3.12 APPROVAL OF LOANS TO OFFICERS............................. 10
3.13 REMOVAL OF DIRECTORS...................................... 10
ARTICLE IV - COMMITTEES............................................. 10
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<PAGE> 3
4.1 COMMITTEES OF DIRECTORS................................... 10
4.2 COMMITTEE MINUTES......................................... 11
4.3 MEETINGS AND ACTION OF COMMITTEES......................... 11
ARTICLE V - OFFICERS................................................ 12
5.1 OFFICERS.................................................. 12
5.2 APPOINTMENT OF OFFICERS................................... 12
5.3 SUBORDINATE OFFICERS...................................... 12
5.4 REMOVAL AND RESIGNATION OF OFFICERS....................... 12
5.5 VACANCIES IN OFFICES...................................... 13
5.6 CHAIRMAN OF THE BOARD..................................... 13
5.7 PRESIDENT................................................. 13
5.8 VICE PRESIDENTS........................................... 13
5.9 SECRETARY................................................. 14
5.10 CHIEF FINANCIAL OFFICER................................... 14
5.11 ASSISTANT SECRETARY....................................... 15
5.12 ASSISTANT TREASURER....................................... 15
5.13 REPRESENTATION OF SHARES OF OTHER CORPORATIONS............ 15
5.14 AUTHORITY AND DUTIES OF OFFICERS.......................... 15
ARTICLE VI - INDEMNITY.............................................. 16
6.1 THIRD PARTY ACTIONS....................................... 16
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION............. 16
6.3 SUCCESSFUL DEFENSE........................................ 17
6.4 DETERMINATION OF CONDUCT.................................. 17
6.5 PAYMENT OF EXPENSES IN ADVANCE............................ 17
6.6 INDEMNITY NOT EXCLUSIVE................................... 18
6.7 INSURANCE INDEMNIFICATION................................. 18
6.8 THE CORPORATION........................................... 18
6.9 EMPLOYEE BENEFIT PLANS.................................... 19
6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF
EXPENSES................................................. 19
ARTICLE VII - RECORDS AND REPORTS................................... 19
7.1 MAINTENANCE AND INSPECTION OF RECORDS..................... 19
7.2 INSPECTION BY DIRECTORS................................... 20
7.3 ANNUAL STATEMENT TO STOCKHOLDERS.......................... 20
ARTICLE VIII - GENERAL MATTERS...................................... 21
8.1 CHECKS.................................................... 21
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS.......... 21
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES.................... 21
8.4 SPECIAL DESIGNATION ON CERTIFICATES....................... 22
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<PAGE> 4
TABLE OF CONTENTS
(continued)
8.5 LOST CERTIFICATES......................................... 22
8.6 CONSTRUCTION; DEFINITIONS................................. 23
8.7 DIVIDENDS................................................. 23
8.8 FISCAL YEAR............................................... 23
8.9 SEAL...................................................... 23
8.10 TRANSFER OF STOCK......................................... 23
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<PAGE> 5
TABLE OF CONTENTS
(continued)
Page
8.11 STOCK TRANSFER AGREEMENTS................................. 24
8.12 REGISTERED STOCKHOLDERS................................... 24
ARTICLE IX - AMENDMENTS.............................................. 24
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<PAGE> 6
BYLAWS
OF
SPECTRX, INC.
(as amended January 11, 1993)
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of the corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware. The name of the registered
agent of the corporation at such location is The Corporation Trust Company.
1.2 OTHER OFFICES
The board of directors may at any time establish other offices at any
place or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place, within or outside
the State of Delaware, designated by the board of directors. In the absence of
any such designation, stockholders' meetings shall be held at the registered
office of the corporation.
2.2 ANNUAL MEETING
The annual meeting of stockholders shall be held each year on a date
and at a time designated by the board of directors. In the absence of such
designation the annual meeting of shareholders shall be held on the second
Monday of May of each year at 10:00 a.m. However, if such day falls on a legal
holiday, then the meeting shall be held at the same time and place on the next
succeeding business day. At the meeting, directors shall be elected and any
other proper business may be transacted.
<PAGE> 7
2.3 SPECIAL MEETING
A special meeting of the stockholders may be called at any time by the
board of directors, or by the chairman of the board, or by the president, or by
one or more stockholders holding shares in the aggregate entitled to cast not
less than ten percent of the votes at that meeting.
If a special meeting is called by any person or persons other than the
board of directors, the request shall be in writing, specifying the time of such
meeting and the general nature of the business proposed to be transacted, and
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the chairman of the board, the president or the
secretary of the corporation. No business may be transacted at such special
meeting otherwise than specified in such notice. The officer receiving the
request shall cause notice to be promptly given to the stockholders entitled to
vote, in accordance with the provisions of Sections 2.4 and 2.5 of this Article
II, that a meeting will be held at the time requested by the person or persons
calling the meeting, not less than ten (10) nor more than sixty (60) days after
the receipt of the request. Nothing contained in this paragraph of this Section
2.3 shall be construed as limiting, fixing, or affecting the time when a meeting
of stockholders called by action of the board of directors may be held.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
All notices of meetings with stockholders shall be in writing and shall
be sent or otherwise given in accordance with Section 2.5 of these bylaws not
less than ten (10) nor more than sixty (60) days before the date of the meeting
to each stockholder entitled to vote at such meeting. The notice shall specify
the place, date, and hour of the meeting, and, in the case of a special meeting,
the purpose or purposes for which the meeting is called.
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation. An
affidavit of the Secretary or an Assistant Secretary or of the transfer agent of
the corporation that the notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein.
2.6 QUORUM
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<PAGE> 8
The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum is not present or represented at any
meeting of the stockholders, then either (i) the Chairman of the meeting or (ii)
the stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum is present or
represented. At such adjourned meeting at which a quorum is present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
2.7 ADJOURNED MEETING; NOTICE
When a meeting is adjourned to another time or place, unless these
bylaws otherwise require, notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which the adjournment
is taken. At the adjourned meeting the corporation may transact any business
that might have been transacted at the original meeting. If the adjournment is
for more than thirty (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.
2.8 CONDUCT OF BUSINESS
The chairman of any meeting of stockholders shall determine the order
of business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of business.
2.9 VOTING
The stockholders entitled to vote at any meeting of stockholders shall
be determined in accordance with the provisions of Section 2.12 of these bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation Law
of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners
of stock and to voting trusts and other voting agreements).
Except as provided in the last paragraph of this Section 2.9, or as may
be otherwise provided in the certificate of incorporation, each stockholder
shall be entitled to one vote for each share of capital stock held by such
stockholder.
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<PAGE> 9
At a stockholders' meeting at which directors are to be elected, each
stockholder shall be entitled to cumulate votes (i.e., cast for any candidate a
number of votes greater than the number of votes which such stockholder normally
is entitled to cast) if the candidates' names have been properly placed in
nomination (in accordance with these bylaws) prior to commencement of the
voting and the stockholder requesting cumulative voting or any other stockholder
voting at the meeting in person or by proxy has given notice prior to
commencement of the voting of the stockholder's intention to cumulate votes. If
cumulative voting is properly requested, each holder of stock, or of any class
or classes or of a series or series thereof, who elects to cumulate votes shall
be entitled to as many votes as equals the number of votes which (absent this
provision as to cumulative voting) he would be entitled to cast for the election
of directors with respect to his shares of stock multiplied by the number of
directors to be elected by him, and he may cast all of such votes for a single
director or may distribute them among the number to be voted for, or for any two
or more of them, as he may see fit.
2.10 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of incorporation or
these bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, 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 regular or special meeting
of the stockholders need be specified in any written waiver of notice unless so
required by the certificate of incorporation or these bylaws.
2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise provided in the certificate of incorporation, any
action required by this chapter to be taken at any annual or special meeting of
stockholders of a corporation, or any action that may be taken at any annual or
special meeting of such stockholders, may be taken without a meeting, without
prior notice, and without a vote if a consent in writing, setting forth the
action so taken, is signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted.
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<PAGE> 10
Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing. If the action which is consented to is such as
would have required the filing of a certificate under any section of the General
Corporation Law of Delaware if such action had been voted on by stock holders
at a meeting thereof, then the certificate filed under such section shall state,
in lieu of any statement required by such section concerning any vote of
stockholders, that written notice and written consent have been given as
provided in Section 228 of the General Corporation Law of Delaware.
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
In order that the corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, or entitled to express consent to corporate action in writing without
a meeting, or entitled to receive payment of any dividend or other distribution
or allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the board of directors may fix, in advance, a record date, which shall
not be more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action.
If the board of directors does not so fix a record date:
(i) The record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held.
(ii) The record date for determining stockholders entitled
to express consent to corporate action in writing without a meeting, when no
prior action by the board of directors is necessary, shall be the day on which
the first written consent is expressed.
(iii) The record date for determining stockholders for any
other purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
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<PAGE> 11
2.13 PROXIES
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by a written proxy, signed by
the stockholder and filed with the secretary of the corporation, but no such
proxy shall be voted or acted upon after three (3) years from its date, unless
the proxy provides for a longer period. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the stockholder or the
stockholder's attorney-in-fact. The revocability of a proxy that states on its
face that it is irrevocable shall be governed by the provisions of Section
212(c) of the General Corporation Law of Delaware.
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (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 ten (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 of the meeting, 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. Such list shall
presumptively determine the identity of the stockholders entitled to vote at the
meeting and the number of shares held by each of them.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware
and any limitations in the certificate of incorporation or these bylaws relating
to action required to be approved by the stockholders or by the outstanding
shares, the business and affairs
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<PAGE> 12
of the corporation shall be managed and all corporate powers shall be exercised
by or under the direction of the board of directors.
3.2 NUMBER OF DIRECTORS
The number of directors of the corporation shall be not less than four
(4) nor more than seven (7). The exact number of directors shall be five (5)
until changed, within the limits specified above, by a bylaw amending this
Section 3.2, duly adopted by the board of directors or by the stockholders. The
indefinite number of directors may be changed, or a definite number may be fixed
without provision for an indefinite number, by a duly adopted amendment to the
certificate of incorporation or by an amendment to this bylaw duly adopted by
the vote or written consent of the holders of the majority of the stock issued
and outstanding and entitled to vote or by resolution of the majority of the
board of directors.
No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office expires.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
Except as provided in Section 3.4 of these bylaws, directors shall be
elected at each annual meeting of stockholders to hold office until the next
annual meeting. Directors need not be stockholders unless so required by the
certificate of incorporation or these bylaws, wherein other qualifications for
directors may be prescribed. Each director, including a director elected to fill
a vacancy, shall hold office until his successor is elected and qualified or
until his earlier resignation or removal.
Elections of directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES
Any director may resign at any time upon written notice to the
attention of the Secretary of the corporation. When one or more directors so
resigns and the resignation is effective at a future date, a majority of the
directors then in office, including those who have so resigned, shall have power
to fill such vacancy or vacancies, the vote thereon to take effect when such
resignation or resignations shall become effective, and each director so chosen
shall hold office as provided in this section in the filling of other vacancies.
Unless otherwise provided in the certificate of incorporation or these
bylaws:
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<PAGE> 13
(i) Vacancies and newly created directorships resulting
from any increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(ii) Whenever the holders of any class or classes of stock
or series thereof are entitled to elect one or more directors by the provisions
of the certificate of incorporation, vacancies and newly created directorships
of such class or classes or series may be filled by a majority of the directors
elected by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these bylaws, or may
apply to the Court of Chancery for a decree summarily ordering an election as
provided in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the whole board (as constituted immediately prior to any such increase), then
the Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten (10) percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office as aforesaid,
which election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
The board of directors of the corporation may hold meetings, both
regular and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or
these bylaws, members of the board of directors, or any committee designated by
the board of directors, may participate in a meeting of the board of directors,
or any committee, by means of conference telephone or similar communications
equipment by means
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<PAGE> 14
of which all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
3.6 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice
at such time and at such place as shall from time to time be determined by the
board.
3.7 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes
may be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two (2) directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least four (4) days before the
time of the holding of the meeting. If the notice is delivered personally or by
telephone or by telegram, it shall be delivered personally or by telephone or to
the telegraph company at least forty-eight (48) hours before the time of the
holding of the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. The notice need not specify the purpose or the place of the
meeting, if the meeting is to be held at the principal executive office of the
corporation.
3.8 QUORUM
At all meetings of the board of directors, a majority of the authorized
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the board of directors, except as may be
otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum is not present at any meeting of the board of
directors, then the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is present.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors,
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if any action taken is approved by at least a majority of the required quorum
for that meeting.
3.9 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of incorporation or
these bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, 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 regular or special meeting
of the directors, or members of a committee of directors, need be specified in
any written waiver of notice unless so required by the certificate of
incorporation or these bylaws.
3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A 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, may be taken without a meeting
if all members of the board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the board or committee.
3.11 FEES AND COMPENSATION OF DIRECTORS
Unless otherwise restricted by the certificate of incorporation or
these bylaws, the board of directors shall have the authority to fix the
compensation of directors.
3.12 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of
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guaranty or warranty of the corporation at common law or under any statute.
3.13 REMOVAL OF DIRECTORS
Unless otherwise restricted by statute, by the certificate of
incorporation or by these bylaws, any director or the entire board of directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors; provided, however,
that, so long as shareholders of the corporation are entitled to cumulative
voting, if less than the entire board is to be removed, no director may be
removed without cause if the votes cast against his removal would be sufficient
to elect him if then cumulatively voted at an election of the entire board of
directors.
No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of such director's term
of office.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution passed by a majority of the
whole board, designate one or more committees, with each committee to consist of
one or more of the directors of the corporation. The board may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, 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. Any such committee, to the extent provided in the resolution of the
board of directors or in the bylaws of the corporation, shall have and may
exercise all the powers and authority of the board of directors in the
management of the business and affairs of the corporation, and may authorize the
seal of the corporation to be affixed to all papers that may require it; but no
such committee shall have the power or authority to (i) amend the certificate of
incorporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the board of directors as provided in
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Section 151(a) of the General Corporation Law of Delaware, fix the designations
and any of the preferences or rights of such shares relating to dividends,
redemption, dissolution, any distribution of assets of the corporation or the
conversion into, or the exchange of such shares for, shares of any other class
or classes or any other series of the same or any other class or classes of
stock of the corporation or fix the number of shares of any series of stock or
authorize the increase or decrease of the shares of any series), (ii) adopt an
agreement of merger or consolidation under Sections 251 or 252 of the General
Corporation Law of Delaware, (iii) recommend to the stockholders the sale, lease
or exchange of all or substantially all of the corporation's property and
assets, (iv) recommend to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or (v) amend the bylaws of the corporation; and,
unless the board resolution establishing the committee, the bylaws or the
certificate of incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend, to authorize the issuance of
stock, or to adopt a certificate of ownership and merger pursuant to Section 253
of the General Corporation Law of Delaware.
4.2 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and report
the same to the board of directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these bylaws, Section
3.5 (place of meetings and meetings by telephone), Section 3.6 (regular
meetings), Section 3.7 (special meetings and notice), Section 3.8 (quorum),
Section 3.9 (waiver of notice), and Section 3.10 (action without a meeting),
with such changes in the context of those bylaws as are necessary to substitute
the committee and its members for the board of directors and its members;
provided, however, that the time of regular meetings of committees may be
determined either by resolution of the board of directors or by resolution of
the committee, that special meetings of committees may also be called by
resolution of the board of directors and that notice of special meetings of
committees shall also be given to all alternate members, who shall have the
right to attend all meetings of the committee. The board of directors may adopt
rules for the government of any committee not inconsistent with the provisions
of these bylaws.
ARTICLE V
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OFFICERS
5.1 OFFICERS
The officers of the corporation shall be a president, a secretary,
and a chief financial officer. The corporation may also have, at the discretion
of the board of directors, a chairman of the board, one or more vice presidents,
one or more assistant vice presidents, one or more assistant secretaries, one or
more assistant treasurers, and any such other officers as may be appointed in
accordance with the provisions of Section 5.3 of these bylaws. Any number of
offices may be held by the same person.
5.2 APPOINTMENT OF OFFICERS
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Sections 5.3 or 5.5 of these
bylaws, shall be appointed by the board of directors, subject to the rights, if
any, of an officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or empower the president to
appoint, such other officers and agents as the business of the corporation may
require, each of whom shall hold office for such period, have such authority,
and perform such duties as are provided in these bylaws or as the board of
directors may from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the board of directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
board of directors, by any officer upon whom such power of removal may be
conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
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5.5 VACANCIES IN OFFICES
Any vacancy occurring in any office of the corporation shall be filled
by the board of directors.
5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
board of directors or as may be prescribed by these bylaws. If there is no
president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
5.7 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the
board of directors to the chairman of the board, if there be such an officer,
the president shall be the chief executive officer of the corporation and shall,
subject to the control of the board of directors, have general supervision,
direction, and control of the business and the officers of the corporation. He
shall preside at all meetings of the stockholders and, in the absence or
nonexistence of a chairman of the board, at all meetings of the board of
directors. He shall have the general powers and duties of management usually
vested in the office of president of a corporation and shall have such other
powers and duties as may be prescribed by the board of directors or these
bylaws.
5.8 VICE PRESIDENTS
In the absence or disability of the president, the vice presidents,
if any, in order of their rank as fixed by the board of directors or, if not
ranked, a vice president designated by the board of directors, shall perform all
the duties of the president and when so acting shall have all the powers of, and
be subject to all the restrictions upon, the president. The vice presidents
shall have such other powers and perform such other duties as from time to time
may be prescribed for them respectively by the board of directors, these bylaws,
the president or the chairman of the board.
5.9 SECRETARY
The secretary shall keep or cause to be kept, at the principal
executive office of the corporation or such other place as the board of
directors may direct, a book of minutes of all meetings
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and actions of directors, committees of directors, and stockholders. The
minutes shall show the time and place of each meeting, whether regular or
special (and, if special, how authorized and the notice given), the names of
those present at directors' meetings or committee meetings, the number of shares
present or represented at stockholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the board of
directors, a share register, or a duplicate share register, showing the names of
all stockholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares, and the number
and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the board of directors required to be given by law or
by these bylaws. He shall keep the seal of the corporation, if one be adopted,
in safe custody and shall have such other powers and perform such other duties
as may be prescribed by the board of directors or by these bylaws.
5.10 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be
kept and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all moneys and other
valuables in the name and to the credit of the corporation with such
depositories as may be designated by the board of directors. He shall disburse
the funds of the corporation as may be ordered by the board of directors, shall
render to the president and directors, whenever they request it, an account of
all his transactions as chief financial officer and of the financial condition
of the corporation, and shall have other powers and perform such other duties as
may be prescribed by the board of directors or these bylaws.
The chief financial officer shall be the treasurer of the corporation.
5.11 ASSISTANT SECRETARY
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The assistant secretary, or, if there is more than one, the assistant
secretaries in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the secretary
and shall perform such other duties and have such other powers as may be
prescribed by the board of directors or these bylaws.
5.12 ASSISTANT TREASURER
The assistant treasurer, or, if there is more than one, the assistant
treasurers, in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election),
shall, in the absence of the chief financial officer or in the event of his or
her inability or refusal to act, perform the duties and exercise the powers of
the chief financial officer and shall perform such other duties and have such
other powers as may be prescribed by the board of directors or these bylaws.
5.13 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the president, any vice president, the
chief financial officer, the secretary or assistant secretary of this
corporation, or any other person authorized by the board of directors or the
president or a vice president, is authorized to vote, represent, and exercise on
behalf of this corporation all rights incident to any and all shares of any
other corporation or corporations standing in the name of this corporation. The
authority granted herein may be exercised either by such person directly or by
any other person authorized to do so by proxy or power of attorney duly executed
by such person having the authority.
5.14 AUTHORITY AND DUTIES OF OFFICERS
In addition to the foregoing authority and duties, all officers of
the corporation shall respectively have such authority and perform such duties
in the management of the business of the corporation as may be designated from
time to time by the board of directors or the stockholders.
ARTICLE VI
INDEMNITY
6.1 THIRD PARTY ACTIONS
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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
(other than an action by or in the right of the corporation) by reason of the
fact that he 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 expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement (if such settlement is approved
in advance by the corporation, which approval shall not be unreasonably
withheld) actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interest of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION
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 or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
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)
and amounts paid in settlement (if such settlement is approved in advance by the
corporation, which approval shall not be unreasonably withheld) actually and
reasonably incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in manner he reasonably believed to
be in or not opposed to the best interests of the corporation, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Delaware Court of Chancery or the court
in which such action or suit was brought shall determine upon application that,
despite the adjudication of liability
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but in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Delaware Court of
Chancery or such other court shall deem proper. Notwithstanding any other
provision of this Article VI, no person shall be indemnified hereunder for any
expenses or amounts paid in settlement with respect to any action to recover
short-swing profits under Section 16(b) of the Securities Exchange Act of 1934,
as amended.
6.3 SUCCESSFUL DEFENSE
To the extent that a director, officer, employee or agent of the
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 6.1 and 6.2, or in defense
of any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
6.4 DETERMINATION OF CONDUCT
Any indemnification under Sections 6.1 and 6.2 (unless ordered by a
court) shall be made by the corporation only as authorized in the specific case
upon a determination that the indemnification of the director, officer, employee
or agent is proper in the circumstances because he has met the applicable
standard of conduct set forth in Sections 6.1 and 6.2. Such determination shall
be made (1) by the Board of Directors or the Executive Committee by a majority
vote of a quorum consisting of directors who were not parties to such action,
suit or proceeding or (2) or if such quorum is not obtainable or, even if
obtainable, a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (3) by the stockholders. Notwithstanding the
foregoing, a director, officer, employee or agent of the Corporation shall be
entitled to contest any determination that the director, officer, employee or
agent has not met the applicable standard of conduct set forth in Sections 6.1
and 6.2 by petitioning a court of competent jurisdiction.
6.5 PAYMENT OF EXPENSES IN ADVANCE
Expenses incurred in defending a civil or criminal action, suit or
proceeding, by an individual who may be entitled to indemnification pursuant to
Section 6.1 or 6.2, shall be paid by the corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of the director, officer, employee or agent to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the corporation as authorized in this Article VI.
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6.6 INDEMNITY NOT EXCLUSIVE
The indemnification and advancement of expenses provided by or granted
pursuant to the other sections of this Article VI shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office.
6.7 INSURANCE INDEMNIFICATION
The corporation shall have the power to 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 him and incurred by him in any such capacity or arising out of
his status as such, whether or not the corporation would have the power to
indemnify him against such liability under the provisions of this Article VI.
6.8 THE CORPORATION
For purposes of this Article VI, references to "the corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and employees
or agents, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under and subject to the provisions of this
Article VI (including, without limitation the provisions of Section 6.4) with
respect to the resulting or surviving corporation as he would have with respect
to such constituent corporation if its separate existence had continued.
6.9 EMPLOYEE BENEFIT PLANS
For purposes of this Article VI, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties
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on, or involves services by, such director, officer, employee, or agent with
respect to an employee benefit plan, its participants, or beneficiaries; and a
person who acted in good faith and in a manner he reasonably believed to be in
the interest of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests of
the corporation" as referred to in this Article VI.
6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES
The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article VI shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive officer or at
such place or places as designated by the board of directors, keep a record of
its stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these bylaws as amended to date,
accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent so to act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
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The officer who has charge of the stock ledger of the corporation
shall prepare and make, at least ten (10) days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, 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 ten (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 of the meeting, 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.
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his position as a director. The Court of Chancery
is hereby vested with the exclusive jurisdiction to determine whether a
director is entitled to the inspection sought. The Court may summarily order the
corporation to permit the director to inspect any and all books and records,
the stock ledger, and the stock list and to make copies or extracts therefrom.
The Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
The board of directors shall present at each annual meeting, and at
any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
ARTICLE VIII
GENERAL MATTERS
8.1 CHECKS
From time to time, the board of directors shall determine by
resolution which person or persons may sign or endorse all checks, drafts, other
orders for payment of money, notes or other evidences
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of indebtedness that are issued in the name of or payable to the corporation,
and only the persons so authorized shall sign or endorse those instruments.
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
The board of directors, except as otherwise provided in these bylaws,
may authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES
The shares of the corporation shall be represented by certificates,
provided that the board of directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply to
shares represented by a certificate until such certificate is surrendered to
the corporation. Notwithstanding the adoption of such a resolution by the board
of directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the corporation by the chairman or vice-chairman
of the board of directors, or the president or vice-president, and by the chief
financial officer or an assistant treasurer, or the secretary or an assistant
secretary of such corporation representing the number of shares registered in
certificate form. Any or all of the signatures on the certificate may be a
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate has ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the corporation with the same effect as if he were such
officer, transfer agent or registrar at the date of issue.
The corporation may issue the whole or any part of its shares as
partly paid and subject to call for the remainder of the consideration to be
paid therefor. Upon the face or back of each stock certificate issued to
represent any such partly paid shares, upon the books and records of the
corporation in the case of uncertificated partly paid shares, the total amount
of the consideration to be paid therefor and the amount paid thereon shall be
stated. Upon the declaration of any dividend on fully paid shares, the
corporation shall declare a dividend upon partly paid shares of the same
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class, but only upon the basis of the percentage of the consideration actually
paid thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock
or more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, the designations,
the preferences, and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
8.5 LOST CERTIFICATES
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the same time. The corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate or uncertificated shares.
8.6 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules
of construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these bylaws. Without limiting the generality of this
provision, the singular number includes the plural, the plural number includes
the singular, and the term "person" includes both a corporation and a natural
person.
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8.7 DIVIDENDS
The directors of the corporation, subject to any restrictions
contained in (i) the General Corporation Law of Delaware or (ii) the certificate
of incorporation, may declare and pay dividends upon the shares of its capital
stock. Dividends may be paid in cash, in property, or in shares of the
corporation's capital stock.
The directors of the corporation may set apart out of any of the funds
of the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not be
limited to equalizing dividends, repairing or maintaining any property of the
corporation, and meeting contingencies.
8.8 FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolution of the
board of directors and may be changed by the board of directors.
8.9 SEAL
The corporation may adopt a corporate seal, which shall be adopted and
which may be altered by the board of directors, and may use the same by causing
it or a facsimile thereof to be impressed or affixed or in any other manner
reproduced.
8.10 TRANSFER OF STOCK
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, assignation 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 in its books.
8.11 STOCK TRANSFER AGREEMENTS
The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the General Corporation Law of Delaware.
8.12 REGISTERED STOCKHOLDERS
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The corporation shall be entitled to recognize the exclusive right of
a person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE IX
AMENDMENTS
The bylaws of the corporation may be adopted, amended or repealed by
the stockholders entitled to vote; provided, however, that the corporation may,
in its certificate of incorporation, confer the power to adopt, amend or repeal
bylaws upon the directors. The fact that such power has been so conferred upon
the directors shall not divest the stockholders of the power, nor limit their
power to adopt, amend or repeal bylaws.
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<PAGE> 31
CERTIFICATE OF ADOPTION OF BYLAWS
OF
SPECTRX, INC.
Adoption by Incorporator
The undersigned person appointed in the Certificate of Incorporation
to act as the Incorporator of Spectrx, Inc. hereby adopts the foregoing Bylaws,
comprising twenty-five (25) pages, as the Bylaws of the corporation.
Executed this 28th day of October, 1992.
/s/ Robert D. Brownell
-----------------------------------
Robert D. Brownell, Incorporator
Certificate by Secretary of Adoption by Incorporator
The undersigned hereby certifies that he is the duly elected,
qualified, and acting Secretary of Spectrx, Inc. and that the foregoing Bylaws,
comprising twenty-five (25) pages, were adopted as the Bylaws of the corporation
on October 28th, 1992 by the person appointed in the Certificate of
Incorporation to act as the Incorporator of the corporation.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
affixed the corporate seal this 28th day of October, 1992.
/s/ Keith D. Ignotz
-----------------------------------
Keith D. Ignotz, Secretary
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<PAGE> 1
[LETTERHEAD OF WILSON SONSINI
GOODRICH & ROSATI]
February 26, 1997
EXHIBIT 5.1
SpectRx, Inc.
6025A Unity Drive
Norcross, GA 30071
RE: REGISTRATION STATEMENT ON FORM S-1
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-1 filed by you
with the Securities and Exchange Commission (the "Commission") on or about
February 26, 1997 (as such may be further amended or supplemented, the
"Registration Statement"), in connection with the registration under the
Securities Act of 1933, as amended (the"Act"), of up to 2,300,000 shares of
your Common Stock (the "Shares"). The Shares, which include up to 300,000
shares of Common Stock issuable pursuant to an over-allotment option granted to
the underwriters (the"Underwriters"), are to be sold to the Underwriters as
described in such Registration Statement for sale to the public. All of the
shares being sold are being sold by the Company (including the 300,000 Shares
of Common Stock in the over-allotment option). As your counsel in connection
with this transaction, we have examined the proceedings proposed to be taken by
you in connection with the issuance and sale of the Shares.
Based on the foregoing, it is our opinion that, upon conclusion of the
proceedings being taken or contemplated by us, as your counsel, to be taken
prior to the issuance of the Shares and upon completion of the proceedings
taken in order to permit such transactions to be carried out in accordance with
the securities laws of various states where required, the Shares, when issued
and sold in the manner described in the Registration Statement, will be legally
and validly issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the
Registration Statement, and further consent to the use of our name wherever
appearing in the Registration Statement, including the prospectus constituting
a part thereof, which has been approved by us, as such may be further amended
or supplemented, or incorporated by reference in any Registration Statement
relating to the prospectus file pursuant to Rule 462(b) of the Act.
Very truly yours,
/s/ WILSON SONSINI GOODRICH & ROSATI
------------------------------------
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
<PAGE> 1
EXHIBIT 10.1
SPECTRX, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the intention
of the Company to have the Plan qualify as an "Employee Stock Purchase Plan"
under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the Common Stock of the Company.
(d) "Company" shall mean Spectrx, Inc., a Delaware corporation, and
any Designated Subsidiary of the Company.
(e) "Compensation" shall mean all base straight time gross earnings
and commissions, exclusive of payments for overtime, shift premium, incentive
compensation, incentive payments, bonuses and other compensation.
(f) "Designated Subsidiary" shall mean any Subsidiary which has been
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan.
(g) "Employee" shall mean any individual who is an Employee of the
Company for tax purposes whose customary employment with the Company is at least
twenty (20) hours per week and more than five (5) months in any calendar year.
For purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds 90 days and
the individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship shall be deemed to have terminated on the
91st day of such leave.
(h) "Enrollment Date" shall mean the first day of each Offering
Period.
(i) "Exercise Date" shall mean the last day of each Offering Period.
(j) "Fair Market Value" shall mean, as of any date, the value of
Common Stock determined as follows:
(1) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq
<PAGE> 2
SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such exchange or system for the last market trading day
prior to the time of determination, as reported in The Wall Street Journal or
such other source as the Administrator deems reliable, or;
(2) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock on
the date of such determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable, or;
(3) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board.
(4) For purposes of the Enrollment Date of the first Offering
Period under the Plan, the Fair Market Value shall be the initial price to the
public as set forth in the final prospectus included within the registration
statement in Form S-1 filed with the Securities and Exchange Commission for the
initial public offering of the Company's Common Stock (the "Registration
Statement").
(k) "Offering Period" shall mean a period of approximately six (6)
months during which an option granted pursuant to the Plan may be exercised,
commencing on the first Trading Day on or after May 1 and terminating on the
last Trading Day in the period ending the following October 31, or commencing on
the first Trading Day on or after November 1 and terminating on the last Trading
Day in the period ending the following April 30; provided, however, that the
first Offering Period under the Plan shall commence with the first Trading Day
on or after the date on which the Securities and Exchange Commission declares
the Company's Registration Statement effective and ending on the last Trading
Day on or after October 31, 1997. The duration of Offering Periods may be
changed pursuant to Section 4 of this Plan.
(l) "Plan" shall mean this Employee Stock Purchase Plan.
(m) "Purchase Price" shall mean an amount equal to 85% of the Fair
Market Value of a share of Common Stock on the Enrollment Date or on the
Exercise Date, whichever is lower.
(n) "Reserves" shall mean the number of shares of Common Stock
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.
(o) "Subsidiary" shall mean a corporation, domestic or foreign, of
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
(p) "Trading Day" shall mean a day on which national stock exchanges
and the Nasdaq System are open for trading.
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<PAGE> 3
3. Eligibility.
(a) Any Employee who shall be employed by the Company on a given
Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent that,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the Company or of
any Subsidiary, or (ii) to the extent that his or her rights to purchase stock
under all employee stock purchase plans of the Company and its subsidiaries
accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of
stock (determined at the fair market value of the shares at the time such option
is granted) for each calendar year in which such option is outstanding at any
time.
4. Offering Periods. The Plan shall be implemented by consecutive
Offering Periods with a new Offering Period commencing on the first Trading Day
on or after May 1 and November 1 each year, or on such other date as the Board
shall determine, and continuing thereafter until terminated in accordance with
Section 20 hereof; provided, however, that the first Offering Period under the
Plan shall commence with the first Trading Day on or after the date on which the
Securities and Exchange Commission declares the Company's Registration Statement
effective and ending on the last Trading Day on or after October 31, 1997. The
Board shall have the power to change the duration of Offering Periods (including
the commencement dates thereof) with respect to future offerings without
stockholder approval if such change is announced at least five (5) days prior to
the scheduled beginning of the first Offering Period to be affected thereafter.
5. Participation.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the Company's payroll office
fifteen (15) prior to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last payroll in the
Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
6. Payroll Deductions.
(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an amount not exceeding ten percent (10%) of the
Compensation which he or she receives on each pay day during the Offering
Period.
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<PAGE> 4
(b) All payroll deductions made for a participant shall be credited
to his or her account under the Plan and shall be withheld in whole percentages
only. A participant may not make any additional payments into such account.
(c) A participant may discontinue his or her participation in the
Plan as provided in Section 10 hereof, or may increase or decrease the rate of
his or her payroll deductions during the Offering Period by completing or filing
with the Company a new subscription agreement authorizing a change in payroll
deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased to zero percent (0%) at any time during an
Offering Period. Payroll deductions shall recommence at the rate provided in
such participant's subscription agreement at the beginning of the first Offering
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or at
the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period,
each eligible Employee participating in such Offering Period shall be granted an
option to purchase on the Exercise Date of such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Offering Period more than a
number of Shares determined by dividing $10,000 by the Fair Market Value of a
share of the Company's Common Stock on the Enrollment Date (subject to any
adjustment pursuant to Section 19), and provided further that such purchase
shall be subject to the limitations set forth in Sections 3(b) and 12 hereof.
Exercise of the option shall occur as provided in Section 8 hereof, unless the
participant has withdrawn pursuant to Section 10 hereof. The Option shall expire
on the last day of the Offering Period.
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<PAGE> 5
8. Exercise of Option. Unless a participant withdraws from the Plan as
provided in Section 10 hereof, his or her option for the purchase of shares
shall be exercised automatically on the Exercise Date, and the maximum number of
full shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Offering Period, subject to earlier withdrawal by the participant as provided in
Section 10 hereof. Any other monies left over in a participant's account after
the Exercise Date shall be returned to the participant. During a participant's
lifetime, a participant's option to purchase shares hereunder is exercisable
only by him or her.
9. Delivery. As promptly as practicable after each Exercise Date on
which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.
10. Withdrawal.
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time by giving written notice to the Company in
the form of Exhibit B to this Plan. All of the participant's payroll deductions
credited to his or her account shall be paid to such participant promptly after
receipt of notice of withdrawal and such participant's option for the Offering
Period shall be automatically terminated, and no further payroll deductions for
the purchase of shares shall be made for such Offering Period. If a participant
withdraws from an Offering Period, payroll deductions shall not resume at the
beginning of the succeeding Offering Period unless the participant delivers to
the Company a new subscription agreement.
(b) A participant's withdrawal from an Offering Period shall not
have any effect upon his or her eligibility to participate in any similar plan
which may hereafter be adopted by the Company or in succeeding Offering Periods
which commence after the termination of the Offering Period from which the
participant withdraws.
11. Termination of Employment. Upon a participant's ceasing to be an
Employee for any reason, he or she shall be deemed to have elected to withdraw
from the Plan and the payroll deductions credited to such participant's account
during the Offering Period but not yet used to exercise the option shall be
returned to such participant or, in the case of his or her death, to the person
or persons entitled thereto under Section 15 hereof, and such participant's
option shall be automatically terminated. The preceding sentence
notwithstanding, a participant who receives payment in lieu of notice of
termination of employment shall be treated as continuing to be an Employee for
the participant's customary number of hours per week of employment during the
period in which the participant is subject to such payment in lieu of notice.
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<PAGE> 6
12. Interest. No interest shall accrue on the payroll deductions of a
participant in the Plan.
13. Stock.
(a) The maximum number of shares of the Company's Common Stock which
shall be made available for sale under the Plan shall be 214,286 shares, subject
to adjustment upon changes in capitalization of the Company as provided in
Section 19 hereof. If, on a given Exercise Date, the number of shares with
respect to which options are to be exercised exceeds the number of shares then
available under the Plan, the Company shall make a pro rata allocation of the
shares remaining available for purchase in as uniform a manner as shall be
practicable and as it shall determine to be equitable.
(b) The participant shall have no interest or voting right in shares
covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant or in the name of the participant and
his or her spouse.
14. Administration. The Plan shall be administered by the Board or a
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
15. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary
who is to receive any shares and cash, if any, from the participant's account
under the Plan in the event of such participant's death subsequent to an
Exercise Date on which the option is exercised but prior to delivery to such
participant of such shares and cash. In addition, a participant may file a
written designation of a beneficiary who is to receive any cash from the
participant's account under the Plan in the event of such participant's death
prior to exercise of the option. If a participant is married and the designated
beneficiary is not the spouse, spousal consent shall be required for such
designation to be effective.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more
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<PAGE> 7
dependents or relatives of the participant, or if no spouse, dependent or
relative is known to the Company, then to such other person as the Company may
designate.
16. Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
17. Use of Funds. All payroll deductions received or held by the
Company under the Plan may be used by the Company for any corporate purpose, and
the Company shall not be obligated to segregate such payroll deductions.
18. Reports. Individual accounts shall be maintained for each
participant in the Plan. Statements of account shall be given to participating
Employees at least annually, which statements shall set forth the amounts of
payroll deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.
19. Adjustments Upon Changes in Capitalization, Dissolution,
Liquidation, Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the Reserves, the maximum number of shares each
participant may purchase per Offering Period (pursuant to Section 7), as well as
the price per share and the number of shares of Common Stock covered by each
option under the Plan which has not yet been exercised shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration". Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period shall terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Board.
(c) Merger or Asset Sale. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, the Offering Period then in progress shall be
shortened by setting a new Exercise Date (the "New
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<PAGE> 8
Exercise Date"). The New Exercise Date shall be before the date of the Company's
proposed sale or merger. The Board shall notify each participant in writing, at
least ten (10) business days prior to the New Exercise Date, that the Exercise
Date for the participant's option has been changed to the New Exercise Date and
that the participant's option shall be exercised automatically on the New
Exercise Date, unless prior to such date the participant has withdrawn from the
Offering Period as provided in Section 10 hereof.
20. Amendment or Termination.
(a) The Board of Directors of the Company may at any time and for
any reason terminate or amend the Plan. Except as provided in Section 19 hereof,
no such termination can affect options previously granted, provided that an
Offering Period may be terminated by the Board of Directors on any Exercise Date
if the Board determines that the termination of the Plan is in the best
interests of the Company and its stockholders. Except as provided in Section 19
hereof, no amendment may make any change in any option theretofore granted which
adversely affects the rights of any participant. To the extent necessary to
comply with Section 423 of the Code (or any other applicable law, regulation or
stock exchange rule), the Company shall obtain shareholder approval in such a
manner and to such a degree as required.
(b) Without stockholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan.
21. Notices. All notices or other communications by a participant to
the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.
22. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
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<PAGE> 9
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
23. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 20 hereof.
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<PAGE> 10
EXHIBIT A
SPECTRX, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: __________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. _____________________________________ hereby elects to participate in
the Spectrx, Inc. 1997 Employee Stock Purchase Plan (the "Employee
Stock Purchase Plan") and subscribes to purchase shares of the
Company's Common Stock in accordance with this Subscription Agreement
and the Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount
of ____% of my Compensation on each payday (from 1 to _____%) during
the Offering Period in accordance with the Employee Stock Purchase
Plan. (Please note that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise
my option.
4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is
in all respects subject to the terms of the Plan. I understand that my
ability to exercise the option under this Subscription Agreement is
subject to stockholder approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should
be issued in the name(s) of (Employee or Employee and Spouse only): .
6. I understand that if I dispose of any shares received by me pursuant to
the Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares), I will be
treated for federal income tax purposes as having received ordinary
income at the time of such disposition in an amount equal to the excess
of the fair market value of the shares at the time such shares were
purchased by me over the price which I paid for the shares. I hereby
agree to notify the Company in writing within 30 days after the date of
any disposition of shares and I will make adequate provision for
Federal, state or other tax withholding obligations, if any, which
arise upon the disposition of the Common Stock. The
<PAGE> 11
Company may, but will not be obligated to, withhold from my
compensation the amount necessary to meet any applicable withholding
obligation including any withholding necessary to make available to the
Company any tax deductions or benefits attributable to sale or early
disposition of Common Stock by me. If I dispose of such shares at any
time after the expiration of the 2-year holding period, I understand
that I will be treated for federal income tax purposes as having
received income only at the time of such disposition, and that such
income will be taxed as ordinary income only to the extent of an amount
equal to the lesser of (1) the excess of the fair market value of the
shares at the time of such disposition over the purchase price which I
paid for the shares, or (2) 15% of the fair market value of the shares
on the first day of the Offering Period. The remainder of the gain, if
any, recognized on such disposition will be taxed as capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent
upon my eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print) _________________________________________________
(First) (Middle) (Last)
_____________________________ __________________________________________
Relationship
__________________________________________
(Address)
Employee's Social
Security Number: __________________________________________
Employee's Address: __________________________________________
__________________________________________
__________________________________________
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<PAGE> 12
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated: _________________ _____________________________________________________
Signature of Employee
_____________________________________________________
Spouse's Signature (If beneficiary other than spouse)
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<PAGE> 13
EXHIBIT B
SPECTRX, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Spectrx, Inc.
1997 Employee Stock Purchase Plan which began on 19 (the
"Enrollment Date") hereby notifies the Company that he or she hereby withdraws
from the Offering Period. He or she hereby directs the Company to pay to the
undersigned as promptly as practicable all the payroll deductions credited to
his or her account with respect to such Offering Period. The undersigned
understands and agrees that his or her option for such Offering Period will be
automatically terminated. The undersigned understands further that no further
payroll deductions will be made for the purchase of shares in the current
Offering Period and the undersigned shall be eligible to participate in
succeeding Offering Periods only by delivering to the Company a new Subscription
Agreement.
Name and Address of Participant:
------------------------------------
------------------------------------
------------------------------------
Signature:
------------------------------------
Date:
-------------------------------
<PAGE> 1
EXHIBIT 10.2
SPECTRX, INC.
1995 STOCK PLAN
(AS AMENDED)
1. Purposes of the Plan. The purposes of this Stock Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant of an Option and subject to the applicable provisions of Section 422 of
the Code and the regulations promulgated thereunder. Stock Purchase Rights may
also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall
apply:
(a) "Administrator" means the Board or any of its
Committees appointed pursuant to Section 4 of the Plan.
(b) "Applicable Laws" means the requirements relating to
the administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Stock Purchase Rights are,
or will be, granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as
amended.
(e) "Committee" means a Committee appointed by the Board
of Directors in accordance with Section 4 of the Plan.
(f) "Common Stock" means the Common Stock of the Company.
(g) "Company" means Spectrx, Inc., a Delaware
corporation.
(h) "Consultant" means any person who is engaged by the
Company or any Parent or Subsidiary to render consulting or advisory services
and is compensated for such services, and any Director of the Company whether
compensated for such services or not.
(i) "Continuous Status as an Employee or Consultant"
means that the employment or consulting relationship with the Company, any
Parent or Subsidiary is not interrupted or terminated. Continuous Status as an
Employee or Consultant shall not be considered interrupted in
<PAGE> 2
the case of (i) any leave of absence approved by the Company or (ii) transfers
between locations of the Company or between the Company, its Parent, any
Subsidiary, or any successor. A leave of absence approved by the Company shall
include sick leave, military leave, or any other personal leave approved by an
authorized representative of the Company. For purposes of Incentive Stock
Options, no such leave may exceed 90 days, unless reemployment upon expiration
of such leave is guaranteed by statute or contract, including Company policies.
If reemployment upon expiration of a leave of absence approved by the Company is
not so guaranteed, on the 91st day of such leave any Incentive Stock Option held
by the Optionee shall cease to be treated as an Incentive Stock Option and shall
be treated for tax purposes as a Nonstatutory Stock Option.
(j) "Director" means a member of the Board of Directors
of the Company.
(k) "Employee" means any person, including Officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a Director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(m) "Fair Market Value" means, as of any date, the value
of Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, its Fair Market Value shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such exchange or system for the last market trading day
prior to the time of determination and reported in The Wall Street Journal or
such other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ
System (but not on the Nasdaq National Market thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean between the high bid and low asked prices for the
Common Stock on the last market trading day prior to the day of determination;
or
(iii) In the absence of an established market for
the Common Stock, the Fair Market Value thereof shall be determined in good
faith by the Administrator.
(n) "Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
(o) "Nonstatutory Stock Option" means an Option not
intended to qualify as an Incentive Stock Option.
(p) "Officer" means a person who is an officer of the
Company within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
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<PAGE> 3
(q) "Option" means a stock option granted pursuant to the
Plan.
(r) "Optioned Stock" means the Common Stock subject to an
Option or a Stock Purchase Right.
(s) "Optionee" means an Employee or Consultant who
receives an Option or Stock Purchase Right.
(t) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(u) "Plan" means this 1995 Stock Plan, as amended.
(v) "Restricted Stock" means shares of Common Stock
acquired pursuant to a grant of a Stock Purchase Right under Section 12 below.
(w) "Section 16(b)" means Section 16(b) of the Securities
Exchange Act of 1934, as amended.
(x) "Share" means a share of the Common Stock, as
adjusted in accordance with Section 13 below.
(y) "Stock Purchase Right" means a right to purchase
Common Stock pursuant to Section 11 below.
(z) "Subsidiary" means a "subsidiary corporation,"
whether now or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of
Section 13 of the Plan, the maximum aggregate number of Shares which may be
subject to option and sold under the Plan is 1,428,572 Shares. The Shares may be
authorized but unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes
unexercisable without having been exercised in full, or is surrendered pursuant
to an Option Exchange Program, the unpurchased Shares which were subject thereto
shall become available for future grant or sale under the Plan (unless the Plan
has terminated). However, Shares that have actually been issued under the Plan,
upon exercise of either an Option or Stock Purchase Right, shall not be returned
to the Plan and shall not become available for future distribution under the
Plan, except that if Shares of Restricted Stock are repurchased by the Company
at their original purchase price, and the original purchaser of such Shares did
not receive any benefits of ownership of such Shares, such Shares shall become
available for future grant under the Plan. For purposes of the preceding
sentence, voting rights shall not be considered a benefit of Share ownership.
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<PAGE> 4
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. The Plan may
be administered by different bodies with respect to Directors, Officers and
Employees
(ii) Section 162(m). To the extent that the
Administrator determines it to be desirable to qualify Options granted hereunder
as "performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to
qualify transactions hereunder as exempt under Rule 16b-3, the transactions
contemplated hereunder shall be structured to satisfy the requirements for
exemption under Rule 16b-3.
(iv) Other Administration. Other than as provided
above, the Plan shall be administered by (A) the Board or (B) a Committee, which
committee shall be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the
provisions of the Plan and, in the case of a Committee, the specific duties
delegated by the Board to such Committee, and subject to the approval of any
relevant authorities, including the approval, if required, of any stock exchange
upon which the Common Stock is listed, the Administrator shall have the
authority in its discretion:
(i) to determine the Fair Market Value of the
Common Stock, in accordance with Section 2(l) of the Plan;
(ii) to select the Consultants and Employees to
whom Options and Stock Purchase Rights may from time to time be granted
hereunder;
(iii) to determine whether and to what extent
Options and Stock Purchase Rights or any combination thereof are granted
hereunder;
(iv) to determine the number of Shares to be
covered by each such award granted hereunder;
(v) to approve forms of agreement for use under
the Plan;
(vi) to determine the terms and conditions of any
award granted hereunder;
(vii) to determine whether and under what
circumstances an Option may be settled in cash under subsection 10(f) instead of
Common Stock;
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<PAGE> 5
(viii) to reduce the exercise price of any Option
to the then current Fair Market Value if the Fair Market Value of the Common
Stock covered by such Option has declined since the date the Option was granted;
and
(ix) to allow Optionees to satisfy withholding
tax obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Option or Stock Purchase Right that number of Shares
having a Fair Market Value equal to the amount required to be withheld. The Fair
Market Value of the Shares to be withheld shall be determined on the date that
the amount of tax to be withheld is to be determined. All elections by an
Optionee to have Shares withheld for this purpose shall be made in such form and
under such conditions as the Administrator may deem necessary or advisable;
(x) to construe and interpret the terms of the
Plan and awards granted pursuant to the Plan.
(c) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options or Stock Purchase
Rights.
5. Eligibility. Nonstatutory Stock Options and Stock Purchase
Rights may be granted to Employees and Consultants. Incentive Stock Options may
be granted only to Employees. An Employee or Consultant who has been granted an
Option or Stock Purchase Right may, if otherwise eligible, be granted additional
Options or Stock Purchase Rights.
6. Limitations.
(a) Each Option shall be designated in the written option
agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value of Shares subject to an Optionee's Incentive Stock Options
granted by the Company, any Parent or Subsidiary, which become exercisable for
the first time during any calendar year (under all plans of the Company or any
Parent or Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options. For purposes of this Section 6(a), Incentive Stock
Options shall be taken into account in the order in which they were granted. The
Fair Market Value of the Shares shall be determined as of the time the Option
with respect to such Shares is granted.
(b) Neither the Plan nor any Option or Stock Purchase
Right shall confer upon any Optionee any right with respect to continuation of
his or her employment or consulting relationship with the Company, nor shall it
interfere in any way with his or her right or the Company's right to terminate
his or her employment or consulting relationship at any time, with or without
cause.
(c) The following limitations shall apply to grants of
Options:
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<PAGE> 6
(i) No Optionee shall be granted, in any fiscal
year of the Company, Options to purchase more than 500,000 Shares.
(ii) In connection with his or her initial
service, a Optionee may be granted Options to purchase up to an additional
500,000 Shares which shall not count against the limit set forth in subsection
(i) above.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 13.
(iv) If an Option is cancelled in the same fiscal
year of the Company in which it was granted (other than in connection with a
transaction described in Section 13), the cancelled Option will be counted
against the limits set forth in subsections (i) and (ii) above. For this
purpose, if the exercise price of an Option is reduced, the transaction will be
treated as a cancellation of the Option and the grant of a new Option.
7. Term of Plan. The Plan shall become effective upon the earlier
to occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company, as described in Section 19 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 15 of the Plan.
8. Term of Option. The term of each Option shall be the term
stated in the Option Agreement; provided, however, that the term shall be no
more than ten (10) years from the date of grant thereof. In the case of an
Incentive Stock Option granted to an Optionee who, at the time the Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the term of
the Option shall be five (5) years from the date of grant thereof or such
shorter term as may be provided in the Option Agreement.
9. Option Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be
issued upon exercise of an Option shall be such price as is determined by the
Administrator, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the
time of grant of such Option, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant.
(B) granted to any other Employee, the
per Share exercise price shall be no less than 100% of the Fair Market Value per
Share on the date of grant.
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<PAGE> 7
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the
time of grant of such Option, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of the grant.
(B) granted to any other person, the
per Share exercise price shall be no less than 85% of the Fair Market Value per
Share on the date of grant. In the case of a Nonstatutory Stock Option intended
to qualify as "performance-based compensation" within the meaning of Section
162(m) of the Code, the per Share exercise price shall be no less than 100% of
the Fair Market Value per Share on the date of grant.
(b) The consideration to be paid for the Shares to be
issued upon exercise of an Option, including the method of payment, shall be
determined by the Administrator (and, in the case of an Incentive Stock Option,
shall be determined at the time of grant). Such consideration may consist of (1)
cash, (2) check, (3) promissory note, (4) other Shares which (x) in the case of
Shares acquired upon exercise of an Option, have been owned by the Optionee for
more than six months on the date of surrender, and (y) have a Fair Market Value
on the date of surrender equal to the aggregate exercise price of the Shares as
to which such Option shall be exercised, (5) delivery of a properly executed
exercise notice together with such other documentation as the Administrator and
a broker, if applicable, shall require to effect an exercise of the Option and
delivery to the Company of the sale or loan proceeds required to pay the
exercise price, or (6) any combination of the foregoing methods of payment. In
making its determination as to the type of consideration to accept, the
Administrator shall consider if acceptance of such consideration may be
reasonably expected to benefit the Company.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any
Option granted hereunder shall be exercisable at such times and under such
conditions as determined by the Administrator, including performance criteria
with respect to the Company and/or the Optionee, and as shall be permissible
under the terms of the Plan.
An Option may not be exercised for a fraction of a
Share.
An Option shall be deemed to be exercised when
written notice of such exercise has been given to the Company in accordance with
the terms of the Option by the person entitled to exercise the Option and full
payment for the Shares with respect to which the Option is exercised has been
received by the Company. Full payment may, as authorized by the Administrator,
consist of any consideration and method of payment allowable under Section 9(b)
hereof. Until the issuance (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company) of the
stock certificate evidencing such Shares, no right to vote, receive dividends or
any other rights as a shareholder shall exist with respect to the Optioned
Stock,
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<PAGE> 8
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon exercise of the Option. No
adjustment shall be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 13 hereof.
Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.
(b) Termination of Employment or Consulting Relationship.
In the event of termination of an Optionee's Continuous Status as an Employee or
Consultant (but not in the event of an Optionee's change of status from Employee
to Consultant (in which case an Employee's Incentive Stock Option shall
automatically convert to a Nonstatutory Stock Option on the date three (3)
months and one day following such change of status) or from Consultant to
Employee), such Optionee may, but only within such period of time as is
determined by the Administrator, of at least thirty (30) days, with such
determination in the case of an Incentive Stock Option not exceeding three (3)
months after the date of such termination (but in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), exercise his or her Option to the extent that the Optionee was
entitled to exercise it at the date of such termination. To the extent that the
Optionee was not entitled to exercise the Option at the date of such
termination, or if the Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate.
(c) Disability of Optionee. In the event of termination
of an Optionee's Continuous Status as an Employee or Consultant as a result of
his or her disability, the Optionee may, but only within twelve (12) months from
the date of such termination (and in no event later than the expiration date of
the term of such Option as set forth in the Option Agreement), exercise the
Option to the extent otherwise entitled to exercise it at the date of such
termination. If such disability is not a "disability" as such term is defined in
Section 22(e)(3) of the Code, in the case of an Incentive Stock Option such
Incentive Stock Option shall automatically cease to be treated as an Incentive
Stock Option and shall be treated for tax purposes as a Nonstatutory Stock
Option on the day three months and one day following such termination. To the
extent that the Optionee was not entitled to exercise the Option at the date of
termination, or if the Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. In the event of the death of an
Optionee, the Option may be exercised at any time within twelve (12) months
following the date of death (but in no event later than the expiration of the
term of such Option as set forth in the Notice of Grant) by the Optionee's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent that the Optionee was entitled to
exercise the Option on the date of death. If, at the time of death, the Optionee
was not entitled to exercise his or her entire Option, the Shares covered by the
unexercisable portion of the Option shall immediately revert to the Plan. If,
after the Optionee's death, the Optionee's estate or a person who acquires the
right to exercise the Option by
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<PAGE> 9
bequest or inheritance does not exercise the Option within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time
offer to buy out for a payment in cash or Shares, an Option previously granted,
based on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
11. Non-Transferability of Options and Stock Purchase Rights.
Unless otherwise determined by the Administrator, Options and Stock Purchase
Rights may not be sold, pledged, assigned, hypothecated, transferred, or
disposed of in any manner other than by will or by the laws of descent or
distribution and may be exercised, during the lifetime of the Optionee, only by
the Optionee. If the Administrator makes an Option or Stock Purchase Right
transferable, such Option or Stock Purchase Right shall contain such additional
terms and conditions as the Administrator deems appropriate.
12. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be
issued either alone, in addition to, or in tandem with other awards granted
under the Plan and/or cash awards made outside of the Plan. After the
Administrator determines that it will offer Stock Purchase Rights under the
Plan, it shall advise the offeree in writing of the terms, conditions and
restrictions related to the offer, including the number of Shares that such
person shall be entitled to purchase, the price to be paid, and the time within
which such person must accept such offer, which shall in no event exceed thirty
(30) days from the date upon which the Administrator makes the determination to
grant the Stock Purchase Right. The offer shall be accepted by execution of a
Restricted Stock purchase agreement in the form determined by the Administrator.
Shares purchased pursuant to the grant of a Stock Purchase Right shall be
referred to herein as "Restricted Stock."
(b) Repurchase Option. Unless the Administrator
determines otherwise, the Restricted Stock purchase agreement shall grant the
Company a repurchase option exercisable upon the voluntary or involuntary
termination of the purchaser's employment with the Company for any reason
(including death or disability). The purchase price for Shares repurchased
pursuant to the Restricted Stock purchase agreement shall be the original price
paid by the purchaser and may be paid by cancellation of any indebtedness of the
purchaser to the Company. The repurchase option shall lapse at such rate as the
Administrator may determine.
(c) Other Provisions. The Restricted Stock purchase
agreement shall contain such other terms, provisions and conditions not
inconsistent with the Plan as may be determined by the Administrator in its sole
discretion. In addition, the provisions of Restricted Stock purchase agreements
need not be the same with respect to each purchaser.
(d) Rights as a Shareholder. Once the Stock Purchase
Right is exercised, the purchaser shall have rights equivalent to those of a
shareholder and shall be a shareholder when his or
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<PAGE> 10
her purchase is entered upon the records of the duly authorized transfer agent
of the Company. No adjustment shall be made for a dividend or other right for
which the record date is prior to the date the Stock Purchase Right is
exercised, except as provided in Section 13 of the Plan.
13. Adjustments Upon Changes in Capitalization or Merger.
(a) Changes in Capitalization. Subject to any required
action by the shareholders of the Company, the number of shares of Common Stock
covered by each outstanding Option or Stock Purchase Right, and the number of
shares of Common Stock which have been authorized for issuance under the Plan
but as to which no Options or Stock Purchase Rights have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option or Stock Purchase Right, as well as the price per share of Common Stock
covered by each such outstanding Option or Stock Purchase Right, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued shares of Common Stock effected
without receipt of consideration by the Company. The conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.
(b) Dissolution or Liquidation. In the event of the
proposed dissolution or liquidation of the Company, the Administrator shall
notify the Optionee at least fifteen (15) days prior to such proposed action. To
the extent it has not been previously exercised, the Option or Stock Purchase
Right shall terminate immediately prior to the consummation of such proposed
action.
(c) Merger. In the event of a merger of the Company with
or into another corporation, each outstanding Option or Stock Purchase Right may
be assumed or an equivalent option or right may be substituted by such successor
corporation or a parent or subsidiary of such successor corporation. If, in such
event, an Option or Stock Purchase Right is not assumed or substituted, the
Optionee shall fully vest in and have the right to exercise the Option or Stock
Purchase Right as to all of the Optioned Stock, including Shares as to which it
would not otherwise be vested or exercisable. If an Option or Stock Purchase
Right becomes fully vested and exercisable in lieu of assumption or substitution
in the event of a merger or sale of assets, the Administrator shall notify the
Optionee in writing or electronically that the Option or Stock Purchase Right
shall be fully vested and exercisable for a period of fifteen (15) days from the
date of such notice, and the Option or Stock Purchase Right shall terminate upon
the expiration of such period. For the purposes of this paragraph, the Option or
Stock Purchase Right shall be considered assumed if, following the merger, the
Option or Stock Purchase Right confers the right to purchase or receive, for
each Share of Optioned Stock subject to the Option or Stock Purchase Right
immediately prior to the merger, the consideration (whether stock, cash, or
other securities or property) received in the merger by holders
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<PAGE> 11
of Common Stock for each Share held on the effective date of the transaction
(and if the holders are offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares). If
such consideration received in the merger is not solely common stock of the
successor corporation or its Parent, the Administrator may, with the consent of
the successor corporation, provide for the consideration to be received upon the
exercise of the Option or Stock Purchase Right, for each Share of Optioned Stock
subject to the Option or Stock Purchase Right, to be solely common stock of the
successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger.
14. Time of Granting Options and Stock Purchase Rights. The date
of grant of an Option or Stock Purchase Right shall, for all purposes, be the
date on which the Administrator makes the determination granting such Option or
Stock Purchase Right, or such other date as is determined by the Administrator.
Notice of the determination shall be given to each Employee or Consultant to
whom an Option or Stock Purchase Right is so granted within a reasonable time
after the date of such grant.
15. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time
amend, alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation shall be made which would impair the rights of any
Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with Applicable Laws,
the Company shall obtain shareholder approval of any Plan amendment in such a
manner and to such a degree as required.
(b) Effect of Amendment or Termination. Any such
amendment or termination of the Plan shall not affect Options or Stock Purchase
Rights already granted, and such Options and Stock Purchase Rights shall remain
in full force and effect as if this Plan had not been amended or terminated,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
16. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option or Stock Purchase Right unless the
exercise of such Option or Stock Purchase Right and the issuance and delivery of
such Shares pursuant thereto shall comply with Applicable Laws, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an Option or Stock Purchase
Right, the Company may require the person exercising such Option or Stock
Purchase Right to represent and warrant at the time of any such exercise that
the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of counsel for
the Company, such a representation is required by any of the aforementioned
relevant provisions of law.
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<PAGE> 12
17. Reservation of Shares. The Company, during the term of this
Plan, shall at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.
18. Agreements. Options and Stock Purchase Rights shall be
evidenced by written agreements in such form as the Administrator shall approve
from time to time.
19. Shareholder Approval. Continuance of the Plan shall be subject
to approval by the shareholders of the Company within twelve (12) months before
or after the date the Plan is adopted. Such shareholder approval shall be
obtained in the degree and manner required under Applicable Laws.
20. Information to Optionees and Purchasers. The Company shall
provide to each Optionee and to each individual who acquires Shares pursuant to
the Plan, not less frequently than annually during the period such Optionee or
purchaser has one or more Options or Stock Purchase Rights outstanding, and, in
the case of an individual who acquires Shares pursuant to the Plan, during the
period such individual owns such Shares, copies of annual financial statements.
The Company shall not be required to provide such statements to key employees
whose duties in connection with the Company assure their access to equivalent
information.
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<PAGE> 13
SPECTRX, INC.
1995 STOCK PLAN
(AS AMENDED)
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
[Optionee's Name and Address]
_____________________________
You have been granted an option to purchase Common Stock of the
Company, subject to the terms and conditions of the Plan and this Option
Agreement, as follows:
Grant Number _________________________
Date of Grant _________________________
Vesting Commencement Date _________________________
Exercise Price per Share $________________________
Total Number of Shares Granted _________________________
Total Exercise Price $_________________________
Type of Option: ____ Incentive Stock Option
____ Nonstatutory Stock Option
Term/Expiration Date: _________________________
<PAGE> 14
Vesting Schedule:
This Option may be exercised, in whole or in part, in accordance with
the following schedule:
25% of the Shares subject to the Option shall vest twelve months after
the Vesting Commencement Date, and 1/48 of the Shares subject to the Option
shall vest each month thereafter.
Termination Period:
This Option may be exercised for 30 days after termination of your
employment or consulting relationship, or such longer period as may be
applicable upon death or disability of Optionee as provided in the Plan. In the
event of the Optionee's change in status from Employee to Consultant or
Consultant to Employee, this Option Agreement shall remain in effect. In no
event shall this Option be exercised later than the Term/Expiration Date as
provided above.
II. AGREEMENT
1. Grant of Option. SpectRx, Inc., a Delaware corporation (the
"Company"), hereby grants to the Optionee named in the Notice of Grant (the
"Optionee"), an option (the "Option") to purchase the total number of shares of
Common Stock (the "Shares") set forth in the Notice of Grant, at the exercise
price per share set forth in the Notice of Grant (the "Exercise Price") subject
to the terms, definitions and provisions of the 1995 Stock Plan, as amended,
(the "Plan") adopted by the Company, which is incorporated herein by reference.
Unless otherwise defined herein, the terms defined in the Plan shall have the
same defined meanings in this Option Agreement.
If designated in the Notice of Grant as an Incentive Stock
Option ("ISO"), this Option is intended to qualify as an Incentive Stock Option
as defined in Section 422 of the Code. Nevertheless, to the extent that it
exceeds the $100,000 rule of Code Section 422(d), this Option shall be treated
as a Nonstatutory Stock Option ("NSO").
2. Exercise of Option.
(a) Right to Exercise. This Option shall be exercisable
during its term in accordance with the Vesting Schedule set out in the Notice of
Grant and with the applicable provisions of the Plan and this Option Agreement.
In the event of Optionee's death, disability or other termination of the
employment or consulting relationship, this Option shall be exercisable in
accordance with the applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option shall be exercisable
by written notice (in the form attached as Exhibit A) which shall state the
election to exercise the Option, the number of Shares in respect of which the
Option is being exercised, and such other representations and agreements as to
the holder's investment intent with respect to such shares of Common Stock as
may be required by the Company pursuant to the provisions of the Plan. Such
written notice shall be signed by the Optionee and shall be delivered in person
or by certified mail to the Secretary of the
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<PAGE> 15
Company. The written notice shall be accompanied by payment of the Exercise
Price. This Option shall be deemed to be exercised upon receipt by the Company
of such written notice accompanied by the Exercise Price.
No Shares will be issued pursuant to the exercise of an Option
unless such issuance and such exercise shall comply with all relevant provisions
of law and the requirements of any stock exchange upon which the Shares may then
be listed. Assuming such compliance, for income tax purposes the Shares shall be
considered transferred to the Optionee on the date on which the Option is
exercised with respect to such Shares.
3. Optionee's Representations. In the event the Shares
purchasable pursuant to the exercise of this Option have not been registered
under the Securities Act of 1933, as amended, at the time this Option is
exercised, Optionee shall, if required by the Company, concurrently with the
exercise of all or any portion of this Option, deliver to the Company his or her
Investment Representation Statement in the form attached hereto as Exhibit B.
4. Method of Payment. Payment of the Exercise Price shall be by
any of the following, or a combination thereof, at the election of the Optionee:
(a) cash;
(b) check;
(c) surrender of other shares of Common Stock of the
Company which (A) in the case of Shares acquired pursuant to the exercise of a
Company option, have been owned by the Optionee for more than six (6) months on
the date of surrender, and (B) have a Fair Market Value on the date of surrender
equal to the Exercise Price of the Shares as to which the Option is being
exercised; or
(d) delivery of a properly executed exercise notice
together with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the Exercise Price.
5. Restrictions on Exercise. This Option may not be exercised
until such time as the Plan has been approved by the stockholders of the
Company, or if the issuance of such Shares upon such exercise or the method of
payment of consideration for such shares would constitute a violation of any
Applicable Laws.
6. Termination of Relationship. In the event an Optionee's
Continuous Status as an Employee or Consultant terminates, Optionee may, to the
extent otherwise so entitled at the date of such termination (the "Termination
Date"), exercise this Option during the Termination Period set out in the Notice
of Grant. To the extent that Optionee was not entitled to exercise this Option
at the
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<PAGE> 16
date of such termination, or if Optionee does not exercise this Option within
the time specified herein, the Option shall terminate.
7. Disability of Optionee. Notwithstanding the provisions of
Section 7 above, in the event of termination of an Optionee's consulting
relationship or Continuous Status as an Employee as a result of his or her
disability, Optionee may, but only within twelve (12) months from the date of
such termination (and in no event later than the expiration date of the term of
such Option as set forth in the Option Agreement), exercise the Option to the
extent otherwise entitled to exercise it at the date of such termination;
provided, however, that if such disability is not a "disability" as such term is
defined in Section 22(e)(3) of the Code, in the case of an Incentive Stock
Option such Incentive Stock Option shall cease to be treated as an Incentive
Stock Option and shall be treated for tax purposes as a Nonstatutory Stock
Option on the day three months and one day following such termination. To the
extent that Optionee was not entitled to exercise the Option at the date of
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
8. Death of Optionee. In the event of termination of Optionee's
Continuous Status as an Employee or Consultant as a result of the death of
Optionee, the Option may be exercised at any time within twelve (12) months
following the date of death (but in no event later than the date of expiration
of the term of this Option as set forth in Section 10 below), by Optionee's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent the Optionee could exercise the Option at
the date of death.
9. Non-Transferability of Option. This Option may not be
transferred in any manner otherwise than by will or by the laws of descent or
distribution and may be exercised during the lifetime of Optionee only by
Optionee. The terms of this Option shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
10. Term of Option. This Option may be exercised only within the
term set out in the Notice of Grant, and may be exercised during such term only
in accordance with the Plan and the terms of this Option. The limitations set
out in Section 8 of the Plan regarding Options designated as Incentive Stock
Options and Options granted to more than ten percent (10%) stockholders shall
apply to this Option.
11. Tax Consequences. Set forth below is a brief summary as of the
date of this Option of some of the federal and Delaware tax consequences of
exercise of this Option and disposition of the Shares. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING
OF THE SHARES.
(a) Exercise of ISO. If this Option qualifies as an ISO,
there will be no regular federal income tax liability or Delaware income tax
liability upon the exercise of the Option, although the excess, if any, of the
Fair Market Value of the Shares on the date of exercise over the Exercise
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<PAGE> 17
Price will be treated as an adjustment to the alternative minimum tax for
federal tax purposes and may subject the Optionee to the alternative minimum tax
in the year of exercise.
(b) Exercise of ISO Following Disability. If the
Optionee's Continuous Status as an Employee or Consultant terminates as a result
of disability that is not total and permanent disability as defined in Section
22(e)(3) of the Code, to the extent permitted on the date of termination, the
Optionee must exercise an ISO within three months of such termination for the
ISO to be qualified as an ISO.
(c) Exercise of Nonstatutory Stock Option. There may be a
regular federal income tax liability and Delaware income tax liability upon the
exercise of a Nonstatutory Stock Option. The Optionee will be treated as having
received compensation income (taxable at ordinary income tax rates) equal to the
excess, if any, of the Fair Market Value of the Shares on the date of exercise
over the Exercise Price. If Optionee is an Employee or a former Employee, the
Company will be required to withhold from Optionee's compensation or collect
from Optionee and pay to the applicable taxing authorities an amount in cash
equal to a percentage of this compensation income at the time of exercise, and
may refuse to honor the exercise and refuse to deliver Shares if such
withholding amounts are not delivered at the time of exercise.
(d) Disposition of Shares. In the case of an NSO, if
Shares are held for at least one year, any gain realized on disposition of the
Shares will be treated as long-term capital gain for federal and Delaware income
tax purposes. In the case of an ISO, if Shares transferred pursuant to the
Option are held for at least one year after exercise and are disposed of at
least two years after the Date of Grant, any gain realized on disposition of the
Shares will also be treated as long-term capital gain for federal and Delaware
income tax purposes. If Shares purchased under an ISO are disposed of within
such one-year period or within two years after the Date of Grant, any gain
realized on such disposition will be treated as compensation income (taxable at
ordinary income rates) to the extent of the difference between the Exercise
Price and the lesser of (1) the Fair Market Value of the Shares on the date of
exercise, or (2) the sale price of the Shares.
(e) Notice of Disqualifying Disposition of ISO Shares. If
the Option granted to Optionee herein is an ISO, and if Optionee sells or
otherwise disposes of any of the Shares acquired pursuant to the ISO on or
before the later of (1) the date two years after the Date of Grant, or (2) the
date one year after the date of exercise, the Optionee shall immediately notify
the Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee.
12. Entire Agreement; Governing Law. The Plan is incorporated
herein by reference. The Plan and this Option Agreement constitute the entire
agreement of the parties with respect to the subject matter hereof and supersede
in their entirety all prior undertakings and agreements of the Company and
Optionee with respect to the subject matter hereof, and may not be modified
adversely
-5-
<PAGE> 18
to the Optionee's interest except by means of a writing signed by the Company
and Optionee. This agreement is governed by Delaware law except for that body of
law pertaining to conflict of laws.
SPECTRX, INC.
a Delaware corporation
By:___________________________
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
THE OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE
WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS
OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES
THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK OPTION PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT
CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that
he is familiar with the terms and provisions thereof, and hereby accepts this
Option subject to all of the terms and provisions thereof. Optionee has reviewed
the Plan and this Option in their entirety, has had an opportunity to obtain the
advice of counsel prior to executing this Option and fully understands all
provisions of the Option. Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Administrator upon
any questions arising under the Plan or this Option. Optionee further agrees to
notify the Company upon any change in the residence address indicated below.
Dated:________________________ ___________________________________
Optionee
Residence Address:
___________________________________
___________________________________
___________________________________
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<PAGE> 19
EXHIBIT A
1995 STOCK PLAN
EXERCISE NOTICE
SpectRx, Inc.
6025 A Unity Drive
Norcross, GA 30071
Attention: Secretary
1. Exercise of Option. Effective as of today, ___________, 19__,
the undersigned ("Optionee") hereby elects to exercise Optionee's option to
purchase _________ shares of the Common Stock (the "Shares") of SpectRx, Inc.
(the "Company") under and pursuant to the 1995 Stock Plan, as amended (the
"Plan") and the [ ] Incentive [ ] Nonstatutory Stock Option Agreement dated
___________, 19__ (the "Option Agreement").
2. Delivery of Payment. Optionee herewith delivers to the Company
the full Exercise Price for the Shares.
3. Representations of Optionee. Optionee acknowledges that
Optionee has received, read and understood the Plan and the Option Agreement and
agrees to abide by and be bound by their terms and conditions.
4. Rights as Stockholder. Until the stock certificate evidencing
such Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a stockholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such stock certificate promptly
after the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock certificate
is issued, except as provided in Section 13 of the Plan.
5. Tax Consultation. Optionee understands that Optionee may
suffer adverse tax consequences as a result of Optionee's purchase or
disposition of the Shares. Optionee represents that Optionee has consulted with
any tax consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
6. Entire Agreement. The Plan and Notice of Grant/Option
Agreement are incorporated herein by reference. This Agreement, the Plan, and
the Option Agreement constitute the entire agreement of the parties with respect
to the subject matter hereof and supersede in their entirety all prior
undertakings and agreements of the Company and Purchaser with respect to the
subject matter
<PAGE> 20
hereof, and may not be modified adversely to the Purchaser's interest except by
means of a writing signed by the Company and Purchaser
Submitted by: Accepted by:
OPTIONEE: SPECTRX, INC.
By:_____________________________________
Its:____________________________________
___________________________________
(Signature)
Address: Address:
___________________________________ 6025 A Unity Drive
___________________________________ Norcross, GA 30071
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<PAGE> 21
SPECTRX, INC.
1995 STOCK PLAN
(AS AMENDED)
NOTICE OF GRANT OF STOCK PURCHASE RIGHT
Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Notice of Grant.
[Grantee's Name and Address]
You have been granted the right to purchase Common Stock of the
Company, subject to the Company's Repurchase Option and your Continuous Status
as an Optionee (as described in the Plan and the attached Restricted Stock
Purchase Agreement), as follows:
Grant Number _________________________
Date of Grant _________________________
Price Per Share $________________________
Total Number of Shares Subject _________________________
to This Stock Purchase Right
Expiration Date: _________________________
YOU MUST EXERCISE THIS STOCK PURCHASE RIGHT BEFORE THE EXPIRATION DATE
OR IT WILL TERMINATE AND YOU WILL HAVE NO FURTHER RIGHT TO PURCHASE THE SHARES.
By your signature and the signature of the Company's representative below, you
and the Company agree that this Stock Purchase Right is granted under and
governed by the terms and conditions of the Spectrx, Inc. 1995 Stock Plan, as
amended, and the Restricted Stock Purchase Agreement, attached hereto as Exhibit
A-1, both of which are made a part of this document. You further agree to
execute the attached Restricted Stock Purchase Agreement as a condition to
purchasing any shares under this Stock Purchase Right.
GRANTEE: SPECTRX, INC.
___________________________ _______________________________
Signature By
___________________________ _______________________________
Print Name Title
<PAGE> 22
EXHIBIT A-1
SPECTRX, INC.
1995 STOCK PLAN
(AS AMENDED)
RESTRICTED STOCK PURCHASE AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Restricted Stock Purchase Agreement.
WHEREAS the Purchaser named in the Notice of Grant, (the "Purchaser")
is an Optionee, and the Purchaser's continued participation is considered by the
Company to be important for the Company's continued growth; and
WHEREAS in order to give the Purchaser an opportunity to acquire an
equity interest in the Company as an incentive for the Purchaser to participate
in the affairs of the Company, the Administrator has granted to the Purchaser a
Stock Purchase Right subject to the terms and conditions of the Plan and the
Notice of Grant, which are incorporated herein by reference, and pursuant to
this Restricted Stock Purchase Agreement (the "Agreement").
NOW THEREFORE, the parties agree as follows:
1. Sale of Stock. The Company hereby agrees to sell to the
Purchaser and the Purchaser hereby agrees to purchase shares of the Company's
Common Stock (the "Shares"), at the per Share purchase price and as otherwise
described in the Notice of Grant.
2. Payment of Purchase Price. The purchase price for the Shares
may be paid by delivery to the Company at the time of execution of this
Agreement of cash, a check, or some combination thereof.
3. Repurchase Option.
(a) In the event the Purchaser ceases to maintain
Continuous Status as an Optionee for any or no reason (including death or
disability) before all of the Shares are released from the Company's Repurchase
Option (see Section 4), the Company shall, upon the date of such termination (as
reasonably fixed and determined by the Company) have an irrevocable, exclusive
option (the "Repurchase Option") for a period of sixty (60) days from such date
to repurchase up to that number of shares which constitute the Unreleased Shares
(as defined in Section 4) at the original purchase price per share (the
"Repurchase Price"). The Repurchase Option shall be exercised by the Company by
delivering written notice to the Purchaser or the Purchaser's executor (with a
copy to the Escrow Holder) AND, at the Company's option, (i) by delivering to
the Purchaser or the Purchaser's executor
<PAGE> 23
a check in the amount of the aggregate Repurchase Price, or (ii) by cancelling
an amount of the Purchaser's indebtedness to the Company equal to the aggregate
Repurchase Price, or (iii) by a combination of (i) and (ii) so that the combined
payment and cancellation of indebtedness equals the aggregate Repurchase Price.
Upon delivery of such notice and the payment of the aggregate Repurchase Price,
the Company shall become the legal and beneficial owner of the Shares being
repurchased and all rights and interests therein or relating thereto, and the
Company shall have the right to retain and transfer to its own name the number
of Shares being repurchased by the Company.
(b) Whenever the Company shall have the right to
repurchase Shares hereunder, the Company may designate and assign one or more
employees, officers, directors or shareholders of the Company or other persons
or organizations to exercise all or a part of the Company's purchase rights
under this Agreement and purchase all or a part of such Shares. If the Fair
Market Value of the Shares to be repurchased on the date of such designation or
assignment (the "Repurchase FMV") exceeds the aggregate Repurchase Price of such
Shares, then each such designee or assignee shall pay the Company cash equal to
the difference between the Repurchase FMV and the aggregate Repurchase Price of
such Shares.
4. Release of Shares From Repurchase Option.
(a) _______________________ percent (______%) of the
Shares shall be released from the Company's Repurchase Option [one year] after
the Date of Grant and __________________ percent (______%) of the Shares [at the
end of each month thereafter], provided that the Purchaser maintains Continuous
Status as an Optionee prior to the date of any such release.
(b) Any of the Shares that have not yet been released
from the Repurchase Option are referred to herein as "Unreleased Shares."
(c) The Shares that have been released from the
Repurchase Option shall be delivered to the Purchaser at the Purchaser's request
(see Section 6).
5. Restriction on Transfer. Except for the escrow described in
Section 6 or the transfer of the Shares to the Company or its assignees
contemplated by this Agreement, none of the Shares or any beneficial interest
therein shall be transferred, encumbered or otherwise disposed of in any way
until such Shares are released from the Company's Repurchase Option in
accordance with the provisions of this Agreement, other than by will or the
laws of descent and distribution.
6. Escrow of Shares.
(a) To ensure the availability for delivery of the
Purchaser's Unreleased Shares upon repurchase by the Company pursuant to the
Repurchase Option, the Purchaser shall, upon execution of this Agreement,
deliver and deposit with an escrow holder designated by the Company (the "Escrow
Holder") the share certificates representing the Unreleased Shares, together
with the stock assignment duly endorsed in blank, attached hereto as Exhibit
A-2. The Unreleased Shares and stock
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<PAGE> 24
assignment shall be held by the Escrow Holder, pursuant to the Joint Escrow
Instructions of the Company and Purchaser attached hereto as Exhibit A-3, until
such time as the Company's Repurchase Option expires. As a further condition to
the Company's obligations under this Agreement, the Company may require the
spouse of Purchaser, if any, to execute and deliver to the Company the Consent
of Spouse attached hereto as Exhibit A-4.
(b) The Escrow Holder shall not be liable for any act it
may do or omit to do with respect to holding the Unreleased Shares in escrow
while acting in good faith and in the exercise of its judgment.
(c) If the Company or any assignee exercises the
Repurchase Option hereunder, the Escrow Holder, upon receipt of written notice
of such exercise from the proposed transferee, shall take all steps necessary to
accomplish such transfer.
(d) When the Repurchase Option has been exercised or
expires unexercised or a portion of the Shares has been released from the
Repurchase Option, upon request the Escrow Holder shall promptly cause a new
certificate to be issued for the released Shares and shall deliver the
certificate to the Company or the Purchaser, as the case may be.
(e) Subject to the terms hereof, the Purchaser shall have
all the rights of a shareholder with respect to the Shares while they are held
in escrow, including without limitation, the right to vote the Shares and to
receive any cash dividends declared thereon. If, from time to time during the
term of the Repurchase Option, there is (i) any stock dividend, stock split or
other change in the Shares, or (ii) any merger or sale of all or substantially
all of the assets or other acquisition of the Company, any and all new,
substituted or additional securities to which the Purchaser is entitled by
reason of the Purchaser's ownership of the Shares shall be immediately subject
to this escrow, deposited with the Escrow Holder and included thereafter as
"Shares" for purposes of this Agreement and the Repurchase Option.
7. Legends. The share certificate evidencing the Shares, if any,
issued hereunder shall be endorsed with the following legend (in addition to any
legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS UPON TRANSFER AND RIGHTS OF REPURCHASE AS SET FORTH IN AN AGREEMENT
BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY.
8. Adjustment for Stock Split. All references to the number of
Shares and the purchase price of the Shares in this Agreement shall be
appropriately adjusted to reflect any stock split, stock dividend or other
change in the Shares which may be made by the Company after the date of this
Agreement.
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<PAGE> 25
9. Tax Consequences. The Purchaser has reviewed with the
Purchaser's own tax advisors the federal, state, local and foreign tax
consequences of this investment and the transactions contemplated by this
Agreement. The Purchaser is relying solely on such advisors and not on any
statements or representations of the Company or any of its agents. The Purchaser
understands that the Purchaser (and not the Company) shall be responsible for
the Purchaser's own tax liability that may arise as a result of the transactions
contemplated by this Agreement. The Purchaser understands that Section 83 of the
Internal Revenue Code of 1986, as amended (the "Code"), taxes as ordinary income
the difference between the purchase price for the Shares and the Fair Market
Value of the Shares as of the date any restrictions on the Shares lapse. In this
context, "restriction" includes the right of the Company to buy back the Shares
pursuant to the Repurchase Option. The Purchaser understands that the Purchaser
may elect to be taxed at the time the Shares are purchased rather than when and
as the Repurchase Option expires by filing an election under Section 83(b) of
the Code with the IRS within 30 days from the date of purchase. The form for
making this election is attached as Exhibit A-5 hereto.
THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE
RESPONSIBILITY AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION
83(b), EVEN IF THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE
THIS FILING ON THE PURCHASER'S BEHALF.
10. General Provisions.
(a) This Agreement shall be governed by the internal
substantive laws, but not the choice of law rules of Georgia. This Agreement,
subject to the terms and conditions of the Plan and the Notice of Grant,
represents the entire agreement between the parties with respect to the purchase
of the Shares by the Purchaser. Subject to Section 15(a) of the Plan, in the
event of a conflict between the terms and conditions of the Plan and the terms
and conditions of this Agreement, the terms and conditions of the Plan shall
prevail. Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Agreement.
(b) Any notice, demand or request required or permitted
to be given by either the Company or the Purchaser pursuant to the terms of this
Agreement shall be in writing and shall be deemed given when delivered
personally or deposited in the U.S. mail, First Class with postage prepaid, and
addressed to the parties at the addresses of the parties set forth at the end of
this Agreement or such other address as a party may request by notifying the
other in writing.
Any notice to the Escrow Holder shall be sent to the Company's
address with a copy to the other party hereto.
(c) The rights of the Company under this Agreement shall
be transferable to any one or more persons or entities, and all covenants and
agreements hereunder shall inure to the benefit of, and be enforceable by the
Company's successors and assigns. The rights and obligations of the Purchaser
under this Agreement may only be assigned with the prior written consent of the
Company.
-4-
<PAGE> 26
(d) Either party's failure to enforce any provision of
this Agreement shall not in any way be construed as a waiver of any such
provision, nor prevent that party from thereafter enforcing any other provision
of this Agreement. The rights granted both parties hereunder are cumulative and
shall not constitute a waiver of either party's right to assert any other legal
remedy available to it.
(e) The Purchaser agrees upon request to execute any
further documents or instruments necessary or desirable to carry out the
purposes or intent of this Agreement.
(f) PURCHASER ACKNOWLEDGES AND AGREES THAT THE VESTING OF
SHARES PURSUANT TO SECTION 4 HEREOF IS EARNED ONLY BY CONTINUOUS SERVICE AT THE
WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED OR PURCHASING SHARES
HEREUNDER). PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED STATUS AS AN OPTIONEE
FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH
PURCHASER'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE PURCHASER'S RELATIONSHIP
WITH THE COMPANY AT ANY TIME, WITH OR WITHOUT CAUSE.
By Purchaser's signature below, Purchaser represents that he or she is
familiar with the terms and provisions of the Plan, and hereby accepts this
Agreement subject to all of the terms and provisions thereof. Purchaser has
reviewed the Plan and this Agreement in their entirety, has had an opportunity
to obtain the advice of counsel prior to executing this Agreement and fully
understands all provisions of this Agreement. Purchaser agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Agreement.
Purchaser further agrees to notify the Company upon any change in the residence
indicated in the Notice of Grant.
DATED: _____________________
PURCHASER: SPECTRX, INC.
______________________________ __________________________________
Signature By
______________________________ __________________________________
Print Name Title
-5-
<PAGE> 27
EXHIBIT A-2
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, __________________________, hereby sell, assign
and transfer unto _____________________________________________________________
(__________) shares of the Common Stock of Spectrx, Inc. standing in my name of
the books of said corporation represented by Certificate No. _____ herewith and
do hereby irrevocably constitute and appoint to transfer the said stock on the
books of the within named corporation with full power of substitution in the
premises.
This Stock Assignment may be used only in accordance with the
Restricted Stock Purchase Agreement (the "Agreement")
between________________________ and the undersigned dated ______________, 19__.
Dated: _______________, 19
Signature:______________________________
INSTRUCTIONS: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise the
Repurchase Option, as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.
<PAGE> 28
EXHIBIT A-3
JOINT ESCROW INSTRUCTIONS
______, 19__
Corporate Secretary
Spectrx, Inc.
6025 A Unity Drive
Norcross, GA 30071
Dear _________________:
As Escrow Agent for both Spectrx, Inc., a Delaware corporation (the
"Company"), and the undersigned purchaser of stock of the Company (the
"Purchaser"), you are hereby authorized and directed to hold the documents
delivered to you pursuant to the terms of that certain Restricted Stock Purchase
Agreement ("Agreement") between the Company and the undersigned, in accordance
with the following instructions:
1. In the event the Company and/or any assignee of the Company
(referred to collectively as the "Company") exercises the Company's Repurchase
Option set forth in the Agreement, the Company shall give to Purchaser and you a
written notice specifying the number of shares of stock to be purchased, the
purchase price, and the time for a closing hereunder at the principal office of
the Company. Purchaser and the Company hereby irrevocably authorize and direct
you to close the transaction contemplated by such notice in accordance with the
terms of said notice.
2. At the closing, you are directed (a) to date the stock
assignments necessary for the transfer in question, (b) to fill in the number of
shares being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company or its
assignee, against the simultaneous delivery to you of the purchase price (by
cash, a check, or some combination thereof) for the number of shares of stock
being purchased pursuant to the exercise of the Company's Repurchase Option.
3. Purchaser irrevocably authorizes the Company to deposit with
you any certificates evidencing shares of stock to be held by you hereunder and
any additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as Purchaser's
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and to complete any transaction herein contemplated,
including but not limited to the filing with any applicable state blue sky
authority of any required applications for consent to, or notice of transfer of,
the securities. Subject to the provisions of this paragraph 3, Purchaser shall
exercise all rights and privileges of a shareholder of the Company while the
stock is held by you.
<PAGE> 29
4. Upon written request of the Purchaser, but no more than once
per calendar year, unless the Company's Repurchase Option has been exercised,
you shall deliver to Purchaser a certificate or certificates representing so
many shares of stock as are not then subject to the Company's Repurchase Option.
Within 90 days after Purchaser ceases to maintain Continuous Status as an
Optionee, you shall deliver to Purchaser a certificate or certificates
representing the aggregate number of shares held or issued pursuant to the
Agreement and not purchased by the Company or its assignees pursuant to exercise
of the Company's Repurchase Option.
5. If at the time of termination of this escrow you should have
in your possession any documents, securities, or other property belonging to
Purchaser, you shall deliver all of the same to Purchaser and shall be
discharged of all further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or
revoked only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties
as are specifically set forth herein and may rely and shall be protected in
relying or refraining from acting on any instrument reasonably believed by you
to be genuine and to have been signed or presented by the proper party or
parties. You shall not be personally liable for any act you may do or omit to do
hereunder as Escrow Agent or as attorney-in-fact for Purchaser while acting in
good faith, and any act done or omitted by you pursuant to the advice of your
own attorneys shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all
warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law, and are hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case you obey or comply with any such order, judgment or decree, you
shall not be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the
identity, authorities or rights of the parties executing or delivering or
purporting to execute or deliver the Agreement or any documents or papers
deposited or called for hereunder.
10. You shall not be liable for the outlawing of any rights under
the statute of limitations with respect to these Joint Escrow Instructions or
any documents deposited with you.
11. You shall be entitled to employ such legal counsel and other
experts as you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
12. Your responsibilities as Escrow Agent hereunder shall
terminate if you shall cease to be an officer or agent of the Company or if you
shall resign by written notice to each party. In the event of any such
termination, the Company shall appoint a successor Escrow Agent.
-2-
<PAGE> 30
13. If you reasonably require other or further instruments in
connection with these Joint Escrow Instructions or obligations in respect
hereto, the necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
securities held by you hereunder, you are authorized and directed to retain in
your possession without liability to anyone all or any part of said securities
until such disputes shall have been settled either by mutual written agreement
of the parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
15. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail with
postage and fees prepaid, addressed to each of the other parties thereunto
entitled at the following addresses or at such other addresses as a party may
designate by ten days' advance written notice to each of the other parties
hereto.
COMPANY: Spectrx, Inc.
6025 A Unity Drive
Norcross, GA 30071
PURCHASER: __________________________
__________________________
__________________________
ESCROW AGENT: Corporate Secretary
Spectrx, Inc.
6025 A Unity Drive
Norcross, GA 30071
16. By signing these Joint Escrow Instructions, you become a party
hereto only for the purpose of said Joint Escrow Instructions; you do not become
a party to the Agreement.
17. This instrument shall be binding upon and inure to the benefit
of the parties hereto, and their respective successors and permitted assigns.
-3-
<PAGE> 31
18. These Joint Escrow Instructions shall be governed by, and
construed and enforced in accordance with, the internal substantive laws, but
not the choice of law rules, of Georgia.
Very truly yours,
SPECTRX, INC.
-------------------------------------
By
-------------------------------------
Title
PURCHASER:
-------------------------------------
Signature
-------------------------------------
Print Name
ESCROW AGENT:
- -------------------------------------
Corporate Secretary
-4-
<PAGE> 32
EXHIBIT A-4
CONSENT OF SPOUSE
I, ____________________, spouse of ___________________, have read and
approve the foregoing Restricted Stock Purchase Agreement (the "Agreement"). In
consideration of the Company's grant to my spouse of the right to purchase
shares of Spectrx, Inc., as set forth in the Agreement, I hereby appoint my
spouse as my attorney-in-fact in respect to the exercise of any rights under the
Agreement and agree to be bound by the provisions of the Agreement insofar as I
may have any rights in said Agreement or any shares issued pursuant thereto
under the community property laws or similar laws relating to marital property
in effect in the state of our residence as of the date of the signing of the
foregoing Agreement.
Dated: _______________, 19
__________________________________________
Signature of Spouse
<PAGE> 33
EXHIBIT A-5
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code of 1986, as amended, to include in taxpayer's gross income
for the current taxable year the amount of any compensation taxable to taxpayer
in connection with his or her receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of
the undersigned are as follows:
NAME: TAXPAYER: SPOUSE:
ADDRESS:
IDENTIFICATION NO.: TAXPAYER: SPOUSE:
TAXABLE YEAR:
2. The property with respect to which the election is made is described as
follows: __________ shares (the "Shares") of the Common Stock of
[Company name] (the "Company").
3. The date on which the property was transferred is: _____________, 19__.
4. The property is subject to the following restrictions:
The Shares may be repurchased by the Company, or its assignee, upon
certain events. This right lapses with regard to a portion of the
Shares based on the continued performance of services by the taxpayer
over time.
5. The fair market value at the time of transfer, determined without
regard to any restriction other than a restriction which by its terms
will never lapse, of such property is:
$_______________.
6. The amount (if any) paid for such property is:
$_______________.
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
except with the consent of the Commissioner.
Dated: ___________________, 19____ ________________________________________
Taxpayer
The undersigned spouse of taxpayer joins in this election.
Dated: ___________________, 19____ ________________________________________
Spouse of Taxpayer
<PAGE> 1
EXHIBIT 10.3
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
SPECTRX, INC.
6015D Unity Drive
Norcross, GA 30071
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 1 - Authorization and Sale of Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Sales of Preferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2 - Closing Dates; Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Delivery. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.3 Subsequent Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 3 - Representations and Warranties of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.1 Organization and Standing; Articles and By-Laws . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.2 Corporate Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.4 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.5 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.6 Labor Agreements and Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.7 Agreements; Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.8 Title to Properties and Assets; Liens, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.9 Compliance with Other Instruments, None Burdensome, etc . . . . . . . . . . . . . . . . . . . . . 5
3.10 Litigation, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.11 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.12 Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.13 Governmental Consent, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.14 Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.15 Brokers or Finders; Other Offers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.16 Patents and Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.17 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 4 - Representations and Warranties of the Purchasers . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.1 Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.2 Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.3 Rule 144 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.4 No Public Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.5 Access to Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.6 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.7 Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.8 Tax Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 5 - Conditions to Closing of Purchasers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.1 Representations and Warranties Correct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.2 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>
-i-
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
5.3 Opinion of Company's Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.4 Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.5 Blue Sky . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.6 Amended and Restated Articles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.7 Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.8 Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.9 Samuels Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.10 Ignotz Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.11 Eppstein Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 6 - Conditions to Closing of Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.1 Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.2 Blue Sky . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.3 Amended and Restated Articles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.4 Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.5 Employment Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 7 - Affirmative Covenants of the Company and the
Purchasers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.1 Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.2 Assignment of Rights to Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.3 Incentive Stock Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.4 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.5 Termination of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 8 - Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 9 - Purchasers' Right of First Refusal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
9.1 Right of First Refusal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 10 - Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
10.1 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
10.2 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
10.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
10.4 Entire Agreement; Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
10.5 Notices, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
10.6 Delays or Omissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10.7 California Corporate Securities Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10.8 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10.9 Finder's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
10.12 Titles and Subtitles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
A Schedule of Purchasers
B Amended and Restated Articles of Incorporation
C Exceptions to Representations and Warranties
D Proprietary Information Agreement
E Registration Rights Agreement
F License Agreement
G Legal Opinion
H Samuels Agreement
I Ignotz Agreement
J Eppstein Agreement
K Employment Agreement
L Holders of Common Stock
</TABLE>
-iii-
<PAGE> 5
SPECTRX, INC.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
This Agreement is made as of February 5, 1993 among Spectrx, Inc., a
Delaware corporation (the "Company"), and the persons and entities listed on
the Schedule of Purchasers attached hereto as Exhibit A (the "Purchasers").
SECTION 1
AUTHORIZATION AND SALE OF PREFERRED STOCK
1.1 AUTHORIZATION. The Company will authorize the sale and
issuance of up to 2,000,000 shares of its Series A Preferred Stock, (the
"Shares"), having the rights, privileges and preferences as set forth in the
Amended and Restated Certificate of Incorporation (the "Articles") in the form
attached to this Agreement as Exhibit B.
1.2 SALES OF PREFERRED. Subject to the terms and conditions
hereof, the Company will severally issue and sell to each of such Purchasers
and the Purchasers will severally buy from the Company the total number of
shares of Series A Preferred Stock set forth in column 2 of the Schedule of
Purchasers at the Closing (as defined below) for the purchase price set forth
in column 3 of the Schedule of Purchasers. The Company's agreements with each
of the Purchasers are separate agreements, and the sales to each of the
Purchasers are separate sales.
SECTION 2
CLOSING DATES; DELIVERY
2.1 CLOSING DATE. The closing of the purchase and sale of the
Series A Preferred Stock hereunder (the "Closing") shall be held at the offices
of Wilson, Sonsini, Goodrich & Rosati, a Professional Corporation, Two Palo
Alto Square, Suite 900, Palo Alto, California 94306 at 10:00 a.m., local time,
on February 5, 1993 or at such other time and place upon which the Company and
the Purchasers shall agree.
2.2 DELIVERY. At the Closing, the Company will deliver to each
Purchaser a certificate, registered in such Purchaser's name, representing the
number of Shares to be purchased by such Purchaser at such Closing as specified
in the Schedule of Purchasers, against
<PAGE> 6
payment of the purchase price therefor by check payable to the Company, or by
wire transfer per the Company's wiring instructions.
2.3 SUBSEQUENT SALES. At any time on or before the 30th day
following the Closing, the Company may sell up to the balance of the authorized
Series A Preferred Stock not sold at the Closing. All such sales shall be made
on the terms and conditions set forth in this Agreement and the purchasers
thereof shall be "Purchasers" under this Agreement. Should any such sales be
made, the Company shall prepare and distribute to the Purchasers a revised
Exhibit A to this Agreement reflecting such sales.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on Exhibit C attached hereto, the Company
represents and warrants to the Purchasers as follows:
3.1 ORGANIZATION AND STANDING; ARTICLES AND BY-LAWS. The Company
is a corporation duly organized and validly existing under, and by virtue of,
the laws of the State of Delaware and is in good standing under such laws. The
Company has requisite corporate power and authority to own and operate its
properties and assets, and to carry on its business as presently conducted and
as proposed to be conducted. The Company is not presently qualified to do
business as a foreign corporation in any jurisdiction other than Georgia, and
the failure to be so qualified will not have a material adverse affect on the
Company's business as now conducted or as now proposed to be conducted.
3.2 CORPORATE POWER. The Company will have at the Closing all
requisite legal and corporate power and authority to execute and deliver this
Agreement and the agreements set forth as Exhibits hereto (collectively, the
"Agreements"), to sell and issue the Shares hereunder, to issue the Common
Stock issuable upon conversion of the Shares and to carry out and perform its
obligations under the terms of the Agreements.
3.3 SUBSIDIARIES. The Company has no subsidiaries or affiliated
companies and does not otherwise own or control, directly or indirectly, any
equity interest in any corporation, association or business entity.
3.4 CAPITALIZATION. The authorized capital stock of the Company
consists or will, upon the filing of the Articles, consist of 10,000,000 shares
of Common Stock, 2,000,000 shares of Series A
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Preferred Stock and 2,000,000 shares of Series A1 Preferred Stock (the Series A
and Series A1 Preferred Stock shall be referred to as the "Preferred").
Immediately prior to the Closing 1,650,000 shares of Common Stock will be
outstanding and no other shares of capital stock will be outstanding. Exhibit
L attached hereto sets forth a true, complete and correct list of the record
and beneficial holders of the issued and outstanding shares of Common Stock of
the Company. All of the outstanding shares of Common Stock are duly
authorized, validly issued, fully paid and nonassessable, and were issued in
compliance with applicable federal and state securities laws. The Shares, when
issued pursuant to the terms of this Agreement, will be duly authorized,
validly issued, fully paid and nonassessable. The Company has reserved
2,000,000 shares of Common Stock for issuance upon conversion of the Preferred,
and 500,000 shares of its Common Stock for issuance pursuant to its 1993
Incentive Stock Plan. Except for those set forth in this Agreement and the
Exhibits thereto (collectively, the "Agreements"), there are no options,
warrants or other rights (including conversion or preemptive rights) or
agreements outstanding to purchase any of the Company's authorized and unissued
capital stock.
3.5 AUTHORIZATION. All corporate action on the part of the
Company, its officers, directors and shareholders necessary for the
authorization, execution, delivery and performance of the Agreements by the
Company, the authorization, sale, issuance and delivery of the Shares (and the
Common Stock issuable upon conversion of the Preferred) and the performance of
all of the Company's obligations under the Agreements has been taken or will be
taken prior to the Closing. The Agreements, when executed and delivered by the
Company, shall constitute valid and binding obligations of the Company,
enforceable in accordance their terms, except as the indemnification provisions
of paragraph 7 of the Registration Rights Agreement hereof may be limited by
principles of public policy, and subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies.
The Shares, when issued in compliance with the provisions of this Agreement,
will be validly issued, will be fully paid and nonassessable, and will have the
rights, preferences and privileges described in the Articles; the Common Stock
issuable upon conversion of the Preferred has been duly and validly reserved
and, when issued in compliance with the provisions of this Agreement and the
Articles, will be validly issued, and will be fully paid and nonassessable; and
the Preferred and such Common Stock will be free of any liens or encumbrances,
assuming the Purchasers take the shares with no notice thereof, other than any
liens or encumbrances created by or imposed upon the holders; provided,
however, that the Preferred (and the Common Stock
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issuable upon conversion thereof) may be subject to restrictions on transfer
under state and/or federal securities laws as set forth herein.
3.6 LABOR AGREEMENTS AND ACTIONS. The Company is not bound by or
subject to (and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or arrangement with
any labor union, and no labor union has requested or, to the knowledge of the
Company, has sought to represent any of the employees, representatives or
agents of the Company. There is no strike or other labor dispute involving the
Company pending, or to the knowledge of the Company threatened, which could
have a material adverse effect on the assets, properties, financial condition,
operating results, or business of the Company, nor is the Company aware of any
labor organization activity involving its employees. The Company is not aware
that any officer or key employee, or that any group of key employees, intends
to terminate their employment with the Company, nor does the Company have a
present intention to terminate the employment of any of the foregoing. The
employment of each officer and, to the best of the Company's knowledge, each
employee of the Company is terminable at the will of the Company.
3.7 AGREEMENTS; ACTION.
(a) Except for agreements explicitly contemplated hereby,
there are no agreements, understandings or proposed transactions between the
Company and any of its officers, directors, affiliates, or any affiliate
thereof nor are there agreements or understandings between any person and/or
entities, which affects or relates to the voting or giving of written consents
with respect to any security or by a director of the Company.
(b) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company is a party or by which it is bound which may involve (i)
obligations (contingent or otherwise) of, or payments to the Company in excess
of, $5,000, or (ii) the license of any patent, copyright, trade secret or other
proprietary right to or from the Company or (iii) provisions restricting or
affecting the development, manufacture or distribution of the Company's
products or services or (iv) indemnification by the Company with respect to
infringements of proprietary rights.
(c) The Company has not (i) declared or paid any
dividends, or authorized or made any distribution upon or with respect to any
class or series of its capital stock, (ii) incurred any indebtedness for money
borrowed or any other liabilities individually in excess of $5,000 or, in the
case of indebtedness and/or
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liabilities individually less than $5,000, in excess of $25,000 in the
aggregate, (iii) made any loans or advances to any person, other than ordinary
advances for travel expenses, or (iv) sold, exchanged or otherwise disposed of
any of its assets or rights, other than the sale of its inventory in the
ordinary course of business.
(d) For the purposes of subsections (b) and (c) above,
all indebtedness, liabilities, agreements, understandings, instruments,
contracts and proposed transactions involving the same person or entity
(including persons or entities the Company has reason to believe are affiliated
therewith) shall be aggregated for the purpose of meeting the individual
minimum dollar amounts of such subsections.
3.8 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company has
good and marketable title to its properties and assets, and has good title to
all its leasehold interests, in each case subject to no mortgage, pledge, lien,
lease, encumbrance or charge, other than (i) the lien of current taxes not yet
due and payable, and (ii) possible minor liens and encumbrances which do not in
any case materially detract from the value of the property subject thereto or
materially impair the operations of the Company, and which have not arisen
otherwise than in the ordinary course of business.
3.9 COMPLIANCE WITH OTHER INSTRUMENTS, NONE BURDENSOME, ETC. The
Company is not in violation or default of any term of its Articles of
Incorporation or Bylaws, or in any material respect of any term or provision of
any material mortgage, indebtedness, indenture, contract, agreement,
instrument, judgment, order or decree, and to the best of its knowledge is not
in violation of any statute, rule or regulation applicable to the Company where
such violation would materially and adversely affect the Company. The
execution, delivery and performance of and compliance with the Agreements, and
the issuance of the Preferred and the Common Stock issuable upon conversion of
the Preferred, have not resulted and will not result in any material violation
of, or conflict with, or constitute with or without the passage of time and the
giving of notice a material violation or default under, the Company's Articles
or Bylaws or any of its agreements nor result in the creation of, any mortgage,
pledge, lien, encumbrance or charge upon any of the properties or assets of the
Company; and there is no such violation or default which materially and
adversely affects the business of the Company or any of its properties or
assets.
3.10 LITIGATION, ETC. There are no actions, suits, proceedings or
investigations pending against the Company or its properties before any court
or governmental agency (nor, to the best of the Company's knowledge, is there
any reasonable basis
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therefor or threat thereof). The foregoing includes, without limitation,
actions pending or threatened (or any basis therefor known to the Company)
involving the prior employment of any of the Company's employees, their use in
connection with the Company's business of any information or techniques
allegedly proprietary to any of their former employers or their obligations
under any agreement with their former employers. The Company is not a party or
subject to the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company currently pending or which the
Company intends to initiate.
3.11 EMPLOYEES. To the best of the Company's knowledge, no
employee of the Company is in violation of any term of any employment contract,
patent disclosure agreement or any other contract or agreement relating to the
relationship of such employee with the Company or any other party because of
the nature of the business conducted or to be conducted by the Company. Each
employee of the Company with access to confidential or proprietary information
has executed a Proprietary Information Agreement, the form of which is attached
hereto as Exhibit D.
3.12 REGISTRATION RIGHTS. Except as set forth in the Registration
Rights Agreement attached hereto as Exhibit E, the Company is not under any
contractual obligation to register (as defined in Section 1 of the Registration
Rights Agreement) any of its presently outstanding securities or any of its
securities which may hereafter be issued.
3.13 GOVERNMENTAL CONSENT, ETC. No consent, approval or
authorization of or designation, declaration or filing with any governmental
authority on the part of the Company is required in connection with the valid
execution and delivery of this Agreement, or the offer, sale or issuance of the
Shares (and the Common Stock issuable upon conversion of the Shares), or the
consummation of any other transaction contemplated hereby, except (a) filing of
the Articles in the office of the Delaware Secretary of State (b) qualification
(or taking such action as may be necessary to secure an exemption from
qualification, if available) of the offer and sale of the Preferred (and the
Common Stock issuable upon conversion of the Preferred) under applicable Blue
Sky laws, which filings and qualifications, if required, will be accomplished
in a timely manner.
3.14 OFFERING. Subject to the accuracy of the Purchasers'
representations in Section 4 hereof, the offer, sale and issuance of the Shares
to be issued in conformity with the terms of this Agreement, and the issuance
of the Common Stock to be issued upon
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conversion of the Preferred, constitute transactions exempt from the
registration requirements of Section 5 of the Securities Act of 1933, as
amended (the "Securities Act") and in compliance with applicable state
securities laws.
3.15 BROKERS OR FINDERS; OTHER OFFERS. The Company has not
incurred, and will not incur, directly or indirectly, as a result of any action
taken by the Company, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement.
3.16 PATENTS AND TRADEMARKS. There are no outstanding options,
licenses, or agreements of any kind relating to the intellectual property of
the Company. Except for the license from Georgia Tech Research Corporation
attached hereto as Exhibit F, the Company is not bound by or a party to any
options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information, proprietary rights and processes of any other person or entity.
The Company has not received any communications alleging that the Company has
violated or, by conducting its business as proposed, would violate any of the
patents, trademarks, service marks, trade names, copyrights or trade secrets or
other proprietary rights of any other person or entity. The Company is not
aware that any of its employees is obligated under any contract (including
licenses, covenants or commitments of any nature) or other agreement, or
subject to any judgment, decree or order of any court or administrative agency,
that would interfere with the use of his best efforts to promote the interests
of the Company or that would conflict with the Company's business as proposed
to be conducted. Neither the execution nor delivery of this Agreement, nor the
carrying on of the Company's business by the employees of the Company, nor the
conduct of the Company's business as proposed, will, to the Company's
knowledge, conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any of such employees is now obligated. The Company
does not believe it is or will be necessary to utilize any inventions of any of
its employees (or people it currently intends to hire) made prior to their
employment by the Company.
3.17 DISCLOSURE. This Agreement with the Exhibits hereto and all
other certificates delivered in connection herewith, when taken as a whole, do
not contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements contained herein not misleading
in light of the circumstances under which they were made. The Company has
fully provided each Purchaser with all the information such Purchaser has
requested for deciding whether to purchase the Shares and all
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information which the Company believes is reasonably necessary to enable such
Purchaser to make such decision.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser hereby severally represents and warrants to the Company
with respect to the purchase of the Shares as follows:
4.1 EXPERIENCE. It has substantial experience in evaluating and
investing in private placement transactions of securities in companies similar
to the Company so that it is capable of evaluating the merits and risks of its
investment in the Company and has the capacity to protect its own interests.
4.2 INVESTMENT. It is acquiring the Shares and the Common Stock
underlying the Preferred for investment for its own account, not as a nominee
or agent, and not with the view to, or for resale in connection with, any
distribution thereof. It understands that the Shares to be purchased and the
Common Stock underlying the Preferred have not been, and will not be,
registered under the Securities Act by reason of a specific exemption from the
registration provisions of the Securities Act, the availability of which
depends upon, among other things, the bona fide nature of the investment intent
and the accuracy of such Purchaser's representations as expressed herein.
4.3 RULE 144. It acknowledges that the Preferred and the
underlying Common Stock must be held indefinitely unless subsequently
registered under the Securities Act or unless an exemption from such
registration is available. It is aware of the provisions of Rule 144
promulgated under the Securities Act which permit limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions, including, among other things, the existence of a public market for
the shares, the availability of certain current public information about the
Company, the resale occurring not less than two years after a party has
purchased and paid for the security to be sold, the sale being effected through
a "broker's transaction" or in transactions directly with a "market maker" and
the number of shares being sold during any three-month period not exceeding
specified limitations.
4.4 NO PUBLIC MARKET. It understands that no public market now
exists for any of the securities issued by the Company and that the Company has
made no assurances that a public market will ever exist for the Company's
securities.
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4.5 ACCESS TO DATA. It has had an opportunity to discuss the
Company's business, management and financial affairs with its management. It
has also had an opportunity to ask questions of officers of the Company, which
questions were answered to its satisfaction. It understands that such
discussions, as well as any written information issued by the Company, were
intended to describe certain aspects of the Company's business and prospects
but were not a thorough or exhaustive description.
4.6 AUTHORIZATION. This Agreement when executed and delivered by
such Purchaser will constitute a valid and legally binding obligation of the
Purchaser, enforceable in accordance with its terms, except as the
indemnification provisions of paragraph 7 of the Registration Rights Agreement
may be limited by principles of public policy, and subject to laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief or other
equitable remedies.
4.7 BROKERS OR FINDERS. The Company has not, and will not, incur,
directly or indirectly, as a result of any action taken by such Purchaser, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement.
4.8 TAX LIABILITY. It has reviewed with its own tax advisors the
federal, state, local and foreign tax consequences of this investment and the
transactions contemplated by this Agreement (including any tax consequences
resulting from the recently enacted tax legislation). It relies solely on such
advisors and not on any statements or representations of the Company or any of
its agents. It understands that it (and not the Company) shall be responsible
for its own tax liability that may arise as a result of this investment or the
transactions contemplated by this Agreement.
SECTION 5
CONDITIONS TO CLOSING OF PURCHASERS
The Purchasers' obligations to purchase the Series A Preferred Stock
at the Closing are, at the option of the Purchasers, subject to the fulfillment
of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations
and warranties made by the Company in Section 3 hereof shall be true and
correct in all material respects as of the Closing.
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5.2 COVENANTS. All covenants, agreements and conditions contained
in this Agreement to be performed by the Company on or prior to the Closing
shall have been performed or complied with in all material respects.
5.3 OPINION OF COMPANY'S COUNSEL. The Purchasers shall have
received from Wilson, Sonsini, Goodrich & Rosati, counsel to the Company, an
opinion addressed to them, dated the Closing Date, in substantially the form of
Exhibit G.
5.4 COMPLIANCE CERTIFICATE. The Company shall have delivered to
the Purchasers a certificate of the Company executed by the President of the
Company, dated as of the Closing certifying to the fulfillment of the
conditions specified in Sections 5.1 and 5.2 of this Agreement.
5.5 BLUE SKY. The Company shall have obtained all necessary Blue
Sky law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Warrants and the
Preferred and the Common Stock issuable upon conversion of the Preferred.
5.6 AMENDED AND RESTATED ARTICLES. The Articles shall have been
filed with the Delaware Secretary of State.
5.7 REGISTRATION RIGHTS AGREEMENT. The Company and the parties
listed thereon shall have executed and delivered the Registration Rights
Agreement in substantially the form attached hereto as Exhibit E.
5.8 DIRECTORS. Effective as of the Closing Date, the Company's
Board of Directors will consist of Mark Samuels and Keith Ignotz, two persons
chosen by the Purchasers and a fifth person to be chosen by the holders of
Common Stock.
5.9 SAMUELS AGREEMENT. Mark Samuels shall enter into a
stockholder agreement with the Company and the Purchasers in substantially the
form attached hereto as Exhibit H.
5.10 IGNOTZ AGREEMENT. Keith Ignotz shall enter into a stockholder
agreement with the Company and the Purchasers in substantially the form
attached hereto as Exhibit I.
5.11 EPPSTEIN AGREEMENT. Jonathan Eppstein shall enter into a
stockholder agreement with the Company and the Purchasers in substantially the
form attached hereto as Exhibit J.
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SECTION 6
CONDITIONS TO CLOSING OF COMPANY
The Company's obligation to sell and issue the Series A Preferred
Stock at the Closing is, at the option of the Company, subject to the
fulfillment as of the Closing of the following conditions:
6.1 REPRESENTATIONS. The representations made by the Purchasers
in Section 4 hereof shall be true and correct when made, and shall be true and
correct on the Closing.
6.2 BLUE SKY. The Company shall have obtained all necessary Blue
Sky law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Preferred and
the Common Stock issuable upon conversion of the Preferred.
6.3 AMENDED AND RESTATED ARTICLES. The Articles shall have been
filed with the Delaware Secretary of State.
6.4 LEGAL MATTERS. All material matters of a legal nature which
pertain to this Agreement, and the transactions contemplated hereby, shall have
been reasonably approved by counsel to the Company.
6.5 EMPLOYMENT AGREEMENT. Keith Ignotz and the Company shall have
entered into an employment agreement in the form attached hereto as Exhibit K.
SECTION 7
AFFIRMATIVE COVENANTS OF THE COMPANY AND THE PURCHASERS
The Company hereby covenants and agrees as follows:
7.1 FINANCIAL INFORMATION. As long as a Purchaser holds not less
than 400,000 shares of Preferred and/or Common Stock issued upon conversion of
the Preferred:
(a) As soon as practicable after the end of each fiscal
year, and in any event within 120 days thereafter, consolidated balance sheets
of the Company and its subsidiaries, if any, as of the end of such fiscal year,
and consolidated statements of income and consolidated statements of changes in
financial position of the Company and its subsidiaries, if any, for such year,
prepared in
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accordance with generally accepted accounting principles and setting forth in
each case in comparative form the figures for the previous fiscal year (or, at
the election of the Company, setting forth in comparative form the budgeted
figures for the fiscal year then reported), all in reasonable detail and
audited by independent public accountants of national standing selected by the
Company.
(b) As soon as practicable after the end of each month,
and in any event within 15 days thereafter, an unaudited quarterly report
including a balance sheet, profit and loss statement cash flow analysis
(prepared in accordance with generally accepted accounting principles other
than for accompanying notes and subject to changes resulting from year-end
audit adjustments).
7.2 ASSIGNMENT OF RIGHTS TO FINANCIAL INFORMATION. The rights
granted pursuant to Section 7.1 may not be assigned or otherwise conveyed by
any Purchaser or by any subsequent transferee of any such rights without the
prior written consent of the Company; provided, however, that any Purchaser may
assign to any transferee, other than a competitor of the Company, and after
giving notice to the Company, the rights granted pursuant to Section 7.1 to (i)
a transferee who acquires at least 400,000 shares of Preferred and/or Common
Stock issued upon conversion of the Preferred (appropriately adjusted for
Recapitalizations) or (ii) any constituent partner of a Purchaser.
7.3 INCENTIVE STOCK PURCHASE. The Company hereby covenants and
agrees that an aggregate of 400,000 Shares of the Company's Common Stock shall
be sold to Mark Samuels and Keith Ignotz, within eleven months from the
Closing, at a purchase price equal to the lesser of (i) fair market value or
(ii) $.40 per share. The Board of Directors shall allocate the 400,000 Shares
among Mark Samuels and Keith Ignotz. The 400,000 Shares shall be subject to
repurchase by the Company following issuance if the Purchaser of such shares is
no longer employed by the Company. This repurchase right will lapse (i) as to
25% of the issued shares upon payment of the purchase price and (ii) as to the
remaining 75% ratably, on a monthly basis, over the 36 months following payment
of the purchase price.
7.4 INSPECTION. The Company shall permit each Purchaser, at such
Investor's expense, to visit and inspect the Company's properties, to examine
its books of account and records and to discuss the Company's affairs, finances
and accounts with its officers, all at such reasonable times as may be
requested by the Investor, provided, however, that the Company shall not be
obligated pursuant to this Section 7.4 to provide access to any information
which it reasonably considers to be a trade secret or similar confidential
information.
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7.5 TERMINATION OF COVENANTS. The covenants set forth in this
Sections 7.1, 7.2 and 7.4 shall terminate and be of no further force or effect
at such time as the Company is required to file reports pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934, as amended.
SECTION 8
REGISTRATION RIGHTS
The Purchasers shall have the registration rights set forth in the
Registration Rights Agreement attached hereto as Exhibit E.
SECTION 9
PURCHASERS' RIGHT OF FIRST REFUSAL
9.1 RIGHT OF FIRST REFUSAL. The Company hereby grants to each
Purchaser the right of first refusal to purchase all or any part of such
Purchaser's pro rata share of New Securities (as defined in this Section 9.1)
which the Company may, from time to time, propose to sell and issue. A pro
rata share, for purposes of this right of first refusal, is the ratio that the
sum of the number of shares of Common Stock then held by such Purchaser and the
number of shares of Common Stock issuable upon conversion of the Preferred
Stock then held by such Purchaser bears to the sum of (i) the total number of
shares of Common Stock then outstanding plus (ii) the number of shares of
Common Stock issuable upon conversion of the then outstanding Preferred Stock,
plus (iii) the number of shares issuable upon exercise of outstanding options
and warrants plus (iv) any shares reserved for future issuance pursuant to
plans approved by the Company's Board of Directors.
(a) Except as set forth below, "New Securities" shall
mean any shares of capital stock of the Company including Common Stock and
Preferred Stock, whether now authorized or not, and rights, options or warrants
to purchase said shares of Common Stock or Preferred, and securities of any
type whatsoever that are, or may become, convertible into said shares of Common
Stock or Preferred. Notwithstanding the foregoing, "New Securities" does not
include (i) the Shares purchased under this Agreement, including Common Stock
issuable upon conversion of the Preferred, (ii) securities offered to the
public generally pursuant to a registration statement or pursuant to Regulation
A under the Securities Act, (iii) securities issued pursuant to the acquisition
of another corporation by the Company by merger, purchase of
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substantially all of the assets or other reorganization whereby the Company or
its shareholders own not less than fifty-one percent (51%) of the voting power
of the surviving or successor corporation, (iv) shares of the Company's Common
Stock or related options convertible into such Common Stock issued to
employees, officers and directors of, and consultants, customers, licensors,
and vendors to, the Company, pursuant to any arrangement approved by the Board
of Directors of the Company, (v) stock issued pursuant to any rights or
agreements including without limitation convertible securities, options and
warrants, provided that the rights of first refusal established by this Section
9.1 apply with respect to the initial sale or grant by the Company of such
rights or agreements, (vi) stock issued in connection with any stock split,
stock dividend or recapitalization by the Company.
(b) In the event the Company proposes to undertake an
issuance of New Securities, it shall give each Purchaser notice of its
intention, describing the type of New Securities, and the price and terms upon
which the Company proposes to issue the same. Each Purchaser shall have twenty
(20) days from the date of such notice to agree to purchase up to their
respective pro rata shares of such New Securities for the price and upon the
terms specified in the notice by giving written notice to the Company and
stating therein the quantity of New Securities to be purchased.
(c) In the event a Purchaser fails to exercise the right
of first refusal within said twenty (20) day period, the Company shall have one
hundred (100) days thereafter to enter into an agreement and sell the New
Securities not elected to be purchased by Purchasers at the price and upon the
terms no more favorable to the purchasers of such securities than specified in
the Company's notice. In the event the Company has not entered into an
agreement and closed the sale of the New Securities within said one hundred
(100) day period, the Company shall not thereafter issue or sell any New
Securities, without first offering such securities in the manner provided
above.
(d) The right of first refusal granted under this
Agreement shall expire upon the first to occur of the following: (i) upon the
closing of a firm commitment underwritten public offering pursuant to an
effective registation statement under the Securities Act covering the offer and
sale of Common Stock of which the aggregate gross proceeds attributable to
sales for the account of the Company exceed $10,000,000 at a per share issuance
price of $5.00 per share; or (ii) as to a Purchaser if such Purchaser no longer
holds 400,000 shares of Preferred and/or Common Stock issued upon conversion of
the Preferred (appropriately adjusted for Recapitalizations).
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(e) The right of first refusal hereunder is not
assignable except by each of such Purchasers to any wholly-owned subsidiary or
constituent partner who acquires at least 400,000 shares (appropriately
adjusted for Recapitalizations).
SECTION 10
MISCELLANEOUS
10.1 GOVERNING LAW. This Agreement shall be governed in all
respects by the internal laws of the State of California as applied to
agreements entered into among California residents to be performed entirely
within California.
10.2 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by any Purchaser
and the closing of the transactions contemplated hereby.
10.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto,
provided, however, that the rights of a Purchaser to purchase the Preferred
shall not be assignable without the consent of the Company.
10.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other
documents delivered pursuant hereto at the Closing constitute the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof, and no party shall be liable or bound to any other
party in any manner by any warranties, representations or covenants except as
specifically set forth herein or therein. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged
or terminated other than by a written instrument signed by the party against
whom enforcement of any such amendment, waiver, discharge or termination is
sought; provided, however, that holders of a majority of the Common Stock
issued or issuable upon conversion of the Preferred may, with the Company's
prior written consent, waive, modify or amend on behalf of all Purchasers, any
provision hereof except Section 7.3 (which also requires the consent of Mark
Samuels and Keith Ignotz) hereof.
10.5 NOTICES, ETC. All notices and other communications required
or permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by
messenger, addressed (a) if to a Purchaser, at such Purchaser's address set
forth in Exhibit A, or
-15-
<PAGE> 20
at such other address as such Purchaser shall have furnished to the Company in
writing, or (b) if to any other holder of any Shares, at such address as such
holder shall have furnished the Company in writing, or, until any such holder
so furnishes an address to the Company, then to and at the address of the last
holder of such Shares who has so furnished an address to the Company, or (c) if
to the Company, one copy should be sent to its address set forth on the cover
page of this Agreement and addressed to the attention of the Corporate
Secretary, or at such other address as the Company shall have furnished to the
Purchasers.
Each such notice or other communication shall for all purposes
of this Agreement be treated as effective or having been given when delivered
if delivered personally, or, if sent by mail, at the earlier of its receipt or
72 hours after the same has been deposited in a regularly maintained receptacle
for the deposit of the United States mail, addressed and mailed as aforesaid.
10.6 DELAYS OR OMISSIONS. Except as expressly provided herein, no
delay or omission to exercise any right, power or remedy accruing to any holder
of any Shares, upon any breach or default of the Company under this Agreement,
shall impair any such right, power or remedy of such holder nor shall it be
construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any
other breach or default theretofore or thereafter occurring. Any waiver,
permit, consent or approval of any kind or character on the part of any holder
of any breach or default under this Agreement, or any waiver on the part of any
holder of any provisions or conditions of this agreement, must be in writing
and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement or by law or otherwise
afforded to any holder, shall be cumulative and not alternative.
10.7 CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE
SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF
SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION
THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE OF SECURITIES
IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100, 25102, OR 25105 OF THE
CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE
EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE
IS SO EXEMPT.
10.8 EXPENSES.
-16-
<PAGE> 21
(a) The Company and each Purchaser shall bear its own
legal and other expenses with respect to this Agreement.
(b) If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement (including any exhibit or
schedule hereto), the prevailing party shall be entitled to reasonable
attorney's fees, costs and necessary disbursements in addition to any other
relief to which such party may be entitled.
10.9 FINDER'S FEES. With respect to any finder's fees arising out
of the purchase of the Shares pursuant to this Agreement:
(a) The Company hereby agrees to indemnify and to hold
the Purchasers harmless of and from any liability for any commission or
compensation in the nature of a finder's fee to any broker or other person or
firm (and the costs and expenses of defending against such liability or
asserted liability) for which the Company or any of its employees or
representatives are responsible.
(b) Each Purchaser hereby agrees to indemnify and to hold
the Company harmless of and from any liability for any commission or
compensation in the nature of a finder's fee to any broker or other person or
firm (and the costs and expenses of defending against such liability or
asserted liability) for which such Purchaser or any of its employees or
representatives, are responsible.
10.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which may be executed by less than all of the Purchasers,
each of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
10.11 SEVERABILITY. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that no such severability shall be
effective if it materially changes the economic benefit of this Agreement to
any party.
10.12 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
-17-
<PAGE> 22
The foregoing agreement is hereby executed as of the date first above
written.
"COMPANY" "PURCHASERS"
SPECTRX, INC. HILLMAN MEDICAL VENTURES 1993
a Delaware corporation L.P., a Delaware limited
partnership
By: By: Hillman/Dover Limited
------------------------------------ Partnership, general partner
Title:
----------------------------------
By: Wilmington Securities, Inc., its
sole general partner
By:
--------------------------------
Title:
-----------------------------
NORO-MOSELEY PARTNERS II, L.P.,
a Georgia limited partnership
By: Moseley & Company, II,
general partner
By:
---------------------------------
Jack R. Kelly Jr.
Title: General Partner
-18-
<PAGE> 23
EXHIBIT A
SCHEDULE OF PURCHASERS
<PAGE> 24
EXHIBIT A
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
(1) (2) (3)
Number of Shares of Aggregate Purchase Price
Name and Address Series A Preferred of Series A Preferred
- --------------------------------------------- -------------------------- ----------------------------
<S> <C> <C>
Hillman Medical Ventures 1993 L.P. 1,000,000 $1,000,000.00
824 Market Street, Suite 900
Wilmington, DE 19801
Attn: Darlene Clarke
Noro-Moseley Partners II, L.P. 750,000 $ 750,000.00
4200 Northside Parkway, Bldg. 9
Atlanta, GA 30327
Attn: Jack Kelly
The Gavin Herbert, Jr. Successor Trust 100,000 $ 100,000.00
2525 Dupont Drive
P.O. Box 19534
Irvine, CA 92713-9534
Attn: Gavin Herbert
</TABLE>
<PAGE> 25
EXHIBIT B
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
<PAGE> 26
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, WILLIAM T. QUILLEN, SECRETARY OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF RESTATED
CERTIFICATE OF INCORPORATION OF "SPECTRX, INC." FILED IN THIS OFFICE ON THE
FIFTH DAY OF FEBRUARY, A.D. 1993, AT 10 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
* * * * * * * * * *
[SEAL OF THE SECRETARY OF STATE]
----------------------------------------
William T. Quillen, Secretary of State
AUTHENTICATION:*3776013
DATE: 02/05/1993
<PAGE> 27
RESTATED CERTIFICATE OF INCORPORATION
OF
SPECTRX, INC.
SpectRx, Inc., a Corporation organized and existing under the laws of
the State of Delaware (the "Corporation"), hereby certifies that:
1. The name of the Corporation is SpectRx, Inc. The Corporation was
originally incorporated under the same name, and the original Certificate of
Incorporation was filed with the Secretary of State of the State of Delaware on
October 27, 1992.
2. This Certificate restates and amends the provisions of the
Corporation's Certificate of Incorporation to read as set forth in Exhibit A
attached to this Certificate.
3. This restatement and amendment of the Corporation's Certificate of
Incorporation has been duly adopted by the Corporation's Board of Directors in
accordance with Sections 242 and 245 of the General Corporation Law of the
State of Delaware, and by the holders of each class of outstanding stock
entitled to vote thereon as a class by written consent given in accordance with
Section 228 of the General Corporation Law of the State of Delaware. Written
notice pursuant to Section 228 has been given to those stockholders of the
Corporation who have not consented in writing to this action.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Restatement of Certificate of Incorporation to be signed by Mark A. Samuels,
its President, and attested by Robert D. Brownell, its Assistant Secretary,
this 3 day of February, 1993.
SPECTRX, INC.
By: /s/ Mark A. Samuels
-------------------------------
Mark A. Samuels, President
ATTEST:
/s/ Robert D. Brownell
- -----------------------------
Robert D. Brownell,
Assistant Secretary
<PAGE> 28
EXHIBIT A
RESTATED CERTIFICATE OF INCORPORATION
OF
SPECTRX, INC.
I.
The name of this Corporation is SpectRx, Inc. (the "Corporation").
II.
The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle, Zip Code 19801. The name of its registered
agent at such address is The Corporation Trust Company.
III.
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
IV.
The Corporation is authorized to issue two classes of capital stock:
Preferred Stock, $0.001 par value per share, and Common Stock, $0.001 par value
per share. The total number of shares of Preferred Stock which the Corporation
shall have the authority to issue is 4,000,000 of which 2,000,000 shares shall
be designated Series A Preferred Stock ("Series A Preferred Stock") and
2,000,000 shares shall be designated Series A1 Preferred Stock ("Series A1
Preferred Stock"). The total number of shares of Common Stock which the
Corporation shall have the authority to issue is 10,000,000. The Series A
Preferred Stock and Series A1 Preferred Stock are herein collectively referred
to as the "Preferred Stock."
V.
The rights, preferences, privileges and restrictions granted to or
imposed upon the Common Stock and the Preferred Stock are as follows:
1. Dividends. The holders of Series A Preferred Stock and Series
A1 Preferred Stock shall be entitled, when and if declared by the board of
directors of the Corporation, to dividends out
<PAGE> 29
of assets of the Corporation legally available therefor at the rate of $0.10
and $0.10 per share, per annum, respectively. Dividends on the Preferred Stock
shall be payable in preference and prior to any payment of any dividend on the
Common Stock of the Corporation. Thereafter, the holders of Common Stock shall
be entitled, when and if declared by the board of directors of the Corporation,
to dividends out of assets of the Corporation legally available therefor.
Notwithstanding anything set forth in this paragraph 1, no dividends shall be
payable on any shares of Common Stock issued with respect to shares of Series
A1 Preferred Stock issued pursuant to paragraph 4(e)(ii). The right to
dividends on shares of Common Stock and Preferred Stock shall not be
cumulative, and no right shall accrue to holders of Common Stock or Preferred
Stock by reason of the fact that dividends on said shares are not declared in
any prior period.
2. Liquidation Preference.
(a) Preference. In the event of any liquidation,
dissolution or winding up of the Corporation, either voluntarily or
involuntarily, the holders of Series A Preferred Stock and Series A1 Preferred
Stock shall be entitled to receive, prior and in preference to any distribution
of any of the assets or surplus funds of the Corporation to the holders of
Common Stock of the Corporation, an amount equal to $1.00 and $1.00 per share,
respectively, plus any declared but unpaid dividends. If upon such
liquidation, dissolution or winding up of the Corporation, the assets of the
Corporation are insufficient to provide for the cash payment described above to
the holders of Preferred Stock, such assets as are available shall be paid to
the holders of Preferred Stock in proportion to the full preferential amount
each such holder is otherwise entitled to receive.
After the payment or setting apart of payment to the holders
of Preferred Stock of the preferential amounts so payable to them, the holders
of Common Stock shall be entitled to receive any remaining assets of the
Corporation on a pro rata basis, based upon the number of shares held.
(b) Reorganization or Merger. A reorganization or merger
of the Corporation with or into any other corporation or corporations, or a
sale of all or substantially all of the assets of the Corporation shall be
deemed to be a liquidation within the meaning of this paragraph 2; provided
that the holders of Preferred Stock and Common Stock shall be paid in cash or
in securities received or in a combination thereof (which combination shall be
in the same proportions as the consideration received in the transaction). Any
securities to be delivered to the holders of the Preferred Stock and Common
Stock upon a merger, reorganization or sale of substantially all of the assets
of the Corporation shall be valued as follows:
(i) If traded on a securities exchange, the value
shall be deemed to be the average of the closing prices of the securities on
such exchange over the 30-day period ending three (3) business days prior to
the closing;
(ii) If actively traded over-the-counter, the
value shall be deemed to be the average of the closing bid prices over the
30-day period ending three (3) business days prior to the closing; and
-2-
<PAGE> 30
(iii) If there is no active public market, the
value shall be the fair market value thereof, as mutually determined by the
Corporation and the holders of not less than a majority of the outstanding
shares of Preferred Stock, provided that if the Corporation and the holders of
a majority of the outstanding shares of Preferred Stock are unable to reach
agreement, then by independent appraisal by an investment banker hired and paid
by the Corporation, but acceptable to the holders of a majority of the
outstanding shares of Preferred Stock.
(c) Noncash Distributions. If any of the assets of the
Corporation are to be distributed other than in cash under this paragraph 2 or
for any purpose, then the board of directors of the Corporation shall promptly
engage independent competent appraisers to determine the value of the assets to
be distributed to the holders of Preferred Stock or Common Stock. The
Corporation shall, upon receipt of such appraiser's valuation, give prompt
written notice to each holder of shares of Preferred Stock or Common Stock of
the appraiser's valuation.
3. Voting Rights.
(a) The holder of each share of Preferred Stock shall be
entitled to the number of votes equal to the largest number of full shares of
Common Stock into which each share of Preferred Stock could be converted on the
record date for the vote or written consent of stockholders and, except as
otherwise required by law, shall have voting rights and powers equal to the
voting rights and powers of the Common Stock. The holder of each share of
Preferred Stock shall be entitled to notice of any stockholders' meeting in
accordance with the bylaws of the Corporation and shall vote with holders of
the Common Stock upon all other matters submitted to a vote of stockholders,
except those matters required to be submitted to a class or series vote
pursuant to paragraph 5 or by law. Fractional votes shall not, however, be
permitted and any fractional voting rights resulting from the above formula
(after aggregating all shares of Common Stock into which shares of Preferred
Stock held by each holder could be converted) shall be rounded to the nearest
whole number (with one-half rounded upward to one).
(b) Notwithstanding the foregoing, as long as more than
800,000 shares of Preferred Stock are outstanding, the holders of Preferred
Stock, voting as a class, shall have the right to elect two members of the
Corporation's board of directors. The holders of Common Stock, voting as a
single class, shall have the right to elect all other members of the
Corporation's board of directors. Notwithstanding any Bylaw provisions to the
contrary, the stockholders entitled to elect a particular director shall be
entitled to remove such director or to fill a vacancy in the seat formerly held
by such a director, all in accordance with the applicable provisions provided
in the General Corporation Law of the State of Delaware.
4. Conversion. The holders of the Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Preferred Stock
shall be convertible without the payment of any additional consideration by the
holder thereof and, at the option of the holder
-3-
<PAGE> 31
thereof, at any time after the date of issuance of such share at the office of
the Corporation or any transfer agent for the Preferred Stock. Each share of
each series of Preferred Stock shall be convertible into the number of fully
paid and nonassessable shares of Common Stock which results from dividing the
Conversion Price (as hereinafter defined) per share in effect for such series
of Preferred Stock at the time of conversion into the per share Conversion
Value (as hereinafter defined) of such series. Upon the filing of this
Restated Certificate of Incorporation with the Delaware Secretary of State, the
Conversion Price per share of Series A Preferred Stock shall be $1.00, and the
per share Conversion Value of Series A Preferred Stock shall be $1.00, and the
Conversion Price per share of Series A1 Preferred Stock shall be $1.00, and the
per share Conversion Value of Series A1 Preferred Stock shall be $1.00. The
Conversion Prices of Series A Preferred Stock and Series A1 Preferred Stock
shall be subject to adjustments from time to time as provided below. The
number of shares of Common Stock into which a share of a series of Preferred
Stock is convertible is hereinafter referred to as the "Conversion Rate" of
such series.
(b) Automatic Conversion. Each share of Preferred Stock
shall automatically be converted into shares of Common Stock at its then
effective Conversion Rate immediately upon the closing of a firm commitment
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offer and sale of
Common Stock of which the aggregate gross proceeds attributable to sales for
the account of the Corporation exceed $10,000,000 at a per share issuance price
of at least $5.00 per share.
(c) Mechanics of Conversion. Before any holder of
Preferred Stock shall be entitled to convert the same into shares of Common
Stock, such holder shall surrender the certificate(s) therefor, duly endorsed,
at the office of the Corporation or of any transfer agent for the Preferred
Stock and shall give written notice to the Corporation at such office that the
holder elects to convert the same (except that no such written notice of
election to convert shall be necessary in the event of an automatic conversion
pursuant to paragraph 4(b) hereof). The Corporation shall, as soon as
practicable thereafter, issue and deliver at such office to such holder of
Preferred Stock certificate(s) for the number of shares of Common Stock to
which the holder shall be entitled as aforesaid. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the shares of Preferred Stock to be converted (except that
in the case of an automatic conversion pursuant to paragraph 4(b) hereof such
conversion shall be deemed to have been made immediately prior to the closing
of the offering referred to in paragraph 4(b)) and the person(s) entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder(s) of such shares of Common Stock
on such date.
(d) Fractional Shares. In lieu of any fractional shares
to which the holder of Preferred Stock would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the fair market
value of one share of Common Stock as determined by the board of directors of
the Corporation. Whether or not fractional shares of Common Stock are issuable
upon such conversion shall be determined on the basis of the total number of
shares of Preferred Stock of
-4-
<PAGE> 32
each holder at the time converting into Common Stock and the number of shares
of Common Stock issuable upon such aggregate conversion.
(e) Adjustment of Conversion Price.
(i) Special Definitions. For purposes of this
paragraph 4(e), the following definitions shall apply:
(A) "Excluded Stock" shall mean:
(1) all shares of Common Stock
issued and outstanding on the date this document is filed with the Delaware
Secretary of State and all shares of Common Stock issued or issuable upon
conversion of Preferred Stock; and
(2) up to 500,000 shares of Common
Stock or other securities issued or issuable to officers, directors,
consultants or employees of the Corporation or lessors, lenders or licensors to
the Corporation which are approved by of the board of directors of the
Corporation. All outstanding shares of Excluded Stock (including shares of
Common Stock issuable upon conversion of the Preferred Stock) shall be deemed
to be outstanding for all purposes of the computations of subparagraph
4(e)(iii) below.
(B) "Financing" means any issuance of
Common Stock (including securities exercisable for or convertible into Common
Stock) in a transaction with gross proceeds to the Corporation equal to or
greater than $100,000 where the holders of Series A Preferred Stock are offered
an opportunity to purchase their Preferred Stock Pro Rata Share of the
additional shares of Common Stock (including securities exercisable for or
convertible into Common Stock) issued in such transaction.
(C) "Preferred Stock Pro Rata Share"
shall mean the amount determined by multiplying the total number of shares of
Common Stock (including securities exercisable for or convertible into Common
Stock) offered for sale by the Corporation in a Financing to all parties by a
fraction, (x) the numerator of which is the total number of shares of Common
Stock (including securities convertible into Common Stock) held by such
stockholder and (y) the denominator of which is the total number of shares of
Common Stock (including securities convertible into Common Stock) then
outstanding plus any shares reserved for issuance pursuant to plans approved by
the board of directors of the Corporation.
(D) "Series A Dilutive Issuance" shall
mean an issuance of Common Stock (including securities exercisable for or
convertible into Common Stock) in a Financing for a consideration per share
less than the Conversion Price of the Series A Preferred Stock in effect on the
date of and immediately prior to such issue.
-5-
<PAGE> 33
(E) "Participating Investor" shall mean
any holder of Series A Preferred Stock that purchases at least its Preferred
Stock Pro Rata Share of a Series A Dilutive Issuance.
(F) "Non-Participating Investor" shall
mean any holder of Series A Preferred Stock that is not a Participating
Investor.
(ii) Shadow Preferred. In the event the Corporation
issues additional shares of Common Stock (including securities exercisable for
or convertible into Common Stock) in a Series A Dilutive Issuance, each share
of Series A Preferred Stock held by each and every Nonparticipating Investor
shall, immediately prior to the closing of the applicable Series A Dilutive
Issuance (the "Closing"), be converted into one fully paid and nonassessable
share of Series A1 Preferred Stock plus such number of fully paid and
nonassessable shares of Common Stock as is determined by multiplying one by the
Forced Conversion Rate. The Forced Conversion Rate shall be equal to (X) minus
one, where (X) equals the per share Conversion Price of Series A Preferred
Stock immediately prior to the Closing divided into the per share Conversion
Value of Series A Preferred Stock. Upon the conversion of Series A Preferred
Stock held by a Nonparticipating Investor as set forth herein, such shares of
Series A Preferred Stock shall no longer be outstanding on the books of the
Corporation and the Nonparticipating Investor shall be treated for all purposes
as the record holder of such shares of Series A1 Preferred Stock and, if
applicable, Common Stock upon the Closing of the applicable Series A Dilutive
Issuance.
(iii) Adjustment of Conversion Price for Issuance of Common
Stock. No adjustment in the Conversion Price of Series A1 Preferred Stock
shall be made in respect of the issuance of additional shares of Common Stock
or securities exercisable for or convertible into Common Stock (other than in
the event of stock dividends, subdivisions, split-ups, combinations, dividends
or recapitalizations which are covered by paragraphs 4(e)(iv), (v) and (vi)).
The Conversion Price of Series A Preferred Stock
shall be subject to adjustment from time to time as follows:
If the Corporation shall issue any Common Stock other
than Excluded Stock for a consideration per share less than the Conversion
Price in effect immediately prior to the issuance of such Common Stock
(excluding stock dividends, subdivisions, split-ups, combinations, dividends or
recapitalizations which are covered by paragraphs 4(e)(iv), (v) and (vi)), the
Conversion Price in effect immediately after each such issuance shall forthwith
(except as provided in this paragraph 4(e)) be adjusted to a price equal to the
quotient obtained by dividing:
(1) an amount equal to the sum of
(x) the total number of shares of
Common Stock outstanding (including any shares of Common Stock issuable upon
conversion of the Preferred Stock,
-6-
<PAGE> 34
or deemed to have been issued pursuant to subdivision (C) of this clause (iii))
immediately prior to such issuance multiplied by the Conversion Price in effect
immediately prior to such issuance, plus
(y) the consideration received by the
Corporation upon such issuance, by
(2) the total number of shares of Common Stock
outstanding (including any shares of Common Stock issuable upon conversion of
the Preferred Stock or deemed to have been issued pursuant to subdivision (C)
of this clause (iii)) immediately after the issuance of such Common Stock.
For the purposes of this clause (iii), the following
provisions shall be applicable:
(A) 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 any discounts or commissions paid or incurred by the
Corporation in connection with the issuance and sale thereof.
(B) 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 value thereof as
determined by the board of directors of the Corporation, in accordance with
generally accepted accounting treatment; provided, however, that if, at the
time of such determination, the Corporation's Common Stock is traded in the
over-the- counter market or on a national or regional securities exchange, such
fair market value as determined by the board of directors of the Corporation
shall not exceed the aggregate "Current Market Price" (as defined below) of the
shares of Common Stock being issued.
(C) In the case of the issuance of (i)
options to purchase or rights to subscribe for Common Stock (other than
Excluded Stock), (ii) securities by their terms convertible into or
exchangeable for Common Stock (other than Excluded Stock), or (iii) options to
purchase or rights to subscribe for such convertible or exchangeable securities
(other than Excluded Stock):
(1) 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), if any, received by the Corporation 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;
-7-
<PAGE> 35
(2) 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 conversion or exchange 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
Corporation for any such securities and related options or rights (excluding
any cash received on account of accrued interest or accrued dividends), plus
the minimum additional consideration, if any, to be received by the Corporation
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);
(3) 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,
or on any change in the minimum purchase price of such options, rights or
securities, other than a change resulting from the antidilution provisions of
such options, rights or securities, the Conversion Price shall forthwith be
readjusted to such Conversion Price as would have obtained had the adjustment
made upon (x) the issuance of such options, rights or securities not exercised,
converted or exchanged prior to such change, as the case may be, been made upon
the basis of such change or (y) the options or rights related to such
securities not converted or exchanged prior to such change, as the case may be,
been made upon the basis of such change; and
(4) 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 Conversion Price shall forthwith be readjusted to
such Conversion Price as would have obtained had the adjustment made upon the
issuance of such options, rights, convertible or exchangeable securities or
options or rights related to such convertible or exchangeable securities, as
the case may be, been made upon the basis of the issuance of only the number of
shares of Common Stock actually issued upon the exercise of such options or
rights, upon the conversion or exchange of such convertible or exchangeable
securities or upon the exercise of the options or rights related to such
convertible or exchangeable securities, as the case may be.
(iv) If the number of shares of Common Stock outstanding
at any time after the date hereof 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, on the date such payment is made or such change is effective, the
Conversion Price of a series of Preferred Stock shall be appropriately
decreased so that the number of shares of Common Stock issuable on conversion
of any shares of such series of Preferred Stock shall be increased in
proportion to such increase of outstanding shares of Common Stock.
-8-
<PAGE> 36
(v) If the number of shares of Common Stock
outstanding at any time after the date hereof is decreased by a combination of
the outstanding shares of Common Stock, then, on the effective date of such
combination, the Conversion Price of a series of Preferred Stock shall be
appropriately increased so that the number of shares of Common Stock issuable
on conversion of any shares of a series of Preferred Stock shall be decreased
in proportion to such decrease in outstanding shares of Common Stock.
(vi) In case, at any time after the date hereof, of any
capital reorganization (other than a reorganization covered by paragraph 2(b)
above), or any reclassification of the stock of the Corporation (other than as
a result of a stock dividend or subdivision, split-up or combination of shares
of stock), the shares of a series of Preferred Stock shall, after such capital
reorganization or reclassification, be convertible into the kind and number of
shares of stock or other securities or property of the Corporation or otherwise
to which such holder would have been entitled if immediately prior to such
capital reorganization or reclassification he had converted his shares of such
series of Preferred Stock into Common Stock. The provisions of this clause
(vi) shall similarly apply to successive reorganizations, reclassifications,
consolidations, mergers, sales or other dispositions.
(vii) All calculations under this paragraph 4 shall be made
to the nearest cent or to the nearest one hundredth (1/100) of a share of
stock, as the case may be.
(viii) For the purpose of any computation pursuant to this
paragraph 4(e), the "Current Market Price" at any date of one share of Common
Stock, shall be deemed to be the average of the highest reported bid and the
lowest reported offer prices on the preceding business day as furnished by the
National Quotation Bureau, Incorporated (or equivalent recognized source of
quotations) or the closing sale price, if reported; provided, however, that if
the Common Stock is not traded in such manner that the quotations referred to
in this clause (viii) are available for the period required hereunder, Current
Market Price shall be determined in good faith by the board of directors of the
Corporation, but if challenged by the holders of more than 50% of the
outstanding shares of Preferred Stock, then as determined by an independent
appraiser selected by the board of directors of the Corporation, the cost of
such appraisal to be borne by the challenging parties.
(f) Minimal Adjustments. No adjustment in the Conversion
Price need be made if such adjustment would result in a change in the
Conversion Price of less than $0.01. Any adjustment of less than $0.01 which
is not made shall be carried forward and shall be made at the time of and
together with any subsequent adjustment which, on a cumulative basis, amounts
to an adjustment of $0.01 or more in the Conversion Price.
(g) No Impairment. The Corporation will not through any
reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Corporation, but will at all times in
good faith assist in the carrying out of all the provisions of this paragraph 4
and in the taking of all such action as may be
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<PAGE> 37
necessary or appropriate in order to protect the Conversion Rights of the
holders of Preferred Stock against impairment.
(h) Certificate as to Adjustments. Upon the occurrence
of each adjustment or readjustment of the Conversion Rate pursuant to this
paragraph 4, the Corporation at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare and
furnish to each holder of Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon written
request at any time of any holder of Preferred Stock, furnish or cause to be
furnished to such holder a like certificate setting forth (i) such adjustments
and readjustments, (ii) the Conversion Rate of such series of Preferred Stock
at the time in effect, and (iii) the number of shares of Common Stock and the
amount, if any, of other property which at the time would be received upon the
conversion of such holder's shares of Preferred Stock.
(i) Notices of Record Date. In the event of any taking
by the Corporation of a record of the holders of any class of securities for
the purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class
or any other securities or property or to receive any right, the Corporation
shall mail to each holder of Preferred Stock at least ten (10) days prior to
such record date, a notice specifying the date on which any such record is to
be taken for the purpose of such dividend or distribution or right, and the
amount and character of such dividend, distribution or right.
(j) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of Preferred Stock such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of Preferred Stock, the
Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares of stock as shall be sufficient for such
purpose.
(k) Notices. Any notice required by the provisions of
this paragraph 4 to be given to the holder of shares of Preferred Stock shall
be deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at such holder's address appearing on the
books of the Corporation.
(l) Reissuance of Converted Shares. No shares of
Preferred Stock which have been converted into Common Stock after the original
issuance thereof shall ever again be reissued and all such shares of Preferred
Stock so converted shall upon such conversion cease to be a part of the
authorized shares of stock of the Corporation.
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<PAGE> 38
5. Protective Provisions.
(a) Preferred Stock. In addition to any other class vote
that may be required by law, so long as any of the Preferred Stock shall be
outstanding the Corporation shall not without obtaining the approval (by vote
or written consent, as provided by law) of the holders of more than a majority
of the outstanding shares of Preferred Stock:
(i) Change of Rights. Materially and adversely
alter or change the rights, preferences or privileges of the Preferred Stock;
(ii) Create a New Class. Create, or obligate itself to
create, any new class or series of shares of stock having preferences over or
being on a parity with any outstanding shares of Preferred Stock as to
dividends, assets, liquidation preferences, conversion rights or voting rights
or being otherwise superior to or on a parity with any such preference or
priority of any outstanding shares of Preferred Stock, or authorize or issue
shares of stock of any class or series (or any bonds, debentures, notes or
other obligations convertible into or exchangeable for, or having option rights
to purchase, any shares of stock of this Corporation) having any such
preference or priority or being otherwise superior to or being on a parity with
any such preference or priority; or
(iii) merge or consolidate with any other Corporation or
sell, lease, or convey substantially all of the assets of the corporation or
otherwise effect a recapitalization or reorganization of the Corporation.
VI
1. Limitation of Directors' Liability. The liability of the
directors of this Corporation for monetary damages shall be eliminated to the
fullest extent permissible under the laws of the State of Delaware.
2. Indemnification of Corporate Agents. This Corporation is
authorized to indemnify the directors and officers of the Corporation to the
fullest extent permissible under the laws of the State of Delaware.
3. Repeal or Modification. Any repeal or modification of the
foregoing provisions of this Section VI shall not adversely affect any right of
indemnification or limitation of liability of an agent of this Corporation
relating to acts or omissions occurring prior to such repeal or modification.
VII
The Corporation is to have perpetual existence.
VIII
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<PAGE> 39
In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter, amend
or repeal the bylaws of the Corporation.
IX
The number of directors which will constitute the whole Board of
Directors of the Corporation shall be as specified in the bylaws of the
Corporation.
X
The election of directors need not be by written ballot unless the
bylaws of the Corporation shall so provide.
XI
Meeting of stockholders may be held within or without the State of
Delaware, as the bylaws may provide. The books of the Corporation may be kept
(subject to any provisions contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the bylaws of the Corporation.
XII
Advance notice of new business and stockholder nomination for the
election of directors shall be given in the manner and to the extent provided
in the bylaws of the Corporation.
XIII
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Restated Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
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<PAGE> 40
EXHIBIT C
EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES
<PAGE> 41
EXHIBIT C
SCHEDULE OF EXCEPTIONS
This Schedule of Exceptions, dated as February 5, 1993, is made and
given pursuant to Section 3 of the Spectrx, Inc. Series A Preferred Stock
Purchase Agreement dated February 5, 1993 (the "Agreement"). The Section
numbers in this Schedule of Exceptions correspond to the section numbers in the
Agreement; however, any information disclosed herein under any section number
shall be deemed to be disclosed and incorporated into any other section number
under this Agreement where such disclosure would be appropriate. Any terms
defined in the Agreement shall have the same meaning when used in this Schedule
of Exceptions as when used in the Agreement unless the context otherwise
requires.
3.1 Organization and Standing; Articles and By-Laws. The Company
is not yet qualified to do business as a foreign corporation in Georgia,
however the Company intends to take all steps necessary to obtain such
qualification in Georgia immediately after the Closing.
3.4 Capitalization. Of the 500,000 shares of the Company's Common
Stock reserved for isssuance pursuant to the 1993 Incentive Stock Plan, 400,000
of such shares shall be issued to Mark Samuels and Keith Ignotz as set forth in
Section 7.3 of this Agreement.
3.7 Agreements; Action. The Company has the following outstanding
liabilities:
- Liability of approximately $100,000 to Laser Atlanta Optics,
Inc. pursuant to a promissory note issued to purchase
technology and attached as Exhibit F to this Agreement
- Liability of $8,750 to George Newport for consulting work
- Liability of $50,000 to Keith Ignotz for expense and back
salary to be paid in two installments. One installment is for
$20,000 payable on April 1, 1993 and the second installment
for $30,000 is payable on April 1, 1994
- Liability of approximately $17,000 to Wilson, Sonsini,
Goodrich & Rosati for legal costs and expenses associated with
the formation of the Company and the Series A Preferred Stock
Financing
<PAGE> 42
- Liability of $2,500 to Lawrence Madison Communications for
graphic design work
3.16 Patents and Trademarks
The Company purchased all of the technology and other intellectual
property, relating to non-invasive means of diagnosing disease through the use
of fluorescence spectroscopy, of Laser Atlanta Optics, Inc. pursuant to the
agreements attached as Exhibit F to this Agreement.
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<PAGE> 43
EXHIBIT D
PROPRIETARY INFORMATION AGREEMENT
<PAGE> 44
SPECTRX, INC.
EMPLOYEE PROPRIETARY INFORMATION AGREEMENT
As a condition of my employment with Spectrx, Inc., its subsidiaries,
affiliates, successors or assigns (together the "Company"), and in
consideration of my employment with the Company and my receipt of the
compensation now and hereafter paid to me by Company, I agree to the following:
1. At-Will Employment. I understand and acknowledge that my employment with
the Company is for an unspecified duration and constitutes "at-will"
employment. I acknowledge that this employment relationship may be terminated
at any time, with or without good cause or for any or no cause, at the option
either of the Company or myself, with or without notice.
2. Confidential Information.
(a) Company Information. I agree at all times during the term of my
employment and thereafter, to hold in strictest confidence, and not to use,
except for the benefit of the Company, or to disclose to any person, firm or
corporation without written authorization of the Board of Directors of the
Company, any Confidential Information of the Company. I understand that
"Confidential Information" means any Company proprietary information, technical
data, trade secrets or know-how, including, but not limited to, research,
product plans, products, services, customer lists and customers (including, but
not limited to, customers of the Company on whom I called or with whom I became
acquainted during the term of my employment), markets, software, developments,
inventions, processes, formulas, technology, designs, drawings, engineering,
hardware configuration information, marketing, finances or other business
information disclosed to me by the Company either directly or indirectly, in
writing, orally, by drawings, or by observation of parts or equipment. I
further understand that Confidential Information does not include any of the
foregoing items which has become publicly known and made generally available
through no wrongful act of mine or of others who were under confidentiality
obligations as to the item or items involved.
(b) Former Employer Information. I agree that I will not, during my
employment with the Company, improperly use or disclose any proprietary
information or trade secrets of any former or concurrent employer or other
person or entity and that I will not bring onto the premises of the Company any
unpublished document or proprietary information belonging to any such employer,
person or entity unless consented to in writing by such employer, person or
entity.
(c) Third Party Information. I recognize that the Company has received
and in the future will receive from third parties their confidential or
proprietary information subject to a duty on the Company's part to maintain the
confidentiality of such information and to use it only for certain limited
purposes. I agree to hold all such confidential or proprietary information in
the strictest confidence and not to disclose it to any person, firm or
corporation or to use it except as necessary in carrying out my work for the
Company consistent with the Company's agreement with such third party.
3. Inventions.
(a) Inventions Retained and Licensed. I have attached hereto, as Exhibit
A, a list describing all inventions, original works of authorship,
developments, improvements, and trade secrets which were made by me prior to my
employment with the Company, which belong to me, which relate to the Company's
proposed business, products or research and development, and which are not
assigned to the Company hereunder (collectively referred to as "Prior
Inventions"); or, if no such list is attached, I represent that there are no
such Prior Inventions. If in the course of my employment with the Company, I
incorporate into any invention, improvement, development, product,
copyrightable material or trade secret any invention, improvement, development,
concept, discovery or other proprietary information owned by me or in which I
have an interest, the Company is hereby granted and shall have a nonexclusive,
royalty-free, irrevocable, perpetual, worldwide license to make, have made,
modify, use and sell such item as part of or in connection with such product,
process or machine.
(b) Assignment of Inventions. I agree that I will promptly make full
written disclosure to the Company, will hold in trust for the sole right and
benefit of the Company, and hereby assign to the Company, or its designee, all
my right, title, and interest in and to any and all inventions, original works
of authorship, developments, concepts, improvements or trade secrets,
<PAGE> 45
whether or not patentable or registrable under copyright or similar
laws, which I may solely or jointly conceive or develop or reduce to practice,
or cause to be conceived or developed or reduced to practice, during the period
of time I am in the employ of the Company (collectively referred to as
"Inventions"), except as provided in Section 3(f) below. I further acknowledge
that all original works of authorship which are made by me (solely or jointly
with others) within the scope of and during the period of my employment with
the Company and which are protectible by copyright are "works made for hire,"
as that term is defined in the United States Copyright Act.
(c) Inventions Assigned to the United States. I agree to assign to the
United States government all my right, title, and interest in and to any and
all Inventions whenever such full title is required to be in the United States
by a contract between the Company and the United States or any of its agencies.
(d) Maintenance of Records. I agree to keep and maintain adequate and
current written records of all Inventions made by me (solely or jointly with
others) during the term of my employment with the Company. The records will be
in the form of notes, sketches, drawings, and any other format that may be
specified by the Company. The records will be available to and remain the sole
property of the Company at all times.
(e) Patent and Copyright Registrations. I agree to assist the Company,
or its designee, at the Company's expense, in every proper way to secure the
Company's rights in the Inventions and any copyrights, patents, mask work
rights or other intellectual property rights relating thereto in any and all
countries, including the disclosure to the Company of all pertinent information
and data with respect thereto, the execution of all applications,
specifications, oaths, assignments and all other instruments which the Company
shall deem necessary in order to apply for and obtain such rights and in order
to assign and convey to the Company, its successors, assigns and nominees the
sole and exclusive rights, title and interest in and to such Inventions, and
any copyrights, patents, mask work rights or other intellectual property rights
relating thereto. I further agree that my obligation to execute or cause to be
executed, when it is in my power to do so, any such instrument or papers shall
continue after the termination of this Agreement. If the Company is unable
because of my mental or physical incapacity or for any other reason to secure
my signature to apply for or to pursue any application for any United States or
foreign patents or copyright registrations covering Inventions or original
works of authorship assigned to the Company as above, then I hereby irrevocably
designate and appoint the Company and its duly authorized officers and agents
as my agent and attorney in fact, to act for and in my behalf and stead to
execute and file any such applications and to do all other lawfully permitted
acts to further the prosecution and issuance of letters patent or copyright
registrations thereon with the same legal force and effect as if executed by
me.
(f) Exception to Assignments. I understand that the provisions of this
Agreement requiring assignment of Inventions to the Company do not apply to any
invention which qualifies under the provisions of Exhibit B attached hereto. I
will advise the Company promptly in writing of any inventions that I believe
meet the criteria of Exhibit B.
4. Conflicting Employment. I agree that, during the term of my employment
with the Company, I will not engage in any other employment, occupation,
consulting or other business activity directly related to the business in which
the Company is now involved or becomes involved during the term of my
employment, nor will I engage in any other activities that conflict with my
obligations to the Company.
5. Returning Company Documents. I agree that, at the time of leaving the
employ of the Company, I will deliver to the Company (and will not keep in my
possession, recreate or deliver to anyone else) any and all devices, records,
data, notes, reports, proposals, lists, correspondence, specifications,
drawings, blueprints, sketches, materials, equipment, other documents or
property, or reproductions of any aforementioned items developed by me pursuant
to my employment with the Company or otherwise belonging to the Company, its
successors or assigns. In the event of the termination of my employment, I
agree to sign and deliver the "Termination Certification" attached hereto as
Exhibit C.
6. Notification to New Employer. In the event that I leave the employ of the
Company, I hereby grant consent to notification by the Company to my new
employer about my rights and obligations under this Agreement.
7. Solicitation of Employees. I agree that for a period of twelve (12)
months immediately following the termination of my relationship with the
Company for any reason, whether with or without cause, I shall not either
directly or indirectly solicit,
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<PAGE> 46
induce, recruit or encourage any of the Company's employees to leave their
employment, or take away such employees, or attempt to solicit, induce,
recruit, encourage or take away employees of the Company, either for myself or
for any other person or entity.
8. Representations. I agree to execute any proper oath or verify any proper
document required to carry out the terms of this Agreement. I represent that my
performance of all the terms of this Agreement will not breach any agreement to
keep in confidence proprietary information acquired by me in confidence or in
trust prior to my employment by the Company. I have not entered into, and I
agree I will not enter into, any oral or written agreement in conflict
herewith.
9. Arbitration and Equitable Relief.
(a) Arbitration. Except as provided in Section 9(b) below, I agree that
any dispute or controversy arising out of or relating to any interpretation,
construction, performance or breach of this Agreement, shall be settled by
arbitration to be held in Norcross, Georgia in accordance with the rules then
in effect of the American Arbitration Association. The arbitrator may grant
injunctions or other relief in such dispute or controversy. The decision of the
arbitrator shall be final, conclusive and binding on the parties to the
arbitration. Judgement may be entered on the arbitrator's decision in any court
having jurisdiction. The Company and I shall each pay one-half of the costs and
expenses of such arbitration, and each of us shall separately pay our counsel
fees and expenses.
(b) Equitable Remedies. I agree that it would be impossible or
inadequate to measure and calculate the Company's damages from any breach of
the covenants set forth in Sections 2, 3, and 5 herein. Accordingly, I agree
that if I breach any of such Sections, the Company will have available, in
addition to any other right or remedy available, the right to obtain an
injunction from a court of competent jurisdiction restraining such breach or
threatened breach and to specific performance of any such provision of this
Agreement. I further agree that no bond or other security shall be required in
obtaining such equitable relief and I hereby consent to the issuance of such
injunction and to the ordering of specific performance.
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<PAGE> 47
10. General Provisions
(a) Governing Law; Consent to Personal Jurisdiction. This Agreement will
be governed by the laws of the State of Georgia. I hereby expressly consent to
the personal jurisdiction of the state and federal courts located in Georgia
for any lawsuit filed there against me by the Company arising from or relating
to this Agreement.
(b) Entire Agreement. This Agreement sets forth the entire agreement and
understanding between the Company and me relating to the subject matter herein
and merges all prior discussions between us. No modification of or amendment to
this Agreement, nor any waiver of any rights under this agreement, will be
effective unless in writing signed by the party to be charged. Any subsequent
change or changes in my duties, salary or compensation will not affect the
validity or scope of this Agreement.
(c) Severability. If one or more of the provisions in this Agreement are
deemed void by law, then the remaining provisions will continue in full force
and effect.
(d) Successors and Assigns. This Agreement may not be assigned without
the prior written consent of the Company. Subject to the foregoing sentence,
this Agreement will be binding upon my heirs, executors, administrators and
other legal representatives and will be for the benefit of the Company, its
successors, and its assigns.
Date:
------------------
---------------------------
(Name)
- ---------------------
Witness
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<PAGE> 48
EXHIBIT A
LIST OF PRIOR INVENTIONS
AND ORIGINAL WORKS OF AUTHORSHIP
Identifying
Number of
Title Date Brief Description
--------- --------- -----------------
__ No inventions or improvements
__ Additional Sheets Attached
Signature of Employee: ___________________________
(Name)
Date:
---------------------------
<PAGE> 49
EXHIBIT B
EXCEPTION TO ASSIGNMENTS
The assignment provisions shall not apply to an invention that the employee
developed entirely on his or her own time without using the employer's
equipment, supplies, facilities, or trade secret information except for those
inventions that either:
(1) Relate at the time of conception or reduction to practice of the
invention to the employer's business, or actual or demonstrably anticipated
research or development of the employer.
(2) Result from any work performed by the employee for the employer.
<PAGE> 50
EXHIBIT C
SPECTRX, INC.
TERMINATION CERTIFICATION
This is to certify that I do not have in my possession, nor have I failed to
return, any devices, records, data, notes, reports, proposals, lists,
correspondence, specifications, drawings, blueprints, sketches, materials,
equipment, other documents or property, or reproductions of any aforementioned
items belonging to Spectrx, Inc., its subsidiaries, affiliates, successors or
assigns (together, the "Company").
I further certify that I have complied with all the terms of the Company's
Employee Proprietary Information Agreement signed by me, including the
reporting of any inventions and original works of authorship (as defined
therein), conceived or made by me (solely or jointly with others) covered by
that agreement.
I further agree that, in compliance with the Employee Proprietary
Information Agreement, I will preserve as confidential all trade secrets,
confidential knowledge, data or other proprietary information relating to
products, processes, know-how, designs, formulas, developmental or experimental
work, computer programs, data bases, other original works of authorship,
customer lists, business plans, financial information or other subject matter
pertaining to any business of the Company or any of its employees, clients,
consultants or licensees.
I further agree that for twelve (12) months from this date, I will not hire
any employees of the Company and I will not solicit, induce, recruit or
encourage any of the Company's employees to leave their employment.
Date:
---------------
------------------------------
(Name)
<PAGE> 51
EXHIBIT E
REGISTRATION RIGHTS AGREEMENT
<PAGE> 52
SPECTRX, INC.
REGISTRATION RIGHTS AGREEMENT
This Agreement is made as of February 5, 1993 among SpectRx, Inc., a
Delaware corporation (the "Company") and the persons and entities listed as
Investors in the signature section at the end of this Agreement.
1. Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"Stock Purchase Agreement" shall mean the Series A Preferred Stock
Purchase Agreement dated of even date herewith (the "Stock Purchase
Agreement").
"Shares" shall mean the Series A Preferred Stock sold pursuant to the
Stock Purchase Agreement.
"Purchasers" shall mean the persons and entities purchasing Shares
pursuant to the Stock Purchase Agreement.
"Restricted Securities" shall mean the securities of the Company
required to bear the legends set forth in the Stock Purchase Agreement.
"Act" shall mean the Securities Act of 1933, as amended.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Act.
"Register," "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Act, and the declaration or ordering of the effectiveness
of such registration statement.
"Registrable Securities" shall mean (i) the Common Stock issued or
issuable upon conversion of the Shares (the "Conversion Stock") and (ii) any
Common Stock or other securities issued or issuable with respect to the Shares
upon any stock split, stock dividend, recapitalization, or similar event, or
any Common Stock otherwise issued or issuable with respect to the Shares,
provided, however, that shares of Common Stock or other securities shall only
be treated as Registrable Securities if and so long as they have not been sold
to or through a broker or dealer or underwriter in a public distribution or a
public securities transaction.
<PAGE> 53
"Holder" shall mean any Purchaser holding Registrable Securities
(including Shares) and any person holding Registrable Securities to whom the
rights under this Agreement have been transferred in accordance with paragraph
10 hereof.
"Initiating Holders" shall mean any Holders who in the aggregate
possess more than 50% of the Registrable Securities.
"Registration Expenses" shall mean all expenses, except Selling
Expenses as otherwise stated below, incurred by the Company in complying with
paragraphs 2, 3 and 4 hereof, including, without limitation, all registration,
qualification and filing fees, printing expenses, escrow fees, fees and
disbursements of counsel for the Company, blue sky fees and expenses, 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, selling
commissions, stock transfer taxes applicable to the securities registered by
the Holders, and any fees and expenses of special counsel of a selling
shareholder.
2. Requested Registration.
(a) Request for Registration. In case the Company shall receive from
Initiating Holders a written request that the Company effect any registration,
qualification or compliance with respect to at least 80% of the shares of
Registrable Securities held by them (or any lesser number of shares of
Registrable Securities having an expected aggregate offering price, net of
underwriting discounts and commissions, greater than $7,500,000), the Company
will:
(i) promptly give written notice of the proposed registration,
qualification or compliance to all other Holders; and
(ii) as soon as practicable, use its best efforts to effect such
registration, qualification or compliance (including, without limitation,
appropriate qualification under applicable blue sky or other state securities
laws and appropriate compliance with applicable regulations issued under the
Act and any other governmental requirements or regulations) as may be so
requested and as would permit or facilitate the sale and distribution of all or
such portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any Holder
or Holders joining in such request as are specified in a written request
received by the Company within 20 days after receipt of such written notice
from the Company.
Provided, however, that the Company shall not be obligated to take
any action to effect any such registration, qualification or compliance
pursuant to this paragraph 2:
(1) In any particular jurisdiction in which the Company
would be required to execute a general consent to service of process in
effecting such registration, qualification or
<PAGE> 54
compliance unless the Company is already subject to service in such
jurisdiction and except as may be required by the Act;
(2) Prior to the earlier of (i) November 1, 1994 or (ii)
six months after the effective date of the Company's first registered public
offering of its stock;
(3) During the period starting with the date sixty (60)
days prior to the Company's estimated date of filing of, and ending on the date
three (3) months immediately following the effective date of, any registration
statement pertaining to securities of the Company (other than a registration of
securities in a Rule 145 transaction or with respect to an employee benefit
plan), provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective;
(4) After the Company has effected two such registrations
pursuant to this paragraph 2(a), and such registrations have been declared or
ordered effective; or
(5) If the Company shall furnish to such Holders a
certificate signed by the President of the Company that in the good faith
judgment of the Board of Directors it would be seriously detrimental to the
Company or its shareholders for a registration statement to be filed at such
time, then the Company's obligation to use its best efforts to register,
qualify or comply under this paragraph 2 shall be deferred for a period not to
exceed 90 days from the date of receipt of written request from the Initiating
Holders, provided, however, that the Company may not make such certification
more than once every calendar year.
Subject to the foregoing clauses (1) through (5), the Company shall
file a registration statement covering the Registrable Securities so requested
to be registered as soon as practicable, after receipt of the request or
requests of the Initiating Holders and in any event within one hundred eighty
(180) days after receipt of such request.
(b) Underwriting. In the event that a registration pursuant to this
paragraph 2 is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as part of the notice given pursuant to
paragraph 2(a)(i). In such event, the right of any Holder to such registration
shall be conditioned upon such Holder's participation in the underwriting
arrangements required by this paragraph 2, and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent requested shall be
limited to the extent provided herein.
The Company shall (together with all Holders proposing to distribute
their securities through such underwriting) enter into an underwriting
agreement in customary form with the managing underwriter selected for such
underwriting by a majority in interest of the Initiating Holders, but subject
to the Company's reasonable approval. Notwithstanding any other provision of
this paragraph 2, if the managing underwriter advises the Initiating Holders in
writing that marketing factors require a limitation of the number of shares to
be underwritten, then the Company shall so advise all holders of Registrable
Securities and the number of shares of Registrable Securities that may be
included in the registration and
<PAGE> 55
underwriting shall be allocated among all Holders thereof (except those Holders
who have indicated to the Company their decision not to distribute any of their
Registrable Securities through such underwriting) in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held by such
Holders at the time of filing the registration statement, provided, however,
that the number of shares of Registrable Securities to be included in such
underwriting shall not be reduced unless all other securities are first
entirely excluded from the underwriting. No Registrable Securities excluded
from the underwriting by reason of the underwriter's marketing limitation shall
be included in such registration. To facilitate the allocation of shares in
accordance with the above provisions, the Company or the underwriters may round
the number of shares allocated to any Holder to the nearest 100 shares.
If any Holder of Registrable Securities disapproves of the terms of
the underwriting, such person may elect to withdraw therefrom by written notice
to the Company, the managing underwriter and the Initiating Holders. The
Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration, and such Registrable Securities shall not be
transferred in a public distribution prior to 90 days after the effective date
of such registration, or such other shorter period of time as the underwriters
may require.
3. Company Registration.
(a) Notice of Registration. If at any time or from time to time the
Company shall determine to register any of its securities, either for its own
account or the account of a security holder or holders, other than (i) in
connection with the Company's initial public offering, (ii) a registration
relating solely to employee benefit plans, or (iii) a registration relating
solely to a Commission Rule 145 transaction, the Company will:
(i) promptly give to each Holder written notice thereof; 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 within 20 days after receipt of such written notice from the
Company, by any Holder.
(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 a part of the written notice given
pursuant to paragraph 3(a)(i). In such event the right of any Holder to
registration pursuant to this paragraph 3 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of 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 and the other holders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the managing underwriter selected for such underwriting by the
Company.
<PAGE> 56
Notwithstanding any other provision of this paragraph 3, if the
managing underwriter determines that marketing factors require a limitation of
the number of shares to be underwritten, the managing underwriter may limit the
Registrable Securities or other securities to be included in such registration
or exclude them entirely. The Company shall so advise all Holders and other
holders distributing their securities through such underwriting and the number
of shares of Registrable Securities and other securities that may be included
in the registration and underwriting shall be allocated among the holders
thereof in proportion, as nearly as practicable, to the respective amounts of
Registrable Securities and other securities held by such holders at the time of
filing the registration statement. To facilitate the allocation of shares in
accordance with the above provisions, the Company may round the number of
shares allocated to any Holder or holder to the nearest 100 shares.
If any Holder or holder disapproves of the terms of any such
underwriting, he may elect to withdraw therefrom by written notice to the
Company and the managing underwriter. Any securities excluded or withdrawn from
such underwriting shall be withdrawn from such registration, and shall not be
transferred in a public distribution prior to 90 days after the effective date
of the registration statement relating thereto, or such other shorter period of
time as the underwriters may require.
(c) Right to Terminate Registration. The Company shall have the right
to terminate or withdraw any registration initiated by it under this paragraph
3 prior to the effectiveness of such registration whether or not any Holder has
elected to include securities in such registration.
4. Registration on Form S-3.
(a) If any Holder or Holders request that the Company file a
registration statement on Form S-3 (or any successor form to Form S-3) for a
public offering of shares of the Registrable Securities the reasonably
anticipated aggregate price to the public of which, net of underwriting
discounts and commissions, would exceed $500,000, and the Company is a
registrant entitled to use Form S-3 to register the Registrable Securities for
such an offering, the Company shall use its best efforts to cause such
Registrable Securities to be registered for the offering on such form and to
cause such Registrable Securities to be qualified in such jurisdictions as the
Holder or Holders may reasonably request; provided, however, that the Company
shall not be required to effect more than one registration pursuant to this
paragraph 4 in any calendar year. The substantive provisions of paragraph 3(b)
shall be applicable to each registration under this paragraph 4.
(b) Notwithstanding the foregoing, the Company shall not be obligated
to take any action pursuant to this paragraph 4: (i) in any particular
jurisdiction in which the Company would be required to execute a general
consent to service of process in effecting such registration, qualification or
compliance unless the Company is already subject to service in such
jurisdiction and except as may be required by the Act; (ii) if the Company,
within ten (10) days of the receipt of the request of the initiating Holders,
gives notice of its bona fide intention to effect the filing of a registration
statement with the Commission within ninety (90) days of receipt of such
request (other than with respect to a registration statement relating to a Rule
145 transaction, an offering solely to employees or any other registration
which is not appropriate for the registration of Registrable Securities); (iii)
during the period starting with
<PAGE> 57
the date sixty (60) days prior to the Company's estimated date of filing of,
and ending on the date six (6) months immediately following, the effective date
of any registration statement pertaining to securities of the Company (other
than a registration of securities in a Rule 145 transaction or with respect to
an employee benefit plan), provided that the Company is actively employing in
good faith all reasonable efforts to cause such registration statement to
become effective; or (iv) if the Company shall furnish to such Holder a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company or its shareholders for registration statements to be filed at such
time, then the Company's obligation to use its best efforts to file a
registration statement shall be deferred for a period not to exceed 90 days
from the receipt of the request to file such registration by such Holder
provided that the Company may not make such certification more than once every
calendar year.
5. Expenses of Registration. All Registration Expenses (exclusive of
underwriting discounts and commissions or fees of special counsel for a selling
Holder) incurred in connection with (i) two registrations pursuant to paragraph
2 and (ii) all registrations pursuant to paragraphs 3 and 4 shall be borne by
the Company.
6. Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Agreement,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will:
(a) Prepare and file with the Commission a registration statement
with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for at least one hundred
and twenty (120) days or until the distribution described in the Registration
Statement has been completed;
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
1933 Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
<PAGE> 58
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(g) Furnish, at the request of any Holder requesting registration of
Registrable Securities pursuant to this Agreement, on the date that such
Registrable Securities are delivered to the underwriters for sale in connection
with a registration pursuant to this Agreement, (i) an opinion, dated such
date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities and (ii) a letter
dated such date, from the independent accountants of the Company, in form and
substance as is customarily given by independent accountants to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities.
7. Indemnification.
(a) The Company will indemnify each Holder, each of its officers and
directors and partners, and each person controlling such Holder within the
meaning of Section 15 of the Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Agreement, and
each underwriter, if any, and each person who controls any underwriter within
the meaning of Section 15 of the Act, against all expenses, claims, losses,
damages or liabilities (or actions in respect thereof), including any of the
foregoing incurred in settlement of any litigation, commenced or threatened,
arising out of or based on any untrue statement (or alleged untrue statement)
of a material fact contained in any registration statement, prospectus,
offering circular or other document, or any amendment or supplement thereto,
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, in light of the
circumstances in which they were made, not misleading, or any violation by the
Company of any federal, state or common law rule or regulation applicable to
the Company in connection with any such registration, qualification or
compliance, and the Company will reimburse each such Holder, each of its
officers and directors, and each person controlling such Holder, each such
underwriter and each person who controls any such underwriter, for any legal
and any other expenses reasonably incurred in connection with investigating,
preparing or defending any such claim, loss, damage, liability or action,
provided that the Company will not be liable in any such case to the extent
that any such claim, loss, damage, liability or expense arises out of or is
based on any untrue statement or omission or alleged untrue statement or
omission, made in reliance upon and in conformity with written
<PAGE> 59
information furnished to the Company by an instrument duly executed by such
Holder, controlling person or underwriter and stated to be specifically for use
therein.
(b) Each Holder will, if Registrable Securities held by such Holder
are included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers, each underwriter, if any, of the Company's securities covered by such
a registration statement, each person who controls the Company or such
underwriter within the meaning of Section 15 of the Act, and each other such
Holder, each of its officers and directors and each person controlling such
Holder within the meaning of Section 15 of the Act, 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, such Holders, such
directors, officers, persons, 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 in
reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by such Holder and stated to be
specifically for use therein. Notwithstanding the foregoing, the liability of
each Holder under this subsection (b) shall be limited in an amount equal to
the public offering price of the shares sold by such Holder, unless such
liability arises out of or is based on willful conduct by such Holder.
(c) Each party entitled to indemnification under this paragraph 7
(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 litigation,
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, provided, however, that the Indemnifying Party
shall bear the expense of independent counsel for the Indemnified Party if the
Indemnified Party reasonably determines that representation of both parties by
the same counsel would be inappropriate due to actual or potential conflicts of
interest, 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 Agreement unless the failure to give such notice is
materially prejudicial to an Indemnifying Party's ability to defend such action
and provided further, that the Indemnifying Party shall not assume the defense
for matters as to which there is a conflict of interest or separate and
different defenses. 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.
<PAGE> 60
8. Information by Holder. The Holder or Holders of Registrable Securities
included in any registration shall furnish to the Company such information
regarding such Holder or Holders, the Registrable Securities held by them and
the distribution proposed by such Holder or Holders as the Company may request
in writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Agreement.
9. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit
the sale of the Restricted Securities to the public without registration, after
such time as a public market exists for the Common Stock of the Company, the
Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Act, at all times after the
effective date that the Company becomes subject to the reporting requirements
of the Act or the Securities Exchange Act of 1934, as amended.
(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 Act
and the Securities Exchange Act of 1934, as amended (at any time after it has
become subject to such reporting requirements);
(c) So long as a Purchaser owns any Restricted Securities to furnish
to the Purchaser forthwith upon request a written statement by the Company as
to its compliance with the reporting requirements of said Rule 144 (at any time
after 90 days after the effective date of the first registration statement
filed by the Company for an offering of its securities to the general public),
and of the Act and the Securities Exchange Act of 1934 (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
of the Company and other information in the possession of or reasonably
obtainable by the Company as a Purchaser may reasonably request in availing
itself of any rule or regulation of the Commission allowing a Purchaser to sell
any such securities without registration.
10. Transfer of Registration Rights. The rights to cause the Company to
register securities granted Purchasers under paragraphs 2, 3 and 4 may be
assigned to a transferee or assignee in connection with any transfer or
assignment of Registrable Securities by a Purchaser provided that: (i) such
transfer may otherwise be effected in accordance with applicable securities
laws, and (ii) such assignee or transferee acquires at least 400,000 Shares
and/or the Conversion Stock into which the Shares are convertible.
Notwithstanding the foregoing, the rights to cause the Company to register
securities may be assigned, in connection with a distribution by such
Purchaser, to any parent or subsidiary company or to any partner, former
partner, or the estate of any such partner without compliance with item (ii)
above, provided written notice thereof is promptly given to the Company.
11. Standoff Agreement. Each Holder agrees, in connection with the
Company's initial public offering of the Company's securities that, upon
request of the Company or the underwriters managing any underwritten offering
of the Company's securities, not to sell, make any short sale of, loan, grant
any option for the purchase of, or otherwise dispose of any Common Stock of the
Company (other than those
<PAGE> 61
included in the registration) without the prior written consent of the Company
or such underwriters, as the case may be, for such period of time (not to
exceed one hundred eighty (180) days) from the effective date of such
registration as may be requested by the underwriters, provided that the
officers and directors of the Company enter into similar agreements.
12. Termination of Registration Rights. All rights of the Holders under
this Agreement shall terminate four (4) years from the date of the Company's
initial public offering.
13. Amendment of Registration Rights. Any provision of the Agreement may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the holders of a majority of the Registrable
Securities then outstanding. Any amendment or waiver effected in accordance
with this paragraph shall be binding upon each holder of any Registrable
Securities then outstanding, each future holder of all such Registrable
Securities, and the Company.
14. Limitations on Subsequent Registration Rights. From and after the date
of this Agreement, the Company shall not, without the prior written consent of
the Holders of a majority of the outstanding Registrable Securities, enter into
any agreement with any holder or prospective holder of any securities of the
Company which would allow such holder or prospective holder (a) to include such
securities in any registration filed under Section 2 hereof, unless under the
terms of such agreement, such holder or prospective holder may include such
securities in any such registration only to the extent that the inclusion of
his securities will not reduce the amount of the Registrable Securities of the
Holders which is included or (b) to make a demand registration which could
result in such registration statement being declared effective prior to the
earlier of either of the dates set forth in subsection 2.a.ii(2) or within one
hundred twenty (120) days of the effective date of any registration effected
pursuant to Section 2.
15. Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement among the parties with regard to the subject matter
hereof. Nothing in this Agreement, express or implied, is intended to confer
upon any person or entity, other than the parties hereto and their respective
successors and assigns, any rights, remedies, obligations, or liabilities under
or by reason of this Agreement, except as expressly provided herein.
16. Governing Law. This Agreement shall be governed in all respects by the
laws of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within
California.
17. Successors and Assigns. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
18. Notices, etc. All notices and other communications required or
permitted hereunder shall be effective upon receipt and shall be in writing and
may be delivered in person, by telecopy, electronic mail, overnight delivery
service or U.S. mail, in which event it may be mailed by first-class, certified
or
<PAGE> 62
registered, postage prepaid, addressed (a) if to a Holder, at such Holder's
address set forth at the end of this Agreement, or at such other address as
such Holder shall have furnished the Company in writing, or, until any such
holder so furnishes an address to the Company, then to and at the address of
the last holder of such shares who has so furnished an address to the Company,
or (b) if to the Company, at its address set forth at the end of this
Agreement, or at such other address as the Company shall have furnished to the
Holders and each such other holder in writing.
19. Severability. Any invalidity, illegality or limitation on the
enforceability of the Agreement or any part thereof, by any Holder whether
arising by reason of the law of the respective Holder's domicile or otherwise,
shall in no way affect or impair the validity, legality or enforceability of
this Agreement with respect to other Holders. If any provision of this
Agreement shall be judicially determined to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
20. Titles and Subtitles. The titles of the paragraphs and subparagraphs
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
21. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
22. Delays or Omissions. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to the Holders, upon any breach or
default of the Company under this Agreement, shall impair any such right, power
or remedy, nor shall it be construed to be a waiver of any such breach or
default, or any acquiescence therein, or of any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. It is further agreed that any waiver, permit, consent or approval of
any kind or character by a Holder of any breach or default under this
Agreement, or any waiver by a Holder of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in writing and that all remedies, either under this
Agreement, or by law or otherwise afforded to a Holder, shall be cumulative and
not alternative.
23. Attorney Fees. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
<PAGE> 63
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first written above.
COMPANY: SPECTRX, INC.
By:
----------------
Title:
--------------
INVESTORS: HILLMAN MEDICAL VENTURES 1993 L.P.,
a Delaware limited partnership
By: Hillman/Dover Limited
Partnership, general partner
By: Wilmington Securities, Inc., its
sole general partner
By:
-----------------
Title:
---------------
NORO-MOSELEY PARTNERS II, L.P., a
Georgia limited partnership
By: Moseley & Company, II,
general partner
By:
-----------------
Jack R. Kelly Jr.
Title: General Partner
<PAGE> 64
EXHIBIT F
LICENSE AGREEMENT
<PAGE> 65
AGREEMENT FOR PURCHASE AND SALE
OF TECHNOLOGY
THIS AGREEMENT is entered into as of the 16 day of January, 1993, by
and between LASER ATLANTA OPTICS, INC., a Georgia corporation ("Seller"); and
SPECTRX, INC., a Delaware corporation ("Purchaser").
W I T N E S S E T H:
WHEREAS, the parties have entered into a certain agreement dated
November 6, 1992 entitled "TECHNOLOGY PURCHASE AND TRANSFER AGREEMENT" (such
agreement being hereinafter referred to as the "Prior Agreement"), the terms of
which are incorporated herein by reference; and
WHEREAS, the parties desire to enter into this Agreement in order to
clarify the terms of the Prior Agreement and to add additional terms which were
agreed to at the time of the Prior Agreement but were not included in the terms
of the Prior Agreement;
NOW THEREFORE, for and in consideration of the premises and mutual
promises, representations, warranties, covenants and agreements contained
herein, the parties do hereby covenant, agree, represent, warrant and stipulate
as follows:
1. PURCHASE AND SALE OF TECHNOLOGY. Upon the terms and
<PAGE> 66
subject to the conditions contained herein, Purchaser hereby agrees to purchase
and Seller hereby agrees to sell all of Seller's right, title and interest in
and to the technology, patents, software, designs, models, drawings, know-how,
trademarks, trade names, service marks (including the goodwill associated with
the trademarks, trade names and service marks), trade secrets, copyrights and
registrations and applications therefor, relating to non-invasive means of
diagnosing disease through the use of fluorescence spectroscopy (the "Assets").
The Assets shall include, without limitation, Seller's rights in and to that
certain license agreement dated May 7, 1991, between Georgia Tech Research
Corporation and Seller, a copy of which is attached hereto as Exhibit A (the
"License Agreement"). In addition, the Assets shall include any and all books,
records, computer tapes or disks, flow diagrams, specification sheets, source
codes, and object codes relating to the Assets, and other physical
manifestations of the Assets.
2. PURCHASE PRICE. The price to be paid by Purchaser for the
Assets at Closing (as hereinafter defined) shall be $100,000.00 and shall be
payable by delivery of a promissory note in the form attached hereto as Exhibit
B and made a part hereof (the "Promissory Note"). The Promissory Note shall be
secured by a patent collateral assignment and security agreement in the form of
Exhibit C attached hereto and made a part hereof (the "Security Agreement")
conveying a security interest in the Assets to Seller.
2
<PAGE> 67
3. WARRANTIES AND REPRESENTATIONS. Seller represents and warrants
to Purchaser as follows:
3.1 Authority. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Georgia and has all requisite corporate power and authority and, except
for the consent of Georgia Tech Research Corporation, all authorizations
necessary to enter into this Agreement and to carry out the transactions
contemplated hereby.
3.2 Ownership of Assets. Seller owns and controls all of
the Assets free and clear of all liens, claims, charges and any other
defects in title of any nature whatsoever.
3.3 Infringement. To the best of Seller's knowledge,
without investigation, no aspect of the Assets infringes upon any
proprietary rights of any other person, firm, corporation or other
legal entity and there is not pending or, to the best of Seller's
knowledge, without investigation, threatened any claim or litigation
against Seller regarding the Assets, nor to the best of Seller's
knowledge, without investigation, is there any basis for such claim.
4. CLOSING. The consummation of the transactions contemplated
herein (the "Closing") shall be held at such time and place designated by
Purchaser but in no event later than January 31,
3
<PAGE> 68
1993. At the Closing, Seller shall deliver to Purchaser the Assets by virtue
of delivery of a certain assignment and bill of sale (the "Assignment") in
substantially the same form as Exhibit D attached hereto and made a part
hereof. The Assignment shall be executed by Georgia Tech Research Corporation
in order to consent to the assignment of Seller's interest in the License
Agreement. At the Closing, Purchaser shall deliver to Seller the Promissory
Note, the Security Agreement, and the Assignment.
5. CONDITION TO CLOSING. Any provision to the contrary contained herein
notwithstanding, Purchaser's obligation to purchase the Assets at Closing is
contingent upon Seller's obtaining the consent of Georgia Tech Research
Corporation to the proposed Assignment. Seller agrees to use its best efforts
in obtaining such consent prior to the Closing.
6. MISCELLANEOUS.
6.1 Further Assurances. Each party covenants that at any time, and
from time to time, after the Closing, it will execute such additional
instruments and take such actions as may be reasonably requested by the other
party to confirm, or perfect, or otherwise to carry out the intent and purpose
of this Agreement.
6.2 Waiver. Any failure on the part of any party hereto to comply
with any of its obligations, agreements, or
4
<PAGE> 69
conditions hereunder may be waived by any other party to whom such compliance
is owed. No waiver of any provision of this Agreement shall be deemed, or
shall constitute, a waiver of any other provision, whether or not similar, nor
shall any waiver constitute a continuing waiver.
6.3 Severability. In the event that any provision of this Agreement or
any word, phrase, clause, sentence, or other portion thereof, shall be
unenforceable or invalid for any reason, such provision or portion thereof
shall be modified or deleted in such a manner so as to make this Agreement, as
modified, legal and enforceable to the fullest extent permitted under
applicable laws.
6.4 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns.
No party may assign this Agreement, in whole or in part, without the prior
express written consent of the other party.
6.5. Entire Agreement. This Agreement and the Prior Agreement constitute
the entire agreement between the parties hereto and supersede and cancel any
prior agreements, representations, warranties or communications, whether oral
or wrtiten, between the parties hereto relating to the transactions contemplated
hereby, or the subject matter
5
<PAGE> 70
hereof. This Agreement may not be changed, waived, discharged or terminated
orally, but only by an agreement in writing signed by the parties hereto. In
the event of a discrepancy between the terms of this Agreement and the Prior
Agreement, the terms of this Agreement shall control.
6.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia.
6.7 Disclaimer. EXCEPT AS EXPRESSLY PROVIDED HEREIN, SELLER DISCLAIMS
ANY AND ALL EXPRESS OR IMPLIED WARRANTIES REGARDING THE ASSETS AND THE
UNDERLYING TECHNOLOGY, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND PURCHASER ACKNOWLEDGES
THAT, EXCEPT AS EXPRESSLY PROVIDED HEREIN, IT IS ACQUIRING THE ASSETS AND THE
UNDERLYING TECHNOLOGY ON AN "AS IS", "WHERE IS", AND "WITH ALL FAULTS" BASIS.
NEITHER SELLER NOR PURCHASER SHALL BE LIABLE FOR ANY INDIRECT OR CONSEQUENTIAL
DAMAGES.
(Signatures begin on next page)
6
<PAGE> 71
IN WITNESS WHEREOF, Purchaser and Seller have caused this Agreement to be
executed as of the date first above written.
"SELLER"
Laser Atlanta Optics, Inc.
By: /s/ Mark A. Samuels
--------------------------
Mark A. Samuels, President
"PURCHASER"
Spectrx, Inc.
By: /s/ Mark A. Samuels
--------------------------
Mark A. Samuels, President
7
<PAGE> 72
EXHIBIT A
LICENSE AGREEMENT
OMITTED
PLEASE SEE EXHIBIT
10.12A
BELOW
<PAGE> 73
EXHIBIT B
SECURED NOTE
$100,000.00 Atlanta, Georgia January___, 1993
FOR VALUE RECEIVED, the undersigned promises to pay to the order of
LASER ATLANTA OPTICS, INC., a Georgia corporation, the principal sum of ONE
HUNDRED THOUSAND ($100,000.00) AND NO/100 DOLLARS, in legal tender of the
United States, with interest thereon from date at the rate of zero per centum
(0.0%) per annum, on the unpaid balance until paid, as follows:
One installment of One Hundred Thousand Dollars ($100,000.00 on or
before January 31, 1993; or
One installment of One Hundred One Thousand Dollars ($101,000.00) after
January 31, 1993, but before February 28, 1993.
Principal and interest are payable at Atlanta, Georgia, or at such
other place as the holder thereof may designate in writing.
Should any installment not be paid when due, or should the maker, or
makers, hereof fail to comply with any of the terms or requirements of a patent
collateral assignment and security agreement of even date herewith, conveying a
security interest in certain properties as security for this indebtedness, the
entire unpaid principal sum evidenced by this Note (i.e., $101,000.00), with
all accrued interest, shall, at the option of the holder, and without notice to
the undersigned, become due and may be collected forthwith, time being of the
essence of this contract. It is further agreed that failure of the holder to
exercise this right of accelerating the maturity of the debt, or indulgence
granted from time to time, shall in no event be considered as a waiver of such
right of acceleration or estop the holder from exercising such right.
In case this Note is collected by law, or through an attorney at law,
all costs of collection, including fifteen per centum (15%) of the principal
and interest as attorney's fees, shall be paid by the makers hereof.
And each of us, whether maker, endorser, guarantor, or surety, hereby
severally waives and renounces, for himself and family, any and all
exemption rights either of us, or the family of either of us, may have under
or by virtue of the Constitution or laws of Georgia, or any other
State, or the United States, as against this debt or any renewal thereof; and
each further waives demand, protest and notice of demand, protest and
non-payment.
<PAGE> 74
In case of default in the payment of the amounts due hereunder by
February 28, 1993, said principal sum (i.e., $101,000.00), or so much thereof
as may remain unpaid at the time of such default, shall bear interest at the
rate of eighteen per centum (18%) per annum from the date of such default.
This contract is to be construed in all respects and enforced according
to the laws of the State of Georgia.
Prepayment Privilege:
This Note may be prepaid at any time without penalty or charge.
Witness the hand of our SPECTRX, INC.
duly authorized officer.
By:
----------------------------
Mark A. Samuels, President
<PAGE> 75
EXHIBIT C
PURCHASE MONEY
PATENT COLLATERAL ASSIGNMENT
AND SECURITY AGREEMENT
This Agreement is made on the ______ day of January, 1993, between
SPECTRX, INC., a Delaware corporation ("Assignor") and LASER ATLANTA OPTICS,
INC., a Georgia corporation ("Lender").
W I T N E S S E T H
WHEREAS, Lender has assigned, conveyed, and transferred to Assignor all
of its right to certain assets by virtue of its execution and delivery of a
certain Assignment and Bill of Sale of even date herewith (the "Assignment"),
the terms of which are incorporated herein by this reference; and
WHEREAS, Assignor has executed and delivered its purchase money
promissory note (the "Note") of even date herewith to the Lender in the
principal amount of $100,000.00; and, in order to induce the Lender to accept
the Note, Assignor has agreed to assign to Lender certain patent rights and
other property acquired through the Assignment.
NOW, THEREFORE, in consideration of the foregoing and the premises
herein contained, Assignor hereby agrees with Lender as follows:
1. To secure the complete and timely satisfaction of all obligations
of Assignor under the Note (the "Obligations"), Assignor hereby grants, assigns
and conveys to Lender all of its rights, title and interest, resulting from the
Assignment to:
a) all right, title and interest in and to the technology,
patents, software, designs, models, drawings, know-how, trademarks, trade
names, and service marks (including the goodwill associated with the
trademarks, trade names and service marks), trade secrets, copyrights,
registrations and applications therefor, relating to non-invasive means of
diagnosing disease through the use of flourescence spectroscopy, including,
without limitation, any and all books, records, computer tapes or disks, flow
diagrams, specifications sheets, source codes, and object codes relating to the
foregoing and other physical manifestations of the foregoing; and
b) all right, title, interest, powers, privileges and options in
and to, and in accordance with, that certain license agreement dated May 7,
1991, by and between GEORGIA TECH RESEARCH CORPORATION and Seller,
including without limitation, all proceeds thereof (such as, by way of example,
license royalties and proceeds of infringement suits), the right to sue for
past, present and future infringements, and
<PAGE> 76
all rights corresponding thereto (collectively called the "Assets").
2. Assignor agrees that, until all of the Obligations shall have been
satisfied in full, it will not enter into any agreement (for example, a license
agreement) which is inconsistent with Assignor's obligations under this
Agreement, without Lender's prior written consent.
3. Unless and until there shall have occurred and be continuing a breach
of the Obligations, Lender hereby grants to Assignor the exclusive,
non-transferable right, license, and use of and to the Assets, provided,
however, Assignor agrees not to sell, assign, or otherwise encumber its
interest in, or grant any sublicense under the Assets, or any part thereof,
without the prior written consent of Lender.
4. If any breach of the Obligations shall have occurred and be
continuing, Assignor's rights, license, and use of and to the Assets set forth
in Section 3, shall terminate forthwith, and the Lender shall have, in addition
to all other rights and remedies given it by this Agreement, those allowed by
law and the rights and remedies of a secured party under the Uniform Commercial
Code as enacted in any jurisdiction in which the Assets may be located and,
without limiting the generality of the foregoing, the Lender may immediately,
without demand or performance and without other notice (except as set forth
next below) or demand whatsoever to Assignor, all of which are hereby expressly
waived, and without advertisement, sell at public or private sale or otherwise
realize upon, in Atlanta, Georgia, or elsewhere, the whole or from time to time
any part of the Assets, or any interest which the Assignor may have therein,
and after deducting from the proceeds of sale or other disposition of the
Assets all expenses (including all reasonable expenses for brokers' fees and
legal services), shall apply the residue of such proceeds toward the
satisfaction of the obligations. Any remainder of the proceeds after
satisfaction in full of the Obligations shall be paid over to the Assignor.
Notice of any sale or other disposition of the Assets shall be given to
Assignor at least five (5) days before the time of nay intended public or
private sale or other disposition of the Patents is to be made, which Assignor
hereby agrees shall be reasonable notice of such sale or other disposition.
At any such sale or other disposition, any holder of the Note or Lender may, to
the extent permissable under applicable law, purchase the whole or any part of
the Assets sold, free from any right of redemption on the part of Assignor,
which right is hereby waived and released.
5. If any breach of the Obligations shall have occurred and be
continuing, Assignor hereby authorizes and empowers Lender to make, constitute
and appoint any officer or agent of Lender, as Lender may select in its
exclusive discretion, as Assignor's true and lawful attorney-in-fact, with the
power to endorse Assignor's
2
<PAGE> 77
name on all applications, documents, papers and instruments necessary for
Lender to use the Assets, or any part thereof, or to grant or issue any
exclusive or non-exclusive license under the Assets, or any part thereof, to
any third person, or necessary for Lender to assign, pledge, convey or
otherwise transfer title in or dispose of the Assets, or any part thereof, to
any third person. Assignor hereby ratifies all that such attorney shall
lawfully do or cause to be done by virtue hereof. This power of attorney is
coupled with an interest and shall be irrevocable for the life of this
Agreement.
6. At such time as Assignor shall completely satisfy all of the
Obligations, this Agreement shall terminate and Lender shall execute and
deliver to Assignor all deeds, assignments and other instruments as may be
necessary or proper to re-vest in Assignor full title to the Assets, subject to
any disposition thereof which may have been made by Lender pursuant hereto.
7. No course of dealing between Assignor and Lender, nor any failure to
exercise, nor any delay in exercising, on the part of Lender, any right, power
or privilege hereunder or under the Note shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, power or privilege hereunder
or thereunder preclude any other or further exercise thereof or the exercise of
any other right, power or privilege.
8. All of Lender's rights and remedies with respect to the Assets,
whether established hereby or by the Note, or by any other agreements or by law
shall be cumulative and may be exercised singularly or concurrently.
9. The provisions of this Agreement are severable, and if any clause or
provision shall be held invalid and unenforceable in whole or in part in any
jurisdiction, then such invalidity or unenforceability shall affect only such
clause or provision, or part thereof, in such jurisdiction, and shall not in
any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Agreement in any jurisdiction.
10. This Agreement is subject to modification only by a writing signed by
the parties.
11. The benefits and burdens of this Agreement shall inure to the benefit
of and be binding upon the respective successors and permitted assigns of the
parties.
12. The validity and interpretation of this Agreement and the rights and
obligations of the parties shall be governed by the laws of the State of
Georgia.
3
<PAGE> 78
WITNESS the execution hereof under seal as of the day and year first
above written.
ASSIGNOR:
Spectrx, Inc.
By:
----------------------------
Mark A. Samuels, President
LENDER
Laser Atlanta Optics, Inc.
By:
----------------------------
Mark A. Samuels, President
4
<PAGE> 79
EXHIBIT D
ASSIGNMENT AND BILL OF SALE
THIS ASSIGNMENT AND BILL OF SALE (the "Assignment"), is made and
entered into as of the ______ day of January, 1993, by and between LASER
ATLANTA OPTICS, INC., a Georgia corporation ("Seller"), and SPECTRX, INC., a
Delaware corporation ("Purchaser").
In consideration of and as a condition to the payment of One Hundred
Thousand and No/100 ($100,000.00) Dollars by Purchaser to Seller, the mutual
promises herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Seller does hereby convey, grant, sell, transfer, assign and
deliver unto Purchaser, its successors and assigns forever, all of Seller's
right, title and interest in and to the technology, patents, software, designs,
models, drawings, know-how, trademarks, trade names, service marks (including
the goodwill associated with the trademarks, trade names and service marks),
trade secrets, copyrights, registrations and applications therefor, relating to
non-invasive means of diagnosing disease through the use of fluorescence
spectroscopy, including, without limitation, any and all books, records,
computer tapes or disks, flow diagrams, specification sheets, source codes, and
object codes relating to the foregoing and other physical manifestations of the
foregoing (the "Assets").
<PAGE> 80
2. Seller hereby grants, assigns and conveys to Purchaser all of
Seller's right, title, interest, powers, privileges and options in and to, and
in accordance with, that certain license agreement dated May 7, 1991, by and
between GEORGIA TECH RESEARCH CORPORATION and Seller, a copy of which is
attached hereto as Exhibit A (the "License Agreement"). Purchaser does hereby
assume and agree to perform all of the duties and obligations of the Seller
under the License Agreement, effective from and after the date hereof.
3. SELLER DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES
REGARDING THE ASSETS, THE LICENSE AGREEMENT, AND THE UNDERLYING TECHNOLOGY
RELATING TO MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND PURCHASER
ACKNOWLEDGES THAT, EXCEPT AS EXPRESSLY PROVIDED IN THE AGREEMENT, IT IS
ACQUIRING THE ASSETS, THE LICENSE AGREEMENT, AND THE UNDERLYING TECHNOLOGY ON
AN "AS IS", "WHERE IS", AND "WITH ALL FAULTS" BASIS. NEITHER SELLER NOR
PURCHASER SHALL NOT BE LIABLE FOR ANY INDIRECT OR CONSEQUENTIAL DAMAGES.
4. Purchaser and Seller each agree that it will execute such
additional instruments and take such actions as may be reasonably requested by
the other party to confirm, or perfect, or otherwise carry out the intent and
purpose of this Assignment.
5. This Assignment shall be binding and shall inure to the benefit of
Seller and Purchaser and their respective successors and
2
<PAGE> 81
assigns.
IN WITNESS WHEREOF, Purchaser and Seller have caused this Assignment to
be executed by their duly executed officers as of the date first above written.
"SELLER"
Laser Atlanta Optics, Inc.
By:
---------------------------
Mark A. Samuels, President
"PURCHASER"
Spectrx, Inc.
By:
---------------------------
Mark A. Samuels, President
In order to consent to the assignment of the License Agreement pursuant
to Section 2 above, and for no other purposes, the undersigned has hereunto
executed this Assignment this day of January, 1993.
GEORGIA TECH RESEARCH CORPORATION
By:
---------------------------
Name:
-------------------------
Title:
------------------------
By:
---------------------------
Name:
-------------------------
Title:
------------------------
3
<PAGE> 82
EXHIBIT G
LEGAL OPINION
<PAGE> 83
[WILSON SONSINI GOODRICH & ROSATI LETTERHEAD]
February 5, 1993
To the Investors Listed in
Exhibit A to the Spectrx, Inc.
Series A Preferred Stock
Purchase Agreement dated
February 5, 1993
Gentlemen:
Reference is made to the Series A Preferred Stock Purchase Agreement,
dated as of February 5, 1993 (the "Agreement"), complete with all listed
exhibits thereto (together, the "Agreements"), by and among Spectrx, Inc., a
Delaware corporation (the "Company"), and the persons and entities listed in
Exhibit A to the Agreement (the "Investors"), which provides for the issuance
by the Company to the Investors of shares of Series A Preferred Stock of the
Company. This opinion is rendered to you pursuant to Section 5.3 of the
Agreement, and all terms used herein have the meanings defined for them in the
Agreement unless otherwise defined herein.
We have acted as counsel for the Company in connection with the
negotiation of the Agreements and the issuance of the Series A Preferred Stock.
As such counsel, we have made such legal and factual examinations and inquiries
as we have deemed advisable or necessary for the purpose of rendering this
opinion. In addition, we have examined originals or copies of such corporate
records of the Company, certificates of public officials and such other
documents which we consider necessary or advisable for the purpose of rendering
this opinion. In such examination we have assumed the genuineness of all
signatures on original documents, the authenticity and completeness of all
documents submitted to us as originals, the conformity to original documents of
all copies submitted to us and the due execution and delivery of all documents
(except as to due execution and delivery by the Company) where due execution
and delivery are a prerequisite to the effectiveness thereof.
As used in this opinion, the expression "to our knowledge," "known to us"
or similar language with reference to matters of fact
<PAGE> 84
means that, after an examination of documents made available to us by the
Company, and after inquiries of officers of the Company, but without any
further independent factual investigation, we find no reason to believe that
the opinions expressed herein are factually incorrect. Further, the expression
"to our knowledge", "known to us" or similar language with reference to matters
of fact refers to the current actual knowledge of the attorneys of this firm
who have worked on matters for the Company. Except to the extent expressly set
forth herein or as we otherwise believe to be necessary to our opinion, we have
not undertaken any independent investigation to determine the existence or
absence of any fact, and no inference as to our knowledge of the existence or
absence of any fact should be drawn from our representation of the Company or
the rendering of the opinion set forth below.
For purposes of this opinion, we are assuming that you have all requisite
power and authority, and have taken any and all necessary corporate or
partnership action, to execute and deliver the Agreements, and we are assuming
that the representations and warranties made by the Investors in the Agreement
and pursuant thereto are true and correct. We are also assuming that the
Investors have purchased the Shares for value, in good faith and without notice
of any adverse claims. We are also assuming that the representations and
warrants made by the Company in the Agreement and pursuant thereto are true and
correct as to matters of fact.
The opinions hereinafter expressed are subject to the following
qualifications:
(a) We express no opinion as to the effect of applicable bankruptcy,
insolvency, reorganization, moratorium or other similar federal or state laws
affecting the rights of creditors;
(b) We express no opinion as to the effect of rules of law governing
specific performance, injunctive relief or other equitable remedies (regardless
of whether any such remedy is considered in a proceeding at law or in equity);
(c) We express no opinion as to compliance with the anti-fraud provisions
of applicable securities laws;
(d) We express no opinion as to the enforceability of the indemnification
provisions of paragraph 7 of the Registration Rights Agreement to the extent
the provisions thereof may be subject to limitations of public policy and the
effect of applicable statutes and judicial decisions;
(e) We are members of the Bar of the State of California. We express no
opinion as to any matter relating to the laws of any jurisdiction other than
the federal laws of the United States of America and the laws of the State of
California. To the extent this
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<PAGE> 85
opinion addresses applicable securities laws of states other than the State of
California, we have not retained nor relied on the opinion of counsel admitted
to the bar of such states, but rather have relied on compilations of the
securities laws of such states contained in reporting services presently
available to us.
Based upon and subject to the foregoing, and except as set forth in the
Schedule of Exceptions to the Agreement, we are of the opinion that:
1. The Company is a corporation duly organized and validly existing under,
and by virtue of, the laws of the State of Delaware and is in good standing
under such laws. The Company has requisite corporate power to own and operate
its properties and assets, and to carry on its business as presently conducted.
The Company is not qualified to do business as a foreign corporation in any
jurisdiction. The Company has no subsidiaries.
2. The Company has all requisite legal and corporate power to execute and
deliver the Agreements and the Restated Articles of Incorporation, to sell and
issue the Series A Preferred Stock thereunder, to issue the Common Stock
issuable upon conversion of the Preferred Stock and to carry out and perform
its obligations under the terms of the Agreements and the Restated Articles of
Incorporation.
3. Immediately prior to the Closing, the authorized capital stock of the
Company consists of 10,000,000 shares of Common Stock, 1,650,000 shares of
which are issued and outstanding, and 4,000,000 shares of Preferred Stock, of
which 2,000,000 shares are designated Series A Preferred Stock and 2,000,000
shares are designated Series A1 Preferred Stock. Immediately prior to Closing,
none of the Preferred Stock is issued and outstanding. The Company has also
reserved 500,000 shares of its Common Stock for issuance pursuant to its 1993
Incentive Stock Plan. All such issued and outstanding shares of Common Stock
have been duly authorized and validly issued and are fully paid and
nonassessable and free of any preemptive or similar rights contained in the
Articles of Incorporation or Bylaws of the Company. The Common Stock issuable
upon conversion of the Preferred Stock has been duly and validly reserved, and
when issued in accordance with the Company's Articles of Incorporation will be
validly issued, fully paid and nonassessable. The Series A Preferred Stock
issued under the Agreement is validly issued, fully paid and nonassessable and
free of any liens, encumbrances and pre-emptive or similar rights contained in
the Articles of Incorporation or Bylaws of the Company; provided, however, that
the Series A Preferred Stock (and the Common Stock issuable upon conversion of
the Preferred) may be subject to restrictions on transfer under state and/or
federal securities laws as set forth in the Agreement. To our knowledge, except
for rights described in the Agreements and the Articles of Incorporation, there
are no other options, warrants,
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<PAGE> 86
conversion privileges or other rights presently outstanding to purchase or
otherwise acquire any authorized but unissued shares of capital stock or other
securities of the Company, or any other agreements to issue any such securities
or rights.
4. All corporate action on the part of the Company, its directors and
shareholders necessary for the authorization, execution and delivery of the
Agreements and the Restated Articles of Incorporation by the Company, the
authorization, sale, issuance and delivery of the Series A Preferred Stock (and
the Common Stock issuable upon conversion of the Preferred Stock) and the
performance of the Company's obligations under the Agreement and the Restated
Articles of Incorporation have been taken. The Agreements and Restated Articles
of Incorporation have been duly and validly executed and delivered by the
Company and constitute valid and binding obligations of the Company.
5. The execution, delivery and performance of and compliance with the
terms of the Agreements and the Restated Articles of Incorporation, and the
issuance of the Series A Preferred Stock (and the Common Stock issuable upon
conversion of the Preferred Stock), do not violate any provision of the
Articles of Incorporation or Bylaws, or, to our knowledge, any provision of any
applicable federal or state law, rule or regulation. To our knowledge, the
execution, delivery and performance of and compliance with the Agreements and
the Restated Articles of Incorporation, and the issuance of the Series A
Preferred Stock (and the Common Stock issuable upon conversion of the
Preferred) do not violate, or constitute a default under, any material
contract, agreement, instrument, judgment or decree binding upon the Company.
6. To our knowledge, there are no actions, suits, proceedings or
investigations pending against the Company or its properties before any court
or governmental agency (nor, to our knowledge, has the Company received any
written threat thereof), which, either in any case or in the aggregate, are
likely to result in any material adverse change in the business or financial
condition of the Company or any of its properties, or in any material
impairment of the right or ability of the Company to carry on its business as
now conducted, or which questions the validity of the Agreement or any action
taken or to be taken by the Company in connection therewith.
7. No consent, approval or authorization of or designation, declaration or
filing with any governmental authority on the part of the Company is required
in connection with the valid execution and delivery of the Agreements and the
Restated Articles of Incorporation, or the offer, sale or issuance of the
Series A Preferred Stock (and the Common issuable upon conversion of the
Preferred) or the consummation of any other transaction contemplated by the
Agreements and the Restated Articles of Incorporation, except (a) filing of the
Restated Articles of Incorporation in the Office
-4-
<PAGE> 87
of the Secretary of State of the State of Delaware, and (b) qualification (or
taking such action as may be necessary to secure an exemption from
qualification, if available) under applicable blue sky laws (but excluding
jurisdictions outside of the United States) of the offer and sale of the Shares
(and the Common issuable upon conversion thereof) and the modification of
rights of shareholders contemplated by the Agreements. The filing referred to
in clause (a) above has been accomplished and is effective. Our opinion herein
is otherwise subject to the timely and proper completion of all filings and
other actions contemplated herein where such filings and actions are to be
undertaken on or after the date hereof.
8. Subject to the accuracy of the Investors' representations in Section 3
of the Agreement and their responses (if any) to the Company's inquiries, we
are of the opinion that the offer, sale and issuance of the Shares in
conformity with the terms of the Agreements constitute transactions exempt from
the registration requirements of Section 5 of the Securities Act of 1933, as
amended.
This opinion is furnished to the Investors solely for their benefit in
connection with the purchase of the Shares, and may not be relied upon by any
other person or for any other purpose without our prior written consent.
Very truly yours,
/S/ WILSON SONSINI GOODRICH & ROSATI
WILSON, SONSINI, GOODRICH & ROSATI
Professional Corporation
-5-
<PAGE> 88
EXHIBIT H
SAMUELS AGREEMENT
<PAGE> 89
SPECTRX, INC.
STOCK RESTRICTION AND CO-SALE AGREEMENT
THIS AGREEMENT is made and entered into this ____ day of January, 1993 by
and among Spectrx, Inc. (the "Company") a Delaware corporation, Mark Samuels
(the "Major Shareholder"), and the investors set forth on the signature page of
this agreement (the "Investors").
WHEREAS, the Investors have acquired or have expressed an interest in
acquiring from the Company shares of its Series A Preferred Stock which are
convertible into shares of Common Stock of the Company.
WHEREAS, the Major Shareholder is presently the legal or beneficial owner
of 434,143 shares of the outstanding Common Stock of the Company (the "Founding
Shares").
WHEREAS, the Major Shareholder wishes to provide a further inducement to
the Investors to purchase the Company's Series A Preferred Stock by offering,
upon the terms and conditions set forth in this Agreement, the Company and the
Investors a right to purchase and the Investors an opportunity to participate
in subsequent sales of the Common Stock of the Company made by the Major
Shareholder.
IT IS THEREFORE AGREED AS FOLLOWS:
1. Option to Repurchase on Termination.
1.1 Repurchase Option.
a. Terms of Option. In the event of the voluntary or involuntary
termination of the Major Shareholder's employment with or services to the
Company for any or no reason (including death or disability) the Company shall,
upon the date of such termination (as reasonably fixed and determined by the
Company) have an irrevocable, exclusive option (the "Repurchase Option") for a
period of ninety (90) days from such date to repurchase all or any portion of
the Founding Shares which have not been released from the Repurchase Option at
such time at the Repurchase FMV (as defined below). The Repurchase Option shall
be exercised by the Company by written notice to the Major Shareholder or his
executor (with a copy to the Escrow Holder) and, at the Company's option, (i)
by delivery to the Major Shareholder or his executor with such notice of a
check in the amount of the Repurchase FMV for the Founding Shares being
repurchased, or (ii) by cancellation by the Company of an amount of the Major
Shareholder's indebtedness to the Company equal to the
<PAGE> 90
Repurchase FMV for the Founding Shares being repurchased, or (iii) by a
combination of (i) and (ii) so that the combined payment and cancellation of
indebtedness equals such Repurchase FMV. Upon delivery of such notice and the
payment of the Repurchase FMV in any of the ways described above, the Company
shall become the legal and beneficial owner of the Founding Shares being
repurchased and all rights and interests therein or relating thereto, and the
Company shall have the right to retain and transfer to its own name the number
of Founding Shares being repurchased by the Company.
b. Repurchase FMV. The "Repurchase FMV" shall be the fair market value of
the Founding Shares to be repurchased on the first day of the Repurchase
Option, as determined in good faith by the Company's Board of Directors.
1.2 Release of Founding Shares From Repurchase Option. One-half (1/2) of the
Founding Shares shall be released from the Company's Repurchase Option on the
date of the closing of the Series A Preferred Stock Purchase Agreement of even
date herewith by and among the Company and certain investors (the "Closing"),
and an additional 1/36th of the Founding Shares not released from the
Repurchase Option on the date of Closing shall be released at the end of each
full month thereafter until all Founding Shares have been released; provided in
each case that the Major Shareholder's employment or services have not been
terminated prior to the date of any such release.
1.3 Escrow of Founding Shares.
a. Assignment to Escrow. The Founding Shares shall be held by the
Secretary of the Company or his designee as escrow holder ("Escrow Holder"),
along with a stock assignment executed by the Major Shareholder in blank, until
the expiration of the Company's option to repurchase such Founding Shares as
set forth above.
b. Escrow Instructions. The Escrow Holder is hereby directed to permit
transfer of the Founding Shares only in accordance with this Agreement or
instructions signed by both parties. In the event further instructions are
desired by the Escrow Holder, he shall be entitled to rely upon directions
executed by a majority of the Company's Board of Directors. The Escrow Holder
shall have no liability for any act or omission hereunder while acting in good
faith in the exercise of his own judgment.
c. Transfer upon Exercise. If the Company or any assignee exercises its
Repurchase Option, the Escrow Holder, upon receipt of written notice of such
option exercise from the proposed transferee, shall take all steps necessary to
accomplish such transfer.
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d. Delivery of Founding Shares. When the Repurchase Option has been
exercised or expires unexercised or a portion of the Founding Shares has been
released from the Repurchase Option, upon the Major Shareholder's request the
Escrow Holder shall promptly cause a new certificate to be issued for such
released Founding Shares and shall deliver such certificate to the Major
Shareholder.
e. Shareholder Rights/Additional Securities. Subject to the terms hereof,
the Major Shareholder shall have all the rights of a shareholder with respect
to such Founding Shares while they are held in escrow, including without
limitation, the right to vote the Founding Shares and receive any cash
dividends declared thereon. If, from time to time during the term of the
Company's Repurchase Option, there is (i) any stock dividend, stock split or
other change in the Founding Shares, or (ii) any merger or sale of all or
substantially all of the assets or other acquisition of the Company, any and
all new, substituted or additional securities to which the Major Shareholder is
entitled by reason of his ownership of the Founding Shares shall be immediately
subject to this escrow, deposited with the Escrow Holder and included
thereafter as "Founding Shares" for purposes of this Agreement.
1.4 Restriction on Transfer of Unreleased Founding Shares. Except for the
escrow described in Section 1.3 or transfer of the Founding Shares to the
Company or its assignees contemplated by Section 1.1, none of the Founding
Shares or any beneficial interest therein shall be transferred, encumbered or
otherwise disposed of in any way until the release of the Founding Shares from
the Company's Repurchase Option in accordance with the provisions of this
Section 1. After such release, the Founding Shares shall be subject to the
restrictions set forth in Section 2.
2. Options to Purchase or Sell.
2.1 Restrictions on Transfer. No sale or other disposition (voluntary or
involuntary) of Founding Shares released from the Company's Repurchase Option
in accordance with the provisions of Section 1 or of other shares of Common
Stock of the Company now owned or hereafter acquired by the Major Shareholder
(the "Shares") shall be valid unless it is made in accordance with the
provisions of this Section 2.
2.2 Right of First Refusal.
a. Offer for Sale. In the event, at any time following the date of
this Agreement, the Major Shareholder or his transferee
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desires to accept a bona fide third-party offer to sell or transfer in any
manner Shares not or no longer subject to the Company's Repurchase Option, he
shall first offer such Shares for sale to the Company at the same price, and
upon the same terms (or terms as similar as reasonably possible) upon which he
is proposing or is to dispose of such Shares, and shall at the same time provide
notice to the Investors of such offer and its terms. Such right of first refusal
shall be provided to the Company for a period of twenty-one (21) days following
receipt by the Company of written notice by Major Shareholder of the terms and
conditions of said proposed sale or transfer, or twenty-one (21) days following
the setting of a price under Section 2.2(c) (when the price is determined under
that Section). In the event that the Company does not exercise its right of
first refusal for the full number of Shares, the Major Shareholder or his
transferee shall then offer such remaining Shares to the Investors in the same
manner as provided herein to the Company, with the Investors' right of first
refusal extending for a similar twenty-one (21) day period. Each Investor shall
be entitled to purchase a pro rata share of such remaining Shares equal to the
number of shares of Common Stock, and other securities convertible into or
exercisable for Common Stock, (together "Common Stock Equivalents") then held by
the Investor, divided by the number of Common Stock Equivalents held by those
Investors electing to exercise their option. In the event the Shares are not
disposed of within ninety (90) days following lapse of the period of the right
of first refusal provided to the Investor, they shall once again be subject to
the right of first refusal herein provided.
b. Involuntary Transfers. In the event, at any time following the date of
this Agreement, of any transfer by operation of law or other involuntary
transfer (including a transfer pursuant to dissolution of marriage) of all or a
portion of the Shares, the Company (or the Investors, if the Company shall
refuse its option) shall have an option to purchase all of the Shares
transferred. Upon such a transfer, the person acquiring the Shares shall
promptly notify the Secretary of the Company and the Investors of such
transfer. The right to purchase such Shares shall be provided to the Company
for a period of twenty-one (21) days following receipt by the Company of
written notice by the person acquiring the Shares. If the Company declines to
exercise its option, the Secretary of the Company shall notify the Investors,
in writing, and each Investor shall have a similar option, on the pro rata
basis set forth in Section 2.2(a) above, for a period of twenty-one (21) days
following their receipt of written notice. The purchase price shall be
determined in accordance with Section 2.2(c) and may be paid by cash.
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c. Determination of Price. With respect to any stock to be transferred
pursuant to Section 2.2(b), the price per Share shall be a price set by the
Board of Directors of the Company which will reflect the current value of the
Shares in terms of present earnings and future prospects for the Company. The
Company shall notify the Major Shareholder or his executor of the price so
determined within twenty-one (21) days after receipt by it of written notice of
the transfer or proposed transfer of the Shares. If the Major Shareholder or
his executor disputes the price as set by the Board of Directors by giving
notice to the Company within ten (10) days after being informed of the price,
the price of the Shares shall be determined by an independent financial analyst
selected jointly by the Board of Directors of the Company and the Major
Shareholder, with the cost of such determination to be divided equally between
the Company and the Major Shareholder. The Board of Directors and the Major
Shareholder shall select such analyst within thirty (30) days after receipt of
notice that the Major Shareholder is disputing the price set by the Board of
Directors. If the Board is not notified of any such dispute within such ten
(10) days period, the decision of the Board of Directors as to the purchase
price shall be final. Any time required to resolved a dispute shall be added to
the twenty-one (21) day period in which the Company may exercise its right to
purchase.
2.3 Right of Co-Sale. Within forty-two (42) days after receipt of the offer
delivered under Section 2.2(a), each Investor shall also notify the Major
Shareholder and the Company whether it exercises its right of co-sale under the
provisions of this Section 2.3. In the event that the Company and the Investors
do not exercise their right of first refusal set forth in Section 2.2 above for
all of the Shares proposed to be sold, and the Major Shareholder continues to
hold Shares which he proposes to sell to the prospective purchaser (the
"Co-Sale Shares"), then each of the Investors may notify the Major Shareholder
of its desire to sell to the prospective purchaser the shares of stock of the
Company which such Investor then holds on the same terms as those on which the
Major Shareholder proposes to sell the Co-Sale Shares. The maximum number of
shares of stock of the Company which an Investor shall be entitled to sell
pursuant to this Section 2.3 shall be equal to that number obtained by
multiplying (x) the total number of Co-Sale Shares by (y) a fraction, the
numerator of which is the total number of shares of Common Stock Equivalents
then held by the Investor and the denominator of which is double the total
number of shares of Common Stock Equivalents then held in the aggregate by the
Major Shareholder and the Investors. If an Investor elects to sell to the
prospective purchaser, then the Major Shareholder shall assign as
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<PAGE> 94
much of his interest in the agreement of sale with the prospective purchaser as
the Investor shall be entitled to and shall accept hereunder.
2.4 Sale after Notice. If within forty-two (42) days after receipt by the
Investors of copies of the initial written notice pursuant to Section 2.2(a)
above, the Investors do not send notice pursuant to Section 2.3 above, then the
Major Shareholder shall be free to sell the stock to such prospective purchaser
but only on the same terms and conditions as contained in the notice sent to
the Investors. In the event the Shares are not disposed of within ninety (90)
days following the lapse of the right of co-sale granted pursuant to Section
2.3 to the Investors, they shall once again be subject to the rights of first
refusal and co-sale herein provided.
2.5 Excluded Transfers. The Major Shareholder may transfer all or part of the
Shares to an ancestor, descendant, spouse, or a custodian or a trustee,
including a trustee of a voting trust, for the account of an ancestor,
descendant, spouse, or the Major Shareholder; provided, however, that this
Agreement shall be binding upon such transferee. All transferees of Shares or
any interest therein pursuant to this Section 2.5 shall be required as a
condition of such transfer to agree in writing in the form satisfactory to the
Company that they will receive and hold such Shares or interests subject to the
provisions of this Agreement, including, insofar as applicable, the Company's
and the Investor's right of first refusal in Section 2.2 and the Investor's
right of co-sale in Section 2.3. Any sale or transfer of the Shares shall be
void unless the provisions of this Agreement are met.
2.6 Termination of Rights.
a. Transfers in Accordance with Agreement. Any Shares transferred in
accordance with the terms of Sections 2.2, 2.3 or 2.4 above, shall no longer be
subject to or covered by this Agreement.
b. Public Market. The rights of the Company and the Investors pursuant to
this Section 2 shall end at such time as a public market exists for the
Company's Common Stock (or any other stock issued to the Major Shareholder in
exchange for the Shares). For the purpose of this Agreement, a "public market"
shall be deemed to exist if (A) such stock is listed on a national securities
exchange (as that term is used in the Securities Exchange Act of 1934) or (B)
such stock is traded on the over-the-counter market and prices are published
daily on business days in a recognized financial journal. Upon termination of
the Company's and the
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<PAGE> 95
Investor's rights pursuant to this Section 2, at the Major Share- holder's
request the Company shall issue a new certificate representing the Shares
without a legend referring to this Agreement.
3. Stock Certificate Legend. The share certificate evidencing the
Shares shall be endorsed with the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY, THE
SHAREHOLDER AND CERTAIN OTHER SHAREHOLDERS OF THE COMPANY, A COPY OF WHICH
IS ON FILE WITH THE SECRETARY OF THE COMPANY.
4. General Provisions.
4.1 Governing Law. This Agreement shall be governed by the laws of the State
of California. This Agreement represents the entire agreement between the
parties with respect to the subject matter hereof and may only be modified or
amended in a writing signed by both parties.
4.2 Notice. Any notice, demand or request required or permitted to be given by
either the Company or the Major Shareholder pursuant to the terms of this
Agreement shall be in writing and shall be deemed given when delivered
personally or deposited in the U.S. mail, First Class with postage prepaid, and
addressed to the parties at the addresses of the parties set forth at the end
of this Agreement or such other address as a party may request by notifying the
other in writing.
4.3 Successors and Assigns. Subject to the conditions of transfer of Shares
hereunder, this Agreement shall be binding upon and inure to the benefit of and
be enforceable by the parties to this Agreement and each of their successors
and assigns.
4.4 Attorney Fees. If any action at law or in equity is necessary to enforce
or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
day and year first set forth above.
MAJOR SHAREHOLDER: COMPANY:
Spectrx, Inc.
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Mark Samuels
No. of Common Shares: 434,143 By:
-------------------------------------
Address: Title:
--------------------- -------------------------------------
---------------------
Address: 2518 Euclid Place
Fremont, CA 94539
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<PAGE> 97
EXHIBIT I
IGNOTZ AGREEMENT
<PAGE> 98
SPECTRX, INC.
STOCK RESTRICTION AND CO-SALE AGREEMENT
THIS AGREEMENT is made and entered into this ____ day of January, 1993 by
and among Spectrx, Inc. (the "Company") a Delaware corporation, Keith Ignotz
(the "Major Shareholder"), and the investors set forth on the signature page of
this agreement (the "Investors").
WHEREAS, the Investors have acquired or have expressed an interest in
acquiring from the Company shares of its Series A Preferred Stock which are
convertible into shares of Common Stock of the Company.
WHEREAS, the Major Shareholder is presently the legal or beneficial owner
of 263,999 shares of the outstanding Common Stock of the Company (the "Founding
Shares").
WHEREAS, the Major Shareholder wishes to provide a further inducement to
the Investors to purchase the Company's Series A Preferred Stock by offering,
upon the terms and conditions set forth in this Agreement, the Company and the
Investors a right to purchase and the Investors an opportunity to participate
in subsequent sales of the Common Stock of the Company made by the Major
Shareholder.
IT IS THEREFORE AGREED AS FOLLOWS:
1. Option to Repurchase on Termination.
1.1 Repurchase Option.
(i) Terms of Option. In the event of the voluntary or involuntary
termination of the Major Shareholder's employment with or services to the
Company for any or no reason (including death or disability) the Company shall,
upon the date of such termination (as reasonably fixed and determined by the
Company) have an irrevocable, exclusive option (the "Repurchase Option") for a
period of ninety (90) days from such date to repurchase all or any portion of
the Founding Shares which have not been released from the Repurchase Option at
such time at the Repurchase FMV (as defined below). The Repurchase Option shall
be exercised by the Company by written notice to the Major Shareholder or his
executor (with a copy to the Escrow Holder) and, at the Company's option, (i)
by delivery to the
<PAGE> 99
Major Shareholder or his executor with such notice of a check in the amount of
the Repurchase FMV for the Founding Shares being repurchased, or (ii) by
cancellation by the Company of an amount of the Major Shareholder's indebtedness
to the Company equal to the Repurchase FMV for the Founding Shares being
repurchased, or (iii) by a combination of (i) and (ii) so that the combined
payment and cancellation of indebtedness equals such Repurchase FMV. Upon
delivery of such notice and the payment of the Repurchase FMV in any of the ways
described above, the Company shall become the legal and beneficial owner of the
Founding Shares being repurchased and all rights and interests therein or
relating thereto, and the Company shall have the right to retain and transfer to
its own name the number of Founding Shares being repurchased by the Company.
(ii) Repurchase FMV. The "Repurchase FMV" shall be the fair market
value of the Founding Shares to be repurchased on the first day of the
Repurchase Option, as determined in good faith by the Company's Board of
Directors.
(a) Release of Founding Shares From Repurchase Option. One thirty-sixth
(1/36th) of the Founding Shares shall be released from the Company's Repurchase
Option on the date of the closing of the Series A Preferred Stock Purchase
Agreement of even date herewith by and among the Company and certain investors
(the "Closing"), and an additional 1/36th of the Founding Shares not released
from the Repurchase Option on the date of Closing shall be released at the end
of each full month thereafter until all Founding Shares have been released;
provided in each case that the Major Shareholder's employment or services have
not been terminated prior to the date of any such release.
(b) Escrow of Founding Shares.
(i) Assignment to Escrow. The Founding Shares shall be held by the
Secretary of the Company or his designee as escrow holder ("Escrow Holder"),
along with a stock assignment executed by the Major Shareholder in blank, until
the expiration of the Company's option to repurchase such Founding Shares as
set forth above.
(ii) Escrow Instructions. The Escrow Holder is hereby directed to
permit transfer of the Founding Shares only in accordance with this Agreement or
instructions signed by both parties. In the event further instructions are
desired by the Escrow Holder, he shall be entitled to rely upon directions
executed by a majority of the Company's Board of Directors. The Escrow Holder
shall have
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<PAGE> 100
no liability for any act or omission hereunder while acting in good faith in the
exercise of his own judgment.
(iii) Transfer upon Exercise. If the Company or any assignee exercises
its Repurchase Option, the Escrow Holder, upon receipt of written notice of such
option exercise from the proposed transferee, shall take all steps necessary to
accomplish such transfer.
(iv) Delivery of Founding Shares. When the Repurchase Option has been
exercised or expires unexercised or a portion of the Founding Shares has been
released from the Repurchase Option, upon the Major Shareholder's request the
Escrow Holder shall promptly cause a new certificate to be issued for such
released Founding Shares and shall deliver such certificate to the Major
Shareholder.
(v) Shareholder Rights/Additional Securities. Subject to the terms
hereof, the Major Shareholder shall have all the rights of a shareholder with
respect to such Founding Shares while they are held in escrow, including without
limitation, the right to vote the Founding Shares and receive any cash dividends
declared thereon. If, from time to time during the term of the Company's
Repurchase Option, there is (i) any stock dividend, stock split or other change
in the Founding Shares, or (ii) any merger or sale of all or substantially all
of the assets or other acquisition of the Company, any and all new, substituted
or additional securities to which the Major Shareholder is entitled by reason of
his ownership of the Founding Shares shall be immediately subject to this
escrow, deposited with the Escrow Holder and included thereafter as "Founding
Shares" for purposes of this Agreement.
(c) Restriction on Transfer of Unreleased Founding Shares. Except for the
escrow described in Section 1.3 or transfer of the Founding Shares to the
Company or its assignees contemplated by Section 1.1, none of the Founding
Shares or any beneficial interest therein shall be transferred, encumbered or
otherwise disposed of in any way until the release of the Founding Shares from
the Company's Repurchase Option in accordance with the provisions of this
Section 1. After such release, the Founding Shares shall be subject to the
restrictions set forth in Section 2.
2. Options to Purchase or Sell.
(a) Restrictions on Transfer. No sale or other disposition (voluntary or
involuntary) of Founding Shares released from the Company's Repurchase Option
in accordance with the provisions of
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<PAGE> 101
Section 1 or of other shares of Common Stock of the Company now owned or
hereafter acquired by the Major Shareholder (the "Shares") shall be valid unless
it is made in accordance with the provisions of this Section 2.
(b) Right of First Refusal.
(i) Offer for Sale. In the event, at any time following the date of
this Agreement, the Major Shareholder or his transferee desires to accept a bona
fide third-party offer to sell or transfer in any manner Shares not or no longer
subject to the Company's Repurchase Option, he shall first offer such Shares for
sale to the Company at the same price, and upon the same terms (or terms as
similar as reasonably possible) upon which he is proposing or is to dispose of
such Shares, and shall at the same time provide notice to the Investors of such
offer and its terms. Such right of first refusal shall be provided to the
Company for a period of twenty-one (21) days following receipt by the Company of
written notice by Major Shareholder of the terms and conditions of said proposed
sale or transfer, or twenty-one (21) days following the setting of a price under
Section 2.2(c) (when the price is determined under that Section). In the event
that the Company does not exercise its right of first refusal for the full
number of Shares, the Major Shareholder or his transferee shall then offer such
remaining Shares to the Investors in the same manner as provided herein to the
Company, with the Investors' right of first refusal extending for a similar
twenty-one (21) day period. Each Investor shall be entitled to purchase a pro
rata share of such remaining Shares equal to the number of shares of Common
Stock, and other securities convertible into or exercisable for Common Stock,
(together "Common Stock Equivalents") then held by the Investor, divided by the
number of Common Stock Equivalents held by those Investors electing to exercise
their option. In the event the Shares are not disposed of within ninety (90)
days following lapse of the period of the right of first refusal provided to the
Investor, they shall once again be subject to the right of first refusal herein
provided.
(ii) Involuntary Transfers. In the event, at any time following the
date of this Agreement, of any transfer by operation of law or other involuntary
transfer (including a transfer pursuant to dissolution of marriage) of all or a
portion of the Shares, the Company (or the Investors, if the Company shall
refuse its option) shall have an option to purchase all of the Shares
transferred. Upon such a transfer, the person acquiring the Shares shall
promptly notify the Secretary of the Company and the Investors of such transfer.
The right to purchase such Shares shall be provided to
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<PAGE> 102
the Company for a period of twenty-one (21) days following receipt by the
Company of written notice by the person acquiring the Shares. If the Company
declines to exercise its option, the Secretary of the Company shall notify the
Investors, in writing, and each Investor shall have a similar option, on the pro
rata basis set forth in Section 2.2(a) above, for a period of twenty-one (21)
days following their receipt of written notice. The purchase price shall be
determined in accordance with Section 2.2(c) and may be paid by cash.
(iii) Determination of Price. With respect to any stock to be
transferred pursuant to Section 2.2(b), the price per Share shall be a price set
by the Board of Directors of the Company which will reflect the current value of
the Shares in terms of present earnings and future prospects for the Company.
The Company shall notify the Major Shareholder or his executor of the price so
determined within twenty-one (21) days after receipt by it of written notice of
the transfer or proposed transfer of the Shares. If the Major Shareholder or his
executor disputes the price as set by the Board of Directors by giving notice to
the Company within ten (10) days after being informed of the price, the price of
the Shares shall be determined by an independent financial analyst selected
jointly by the Board of Directors of the Company and the Major Shareholder, with
the cost of such determination to be divided equally between the Company and the
Major Shareholder. The Board of Directors and the Major Shareholder shall select
such analyst within thirty (30) days after receipt of notice that the Major
Shareholder is disputing the price set by the Board of Directors. If the Board
is not notified of any such dispute within such ten (10) days period, the
decision of the Board of Directors as to the purchase price shall be final. Any
time required to resolved a dispute shall be added to the twenty-one (21) day
period in which the Company may exercise its right to purchase.
(c) Right of Co-Sale. Within forty-two (42) days after receipt of the offer
delivered under Section 2.2(a), each Investor shall also notify the Major
Shareholder and the Company whether it exercises its right of co-sale under the
provisions of this Section 2.3. In the event that the Company and the Investors
do not exercise their right of first refusal set forth in Section 2.2 above for
all of the Shares proposed to be sold, and the Major Shareholder continues to
hold Shares which he proposes to sell to the prospective purchaser (the
"Co-Sale Shares"), then each of the Investors may notify the Major Shareholder
of its desire to sell to the prospective purchaser the shares of stock of the
Company which such Investor then holds on the same terms as those on which the
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<PAGE> 103
Major Shareholder proposes to sell the Co-Sale Shares. The maximum number of
shares of stock of the Company which an Investor shall be entitled to sell
pursuant to this Section 2.3 shall be equal to that number obtained by
multiplying (x) the total number of Co-Sale Shares by (y) a fraction, the
numerator of which is the total number of shares of Common Stock Equivalents
then held by the Investor and the denominator of which is double the total
number of shares of Common Stock Equivalents then held in the aggregate by the
Major Shareholder and the Investors. If an Investor elects to sell to the
prospective purchaser, then the Major Shareholder shall assign as much of his
interest in the agreement of sale with the prospective purchaser as the
Investor shall be entitled to and shall accept hereunder.
(d) Sale after Notice. If within forty-two (42) days after receipt by the
Investors of copies of the initial written notice pursuant to Section 2.2(a)
above, the Investors do not send notice pursuant to Section 2.3 above, then the
Major Shareholder shall be free to sell the stock to such prospective purchaser
but only on the same terms and conditions as contained in the notice sent to
the Investors. In the event the Shares are not disposed of within ninety (90)
days following the lapse of the right of co-sale granted pursuant to Section
2.3 to the Investors, they shall once again be subject to the rights of first
refusal and co-sale herein provided.
(e) Excluded Transfers. The Major Shareholder may transfer all or part of
the Shares to an ancestor, descendant, spouse, or a custodian or a trustee,
including a trustee of a voting trust, for the account of an ancestor,
descendant, spouse, or the Major Shareholder; provided, however, that this
Agreement shall be binding upon such transferee. All transferees of Shares or
any interest therein pursuant to this Section 2.5 shall be required as a
condition of such transfer to agree in writing in the form satisfactory to the
Company that they will receive and hold such Shares or interests subject to the
provisions of this Agreement, including, insofar as applicable, the Company's
and the Investor's right of first refusal in Section 2.2 and the Investor's
right of co-sale in Section 2.3. Any sale or transfer of the Shares shall be
void unless the provisions of this Agreement are met.
(f) Termination of Rights.
(i) Transfers in Accordance with Agreement. Any Shares transferred in
accordance with the terms of Sections 2.2, 2.3 or 2.4 above, shall no longer be
subject to or covered by this Agreement.
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<PAGE> 104
(ii) Public Market. The rights of the Company and the Investors pursuant
to this Section 2 shall end at such time as a public market exists for the
Company's Common Stock (or any other stock issued to the Major Shareholder in
exchange for the Shares). For the purpose of this Agreement, a "public market"
shall be deemed to exist if (A) such stock is listed on a national securities
exchange (as that term is used in the Securities Exchange Act of 1934) or (B)
such stock is traded on the over-the-counter market and prices are published
daily on business days in a recognized financial journal. Upon termination of
the Company's and the Investor's rights pursuant to this Section 2, at the
Major Shareholder's request the Company shall issue a new certificate
representing the Shares without a legend referring to this Agreement.
3. Stock Certificate Legend. The share certificate evidencing the Shares
shall be endorsed with the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY, THE
SHAREHOLDER AND CERTAIN OTHER SHAREHOLDERS OF THE COMPANY, A COPY OF WHICH
IS ON FILE WITH THE SECRETARY OF THE COMPANY.
4. General Provisions.
4.1 Governing Law. This Agreement shall be governed by the laws of the
State of California. This Agreement represents the entire agreement between the
parties with respect to the subject matter hereof and may only be modified or
amended in a writing signed by both parties.
4.2 Notice. Any notice, demand or request required or permitted to be given
by either the Company or the Major Shareholder pursuant to the terms of this
Agreement shall be in writing and shall be deemed given when delivered
personally or deposited in the U.S. mail, First Class with postage prepaid, and
addressed to the parties at the addresses of the parties set forth at the end
of this Agreement or such other address as a party may request by notifying the
other in writing.
4.3 Successors and Assigns. Subject to the conditions of transfer of Shares
hereunder, this Agreement shall be binding upon and inure to the benefit of and
be enforceable by the parties to this Agreement and each of their successors
and assigns.
-7-
<PAGE> 105
4.4 Attorney Fees. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
-8-
<PAGE> 106
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
day and year first set forth above.
MAJOR SHAREHOLDER: COMPANY:
Spectrx, Inc.
- ----------------------------
Keith Ignotz
No. of Common Shares: 263,999 By:
-----------------------------------
Address: Title:
-------------------- --------------------------------
--------------------
Address: 2518 Euclid Place
Fremont, CA 94539
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<PAGE> 107
EXHIBIT J
EPPSTEIN AGREEMENT
<PAGE> 108
SPECTRX, INC.
STOCK RESTRICTION AND CO-SALE AGREEMENT
THIS AGREEMENT is made and entered into this ____ day of January, 1993 by
and among Spectrx, Inc. (the "Company") a Delaware corporation, Jonathan
Eppstein (the "Major Shareholder"), and the investors set forth on the
signature page of this agreement (the "Investors").
WHEREAS, the Investors have acquired or have expressed an interest in
acquiring from the Company shares of its Series A Preferred Stock which are
convertible into shares of Common Stock of the Company.
WHEREAS, the Major Shareholder is presently the legal or beneficial owner
of 15,814 shares of the outstanding Common Stock of the Company (the "Founding
Shares").
WHEREAS, the Major Shareholder wishes to provide a further inducement to
the Investors to purchase the Company's Series A Preferred Stock by offering,
upon the terms and conditions set forth in this Agreement, the Company and the
Investors a right to purchase and the Investors an opportunity to participate
in subsequent sales of the Common Stock of the Company made by the Major
Shareholder.
IT IS THEREFORE AGREED AS FOLLOWS:
1. Option to Repurchase on Termination.
1.1 Repurchase Option.
(i) Terms of Option. In the event of the voluntary or involuntary
termination of the Major Shareholder's employment with or services to the
Company for any or no reason (including death or disability) the Company shall,
upon the date of such termination (as reasonably fixed and determined by the
Company) have an irrevocable, exclusive option (the "Repurchase Option") for a
period of ninety (90) days from such date to repurchase all or any portion of
the Founding Shares which have not been released from the Repurchase Option at
such time at the Repurchase FMV (as defined below). The Repurchase Option shall
be exercised by the Company by written notice to the Major Shareholder or his
executor (with a copy to the
<PAGE> 109
Escrow Holder) and, at the Company's option, (i) by delivery to the Major
Shareholder or his executor with such notice of a check in the amount of the
Repurchase FMV for the Founding Shares being repurchased, or (ii) by
cancellation by the Company of an amount of the Major Shareholder's indebtedness
to the Company equal to the Repurchase FMV for the Founding Shares being
repurchased, or (iii) by a combination of (i) and (ii) so that the combined
payment and cancellation of indebtedness equals such Repurchase FMV. Upon
delivery of such notice and the payment of the Repurchase FMV in any of the ways
described above, the Company shall become the legal and beneficial owner of the
Founding Shares being repurchased and all rights and interests therein or
relating thereto, and the Company shall have the right to retain and transfer to
its own name the number of Founding Shares being repurchased by the Company.
(ii) Repurchase FMV. The "Repurchase FMV" shall be the fair market
value of the Founding Shares to be repurchased on the first day of the
Repurchase Option, as determined in good faith by the Company's Board of
Directors.
(a) Release of Founding Shares From Repurchase Option. One-half (1/2) of
the Founding Shares shall be released from the Company's Repurchase Option on
the date of the closing of the Series A Preferred Stock Purchase Agreement of
even date herewith by and among the Company and certain investors (the
"Closing"), and an additional 1/36th of the Founding Shares not released from
the Repurchase Option on the date of Closing shall be released at the end of
each full month thereafter until all Founding Shares have been released;
provided in each case that the Major Shareholder's employment or services have
not been terminated prior to the date of any such release.
(b) Escrow of Founding Shares.
(i) Assignment to Escrow. The Founding Shares shall be held by the
Secretary of the Company or his designee as escrow holder ("Escrow Holder"),
along with a stock assignment executed by the Major Shareholder in blank, until
the expiration of the Company's option to repurchase such Founding Shares as
set forth above.
(ii) Escrow Instructions. The Escrow Holder is hereby directed to permit
transfer of the Founding Shares only in accordance with this Agreement or
instructions signed by both parties. In the event further instructions are
desired by the Escrow Holder, he shall be entitled to rely upon directions
executed by a majority
-2-
<PAGE> 110
of the Company's Board of Directors. The Escrow Holder shall have no liability
for any act or omission hereunder while acting in good faith in the exercise of
his own judgment.
(iii) Transfer upon Exercise. If the Company or any assignee exercises
its Repurchase Option, the Escrow Holder, upon receipt of written notice of such
option exercise from the proposed transferee, shall take all steps necessary to
accomplish such transfer.
(iv) Delivery of Founding Shares. When the Repurchase Option has been
exercised or expires unexercised or a portion of the Founding Shares has been
released from the Repurchase Option, upon the Major Shareholder's request the
Escrow Holder shall promptly cause a new certificate to be issued for such
released Founding Shares and shall deliver such certificate to the Major
Shareholder.
(v) Shareholder Rights/Additional Securities. Subject to the terms
hereof, the Major Shareholder shall have all the rights of a shareholder with
respect to such Founding Shares while they are held in escrow, including without
limitation, the right to vote the Founding Shares and receive any cash dividends
declared thereon. If, from time to time during the term of the Company's
Repurchase Option, there is (i) any stock dividend, stock split or other change
in the Founding Shares, or (ii) any merger or sale of all or substantially all
of the assets or other acquisition of the Company, any and all new, substituted
or additional securities to which the Major Shareholder is entitled by reason of
his ownership of the Founding Shares shall be immediately subject to this
escrow, deposited with the Escrow Holder and included thereafter as "Founding
Shares" for purposes of this Agreement.
(c) Restriction on Transfer of Unreleased Founding Shares. Except for the
escrow described in Section 1.3 or transfer of the Founding Shares to the
Company or its assignees contemplated by Section 1.1, none of the Founding
Shares or any beneficial interest therein shall be transferred, encumbered or
otherwise disposed of in any way until the release of the Founding Shares from
the Company's Repurchase Option in accordance with the provisions of this
Section 1. After such release, the Founding Shares shall be subject to the
restrictions set forth in Section 2.
2. Options to Purchase or Sell.
(a) Restrictions on Transfer. No sale or other disposition (voluntary or
involuntary) of Founding Shares released from the
-3-
<PAGE> 111
Company's Repurchase Option in accordance with the provisions of Section 1 or of
other shares of Common Stock of the Company now owned or hereafter acquired by
the Major Shareholder (the "Shares") shall be valid unless it is made in
accordance with the provisions of this Section 2.
(b) Right of First Refusal.
(i) Offer for Sale. In the event, at any time following the date of this
Agreement, the Major Shareholder or his transferee desires to accept a bona
fide third-party offer to sell or transfer in any manner Shares not or no
longer subject to the Company's Repurchase Option, he shall first offer such
Shares for sale to the Company at the same price, and upon the same terms (or
terms as similar as reasonably possible) upon which he is proposing or is to
dispose of such Shares, and shall at the same time provide notice to the
Investors of such offer and its terms. Such right of first refusal shall be
provided to the Company for a period of twenty-one (21) days following receipt
by the Company of written notice by Major Shareholder of the terms and
conditions of said proposed sale or transfer, or twenty-one (21) days following
the setting of a price under Section 2.2(c) (when the price is determined under
that Section). In the event that the Company does not exercise its right of
first refusal for the full number of Shares, the Major Shareholder or his
transferee shall then offer such remaining Shares to the Investors in the same
manner as provided herein to the Company, with the Investors' right of first
refusal extending for a similar twenty-one (21) day period. Each Investor shall
be entitled to purchase a pro rata share of such remaining Shares equal to the
number of shares of Common Stock, and other securities convertible into or
exercisable for Common Stock, (together "Common Stock Equivalents") then held
by the Investor, divided by the number of Common Stock Equivalents held by
those Investors electing to exercise their option. In the event the Shares are
not disposed of within ninety (90) days following lapse of the period of the
right of first refusal provided to the Investor, they shall once again be
subject to the right of first refusal herein provided.
(ii) Involuntary Transfers. In the event, at any time following the date
of this Agreement, of any transfer by operation of law or other involuntary
transfer (including a transfer pursuant to dissolution of marriage) of all or a
portion of the Shares, the Company (or the Investors, if the Company shall
refuse its option) shall have an option to purchase all of the Shares
transferred. Upon such a transfer, the person acquiring the Shares shall
promptly notify the Secretary of the Company and the Investors of such
-4-
<PAGE> 112
transfer. The right to purchase such Shares shall be provided to the Company
for a period of twenty-one (21) days following receipt by the Company of
written notice by the person acquiring the Shares. If the Company declines to
exercise its option, the Secretary of the Company shall notify the Investors,
in writing, and each Investor shall have a similar option, on the pro rata
basis set forth in Section 2.2(a) above, for a period of twenty-one (21) days
following their receipt of written notice. The purchase price shall be
determined in accordance with Section 2.2(c) and may be paid by cash.
(iii) Determination of Price. With respect to any stock to be
transferred pursuant to Section 2.2(b), the price per Share shall be a price set
by the Board of Directors of the Company which will reflect the current value of
the Shares in terms of present earnings and future prospects for the Company.
The Company shall notify the Major Shareholder or his executor of the price so
determined within twenty-one (21) days after receipt by it of written notice of
the transfer or proposed transfer of the Shares. If the Major Shareholder or his
executor disputes the price as set by the Board of Directors by giving notice to
the Company within ten (10) days after being informed of the price, the price of
the Shares shall be determined by an independent financial analyst selected
jointly by the Board of Directors of the Company and the Major Shareholder, with
the cost of such determination to be divided equally between the Company and the
Major Shareholder. The Board of Directors and the Major Shareholder shall select
such analyst within thirty (30) days after receipt of notice that the Major
Shareholder is disputing the price set by the Board of Directors. If the Board
is not notified of any such dispute within such ten (10) days period, the
decision of the Board of Directors as to the purchase price shall be final. Any
time required to resolved a dispute shall be added to the twenty-one (21) day
period in which the Company may exercise its right to purchase.
(c) Right of Co-Sale. Within forty-two (42) days after receipt of the offer
delivered under Section 2.2(a), each Investor shall also notify the Major
Shareholder and the Company whether it exercises its right of co-sale under the
provisions of this Section 2.3. In the event that the Company and the Investors
do not exercise their right of first refusal set forth in Section 2.2 above for
all of the Shares proposed to be sold, and the Major Shareholder continues to
hold Shares which he proposes to sell to the prospective purchaser (the
"Co-Sale Shares"), then each of the Investors may notify the Major Shareholder
of its desire to sell to the prospective purchaser the shares of stock of the
Company which
-5-
<PAGE> 113
such Investor then holds on the same terms as those on which the Major
Shareholder proposes to sell the Co-Sale Shares. The maximum number of shares of
stock of the Company which an Investor shall be entitled to sell pursuant to
this Section 2.3 shall be equal to that number obtained by multiplying (x) the
total number of Co-Sale Shares by (y) a fraction, the numerator of which is the
total number of shares of Common Stock Equivalents then held by the Investor and
the denominator of which is double the total number of shares of Common Stock
Equivalents then held in the aggregate by the Major Shareholder and the
Investors. If an Investor elects to sell to the prospective purchaser, then the
Major Shareholder shall assign as much of his interest in the agreement of sale
with the prospective purchaser as the Investor shall be entitled to and shall
accept hereunder.
(d) Sale after Notice. If within forty-two (42) days after receipt by the
Investors of copies of the initial written notice pursuant to Section 2.2(a)
above, the Investors do not send notice pursuant to Section 2.3 above, then the
Major Shareholder shall be free to sell the stock to such prospective purchaser
but only on the same terms and conditions as contained in the notice sent to
the Investors. In the event the Shares are not disposed of within ninety (90)
days following the lapse of the right of co-sale granted pursuant to Section
2.3 to the Investors, they shall once again be subject to the rights of first
refusal and co-sale herein provided.
(e) Excluded Transfers. The Major Shareholder may transfer all or part of
the Shares to an ancestor, descendant, spouse, or a custodian or a trustee,
including a trustee of a voting trust, for the account of an ancestor,
descendant, spouse, or the Major Shareholder; provided, however, that this
Agreement shall be binding upon such transferee. All transferees of Shares or
any interest therein pursuant to this Section 2.5 shall be required as a
condition of such transfer to agree in writing in the form satisfactory to the
Company that they will receive and hold such Shares or interests subject to the
provisions of this Agreement, including, insofar as applicable, the Company's
and the Investor's right of first refusal in Section 2.2 and the Investor's
right of co-sale in Section 2.3. Any sale or transfer of the Shares shall be
void unless the provisions of this Agreement are met.
(f) Termination of Rights.
(i) Transfers in Accordance with Agreement. Any Shares transferred in
accordance with the terms of Sections 2.2, 2.3 or 2.4 above, shall no longer be
subject to or covered by this Agreement.
-6-
<PAGE> 114
(ii) Public Market. The rights of the Company and the Investors pursuant
to this Section 2 shall end at such time as a public market exists for the
Company's Common Stock (or any other stock issued to the Major Shareholder in
exchange for the Shares). For the purpose of this Agreement, a "public market"
shall be deemed to exist if (A) such stock is listed on a national securities
exchange (as that term is used in the Securities Exchange Act of 1934) or (B)
such stock is traded on the over-the-counter market and prices are published
daily on business days in a recognized financial journal. Upon termination of
the Company's and the Investor's rights pursuant to this Section 2, at the
Major Share- holder's request the Company shall issue a new certificate
representing the Shares without a legend referring to this Agreement.
3. Stock Certificate Legend. The share certificate evidencing the Shares
shall be endorsed with the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY, THE
SHAREHOLDER AND CERTAIN OTHER SHAREHOLDERS OF THE COMPANY, A COPY OF WHICH
IS ON FILE WITH THE SECRETARY OF THE COMPANY.
4. General Provisions.
4.1 Governing Law. This Agreement shall be governed by the laws of the
State of California. This Agreement represents the entire agreement between the
parties with respect to the subject matter hereof and may only be modified or
amended in a writing signed by both parties.
4.2 Notice. Any notice, demand or request required or permitted to be given
by either the Company or the Major Shareholder pursuant to the terms of this
Agreement shall be in writing and shall be deemed given when delivered
personally or deposited in the U.S. mail, First Class with postage prepaid, and
addressed to the parties at the addresses of the parties set forth at the end
of this Agreement or such other address as a party may request by notifying the
other in writing.
4.3 Successors and Assigns. Subject to the conditions of transfer of Shares
hereunder, this Agreement shall be binding upon and inure to the benefit of and
be enforceable by the parties to this Agreement and each of their successors
and assigns.
-7-
<PAGE> 115
4.4 Attorney Fees. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
-8-
<PAGE> 116
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
day and year first set forth above.
MAJOR SHAREHOLDER: COMPANY:
Spectrx, Inc.
- ------------------------
Jonathan Eppstein
No. of Common Shares: 15,814 By:
-----------------------------
Address: Title:
- ----------------------------- --------------------------
- -----------------------------
Address: 2518 Euclid Place
Fremont, CA 94539
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<PAGE> 117
EXHIBIT K
EMPLOYMENT AGREEMENT
<PAGE> 118
SPECTRX, INC.
6015D Unity Drive
Norcross, GA 30071
January 13, 1993
Keith D. Ignotz
16040 Green Ridge Terrace
Los Gatos, CA 95032
Dear Keith:
This letter will serve to confirm our discussions relating to
your employment by Spectrx, Inc. (the "Company").
This letter, when signed by you, will constitute the agreement between the
Company and you concerning your employment by the Company and supersedes all
previous agreements and discussions.
Your annual salary, payable in accordance with the payroll policies of the
Company, will be $135,000.
Either you or the Company can terminate this employment relationship at any
time without prior notice, for any reason. Neither you nor the Company has to
give "cause" for termination. Notwithstanding the foregoing, in the event that
your employment by the Company is terminated other than for "cause" prior to
twelve months from the closing of the Company's Series A Preferred Stock
Financing (the "Anniversary"), you shall be entitled to salary and benefits
until the Anniversary. Cause shall mean (i) moral turpitude or conviction of a
felony; (ii) material dishonesty, fraud or misrepresentation; (iii) habitual
neglect of duty after appropriate warning from the Company; or (iv) failure to
promptly relocate to Georgia following the closing of the Company's Series A
Preferred Stock Financing.
As a condition to your employment, you will be required to execute a
Proprietary Information Agreement in the form attached hereto.
If you are in agreement with this proposal, please execute the enclosed
copy of this letter and return it to me along with the Proprietary Information
Agreement which I have enclosed.
Sincerely,
Acknowledged and Accepted: Mark A. Samuels, President
By:
----------------------
<PAGE> 119
EXHIBIT L
HOLDERS OF COMMON STOCK
<TABLE>
<CAPTION>
Number
Name of Shares
------------------------ -----------
<S> <C>
Mark A. Samuels 434,143
Scott W. Patterson 288,395
Thornton Morris 52,717
Dr. Robert Balley 116,288
Dr. Peter Rhee 38,763
Glen Robinson 77,991
Dr. Dan Hankey 77,991
Electromagnetic 46,515
Sciences
Jonathan Eppstein 15,814
Rick Fowler 34,266
Dan Coner 3,334
Frank Maloof 15,505
Steve Maloof 15,505
Nelson Gold 3,876
Charles Phillips 7,753
Doug Meyers 7,753
Paul Moore 3,876
Keith Ignotz 17,597
Rogers Badgett 54,268
Peter Mondalek 7,753
Emory Ethridge 7,753
William Chambers 15,505
Dean Maloof 7,753
Andy Garrett 7,753
William Zachary 27,134
Keith Ignotz 263,999
</TABLE>
<PAGE> 1
EXHIBIT 10.4
===============================================================================
SPECTRX, INC.
--------------
Note and Warrant
Purchase Agreement
--------------
November 6, 1995
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. The Notes and the Warrants. . . . . . . . . . . . . . . . . . 1
1.1 The Notes. . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 The Warrants . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Place and Date of Closing. . . . . . . . . . . . . . . . 1
1.4 Delivery . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Representations and Warranties of the Company . . . . . . . . 1
2.1 Organization and Standing. . . . . . . . . . . . . . . . 1
2.2 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Capitalization . . . . . . . . . . . . . . . . . . . . . 2
2.4 Authorization. . . . . . . . . . . . . . . . . . . . . . 2
3. Representations and Warranties of Investors . . . . . . . . . 3
3.1 Binding Obligation . . . . . . . . . . . . . . . . . . . 3
3.2 Investment Experience. . . . . . . . . . . . . . . . . . 3
3.3 Investment Intent. . . . . . . . . . . . . . . . . . . . 3
3.4 Rule 144 . . . . . . . . . . . . . . . . . . . . . . . . 3
3.5 Discussions with Management. . . . . . . . . . . . . . . 3
4. Conditions to Closing . . . . . . . . . . . . . . . . . . . . 3
4.1 Conditions to Obligations of the Investors . . . . . . . 3
4.2 Conditions to Obligations of the Company . . . . . . . . 4
5. Subsequent Purchase By Hillman Medical Ventures . . . . . . . 4
6. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . 4
6.1 Waivers and Amendments . . . . . . . . . . . . . . . . . 4
6.2 Governing Law. . . . . . . . . . . . . . . . . . . . . . 5
6.3 Survival . . . . . . . . . . . . . . . . . . . . . . . . 5
6.4 Successors and Assigns . . . . . . . . . . . . . . . . . 5
6.5 Entire Agreement . . . . . . . . . . . . . . . . . . . . 5
6.6 Notices, etc.. . . . . . . . . . . . . . . . . . . . . . 5
6.7 Payment of Fees and Expenses . . . . . . . . . . . . . . 5
6.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>
-i-
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
EXHIBITS Page
----
<S> <C> <C>
A Schedule of Investors
B Form of Convertible Promissory Note
C Form of Stock Purchase Warrant
</TABLE>
-ii-
<PAGE> 4
SPECTRX, INC.
NOTE AND WARRANT PURCHASE AGREEMENT
This Agreement is made as of November 6, 1995, among SpectRx, Inc., a
Delaware corporation (the "Company"), with its principal office at 6025A Unity
Drive, Norcross, Georgia 30071, and the investors set forth on the Schedule of
Investors attached hereto as Exhibit A (the "Investors").
1. The Notes and the Warrants.
1.1 The Notes. Each Investor severally agrees, on the terms and
conditions specified in this Agreement, to lend to the Company the sum set
forth in Column 1 of Exhibit A opposite such Investor's name (individually a
"Loan" and collectively the "Loans") at the Closing (as defined below). Each
Investor's loan shall be evidenced by a convertible promissory note
(individually a "Note" and collectively the "Notes") dated as of the date of
the Closing in the form of Exhibit B attached hereto.
1.2 The Warrants. Each Investor severally agrees, on the terms and
conditions specified in this Agreement, to purchase, for the warrant purchase
price set forth in Column 2 of Exhibit A opposite such Investor's name, a
warrant in the form of Exhibit C attached hereto (individually a "Warrant" and
collectively the "Warrants") with an aggregate exercise price as set forth
opposite such investor's name in Column 3 of Exhibit A.
1.3 Place and Date of Closing. The closing of these transactions (the
"Closing") will be held at the offices of Wilson, Sonsini, Goodrich & Rosati,
650 Page Mill Road, Palo Alto, California at 3:00 p.m. on November 6, 1995, or
at such other time and place as the parties shall mutually agree (the "Closing
Date"). At any time on or before the 120th day following the Closing, the
Company may sell additional Notes and Warrants to the Investors or to other
investors. Any such sales shall be made on the terms and conditions set forth
in this Agreement, and any Notes and Warrants sold shall be deemed to be
"Notes" and "Warrants" sold pursuant to this Agreement, and each such
additional investor shall be deemed to be an "Investor" for all purposes under
this Agreement.
1.4 Delivery. At the Closing, the Company will deliver to each
Investor a Note in the principal amount set forth opposite such Investor's name
in Column 1 of Exhibit A, and a Warrant with an aggregate exercise price as set
forth opposite such Investor's name in Column 3 of Exhibit A. At the Closing,
each Investor shall deliver to the Company the amount of such Investor's loan
and the amount of the warrant purchase price as set forth opposite such
Investor's name in Columns 1 and 2, respectively, of Exhibit A by check or wire
transfer.
2. Representations and Warranties of the Company.
2.1 Organization and Standing. The Company is a corporation duly
organized and validly existing in good standing under the laws of the State of
Delaware. The Company has all
<PAGE> 5
requisite corporate power and authority to own its properties and assets and to
carry on its business as presently conducted. The Company is qualified to do
business and is in good standing as a foreign corporation in Georgia. The
Company has not qualified to do business as a foreign corporation in any other
jurisdiction. The failure to be so qualified will not have a material adverse
effect on the Company's business as now conducted.
2.2 Subsidiaries. The Company does not presently control, directly or
indirectly, or have an ownership interest in any other corporation,
partnership, business trust, association or other business entity.
2.3 Capitalization. The authorized capital stock of the Company
consists of 10,000,000 shares of Common Stock and 7,120,000 shares of Preferred
Stock, of which 3,560,000 shares are designated as Series A Preferred Stock and
3,560,000 shares are designated Series A1 Preferred Stock. Immediately prior to
the Closing, 1,973,500 shares of Common Stock and 3,103,784 shares of Series A
Preferred Stock will be outstanding. All of the outstanding shares of Common
Stock and Series A Preferred Stock are duly authorized, validly issued, fully
paid and nonassessable. Immediately prior to the Closing, there will be
outstanding warrants to purchase 12,000 shares of the Company's Common Stock
and 360,000 shares of Series A Preferred Stock. The Company has granted a right
of first refusal to certain of the holders of Series A Preferred Stock pursuant
to a Series A Preferred Stock Purchase Agreement dated February 5, 1993 (the
"Series A Agreement"). The Company has 700,000 shares reserved for future
issuance pursuant to the Company's 1995 Incentive Stock Option Plan. The
Company has issued options to purchase 458,351 shares. There are no other
preemptive or other outstanding rights, subscriptions, options, warrants,
calls, contracts, demands, commitments, convertible securities, conversion
rights or agreements for the purchase or acquisition from the Company of any
shares of its capital stock or other securities of the Company. All of the
outstanding shares of Common Stock and Series A Preferred Stock of the Company
have been duly and validly issued in compliance with federal and state
securities laws.
2.4 Authorization. All corporate action on the part of the Company,
its directors and stockholders necessary for the sale and issuance of the
Notes, Warrants, the equity securities into which the Notes and Warrants are
convertible and exercisable (collectively the "Securities") and the performance
of the Company's obligations under this Agreement, the Notes and the Warrants
will be taken prior to the Closing. Each of this Agreement, the Notes and the
Warrants is a valid, binding and enforceable obligation of the Company, subject
to applicable bankruptcy, insolvency, reorganization or similar laws relating
to or affecting the enforcement of creditor's rights and to the availability of
the remedy of specific performance. The execution and delivery of the
Agreement, the Notes and the Warrants and the performance by the Company of its
terms do not violate, conflict with or result in a material breach of (i) the
Company's Certificate of Incorporation, as amended through the Closing Date;
(ii) the Company's Bylaws; (iii) any judgment, order or decree of any court or
arbitrator to which the Company is a party; or (iv) any contract, undertaking,
indenture or other agreement or instrument by which the Company is now bound or
to which it is now a party. The Company is not subject to any judgment, order
or decree of any court or arbitrator. Except for notices required or permitted
to be filed with certain state and federal securities commissions, which
-2-
<PAGE> 6
notices the Company agrees to file on a timely basis, the execution, delivery
and performance by the Company of this Agreement, the Notes and the Warrants in
compliance with their respective provisions do not require any governmental
consent or approval.
3. Representations and Warranties of Investors. Each Investor, for
that Investor alone, represents and warrants to the Company upon the
acquisition of the Note and the Warrant, upon conversion of the Note and upon
exercise of the Warrant as follows:
3.1 Binding Obligation. Each of this Agreement, the Note and the
Warrant is a valid, binding and enforceable obligation of the Investor, subject
to applicable bankruptcy, insolvency, reorganization or similar laws relating
to or affecting the enforcement of creditor's rights and to the availability of
the remedy of specific performance.
3.2 Investment Experience. The Investor is either an accredited
investor within the meaning of Regulation D prescribed by the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended (the
"Act") or, by virtue of the Investor's experience in evaluating and investing
in private placement transactions of securities in companies similar to the
Company, the Investor is capable of evaluating the merits and risks of the
Investor's investment in the Company and has the capacity to protect the
Investor's own interests.
3.3 Investment Intent. The Investor is acquiring the Securities for
investment for the Investor's own account and not with a view to, or for resale
in connection with, any distribution thereof. The Investor understands that the
Securities have not been registered under the Act by reason of a specific
exemption from the registration provisions of the Act that depends upon, among
other things, the bona fide nature of the investment intent as expressed
herein.
3.4 Rule 144. The Investor acknowledges that the Securities must be
held indefinitely unless subsequently registered under the Act, or unless an
exemption from such registration is available. The Investor is aware of the
provisions of Rules 144 and 144A promulgated under the Act that permit limited
resale of securities purchased in a private placement subject to the
satisfaction of certain conditions.
3.5 Discussions with Management. The Investor has had an opportunity
to discuss the Company's business, management, and financial affairs with the
Company's management and to review the Company's facilities.
4. Conditions to Closing.
4.1 Conditions to Obligations of the Investors. The Investor's
obligations at the Closing are subject to the fulfillment, on or prior to the
Closing Date, of all of the following conditions, any of which may be waived in
whole or in part by the Investors:
-3-
<PAGE> 7
(a) The representations and warranties made by the Company in
Section 2 shall be true and correct when made, and shall be true and correct on
the Closing Date with the same force and effect as if they had been made on and
as of the same date.
(b) Except for the notices required or permitted to be filed
after the Closing Date with certain federal and state securities commissions,
the Company shall have obtained all governmental approvals required in
connection with the lawful sale and issuance of the Securities.
(c) At the Closing, the sale and issuance by the Company, and
the purchase by the Investors, of the Securities shall be legally permitted by
all laws and regulations to which the Investors or the Company are subject.
(d) All corporate and other proceedings in connection with the
transactions contemplated at the Closing and all documents and instruments
incident to such transaction shall be reasonably satisfactory in substance and
form to the Investors and the Investors shall have received all such
counterpart originals or certified or other copies of such documents as they
may reasonably request.
4.2 Conditions to Obligations of the Company. The Company's
obligation to issue and sell the Securities at the Closing is subject to the
fulfillment to the Company's satisfaction on or prior to the Closing Date of
the following conditions, any of which may be waived in whole or in part by the
Company:
(a) Except for the notices required or permitted to be filed
after the Closing Date with certain federal and state securities commissions,
the Company shall have obtained all consents, approvals, permits and waivers
required in connection with the lawful sale and issuance of the Securities.
(b) At the Closing, the sale and issuance by the Company, and
the purchase by the Investors, of the Securities shall be legally permitted by
all laws and regulations to which the Investors or the Company are subject.
5. Subsequent Purchase By Hillman Medical Ventures. Hillman Medical
Ventures 1995 L.P., a Delaware limited partnership, an Investor hereunder,
hereby covenants and agrees that, within five (5) days after the Company and
Fibre Optics Medical Products, Inc. ("FOMP") have entered into an agreement
pursuant to which the Company will purchase substantially all of the assets of
FOMP, Hillman will grant an additional $250,000 Loan to the Company pursuant to
the terms of this Agreement.
6. Miscellaneous.
6.1 Waivers and Amendments. With the written consent of the record
holders of more than 50% of the shares issuable upon exercise of the Warrants
then outstanding, the obligations
-4-
<PAGE> 8
of the Company and the rights of the holders of the Securities under this
Agreement, the Notes and the Warrants may be waived (either generally or in a
particular instance, either retroactively or prospectively and either for a
specified period of time or indefinitely), and with the same consent the
Company, when authorized by resolution of its Board of Directors, may enter
into a supplementary agreement for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement
the Notes and the Warrants; provided, however, that no such waiver or
supplemental agreement shall reduce the aforesaid percentage of the shares
issuable upon exercise of the Warrants which is required to consent to any
waiver or supplemental agreement. Neither this Agreement nor any provisions
hereof may be changed, waived, discharged or terminated orally, but only by a
signed statement in writing.
6.2 Governing Law. This Agreement shall be governed in all respects
by the laws of the State of Delaware as such laws are applied to agreements
between Delaware residents entered into and to be performed entirely within
Delaware.
6.3 Survival. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by any Investor and
the Closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by
or on behalf of the Company pursuant hereto or in connection with the
transactions contemplated hereby shall be deemed to be representations and
warranties by the Company hereunder as of the date of such certificate or
instrument.
6.4 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
6.5 Entire Agreement. This Agreement (including the exhibits attached
hereto) and the other documents delivered pursuant hereto constitute the full
and entire understanding and agreement between the parties with regard to the
subjects hereof and thereof.
6.6 Notices, etc. All notices and other communications required or
permitted hereunder shall be effective upon receipt and shall be in writing and
may be delivered in person, by telecopy, electronic mail, overnight delivery
service or U.S. mail, in which event it may be mailed by first-class, certified
or registered, postage prepaid, addressed (i) if to a Investor, at such
Investor's address set forth in the Schedule of Investors, or at such other
address as such Investor shall have furnished the Company in writing, or (ii)
if to the Company, at its address set forth at the beginning of this Agreement,
or at such other address as the Company shall have furnished to the Investor
and each such other holder in writing.
6.7 Payment of Fees and Expenses. The Company and each of the
Investors shall each bear their own expenses incurred with respect to this
transaction.
-5-
<PAGE> 9
6.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall be deemed to constitute one instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
date and year first written above.
COMPANY:
SPECTRX, INC.
By:
-----------------------------------
Title:
---------------------------------
INVESTORS:
HILLMAN MEDICAL VENTURES 1995 L.P.,
A DELAWARE LIMITED PARTNERSHIP
By: Hillman/Dover Limited
Partnership, General Partner
By: Wilmington Securities, Inc.,
Its Sole General Partner
By:
-----------------------------------
Title:
---------------------------------
NORO-MOSELEY PARTNERS II, L.P.
A GEORGIA LIMITED PARTNERSHIP
By: Moseley & Company, II,
General Partner
By:
----------------------------------
Jack R. Kelly, Jr.
-6-
<PAGE> 10
---------------------------------------
Lawrence Phillips, M.D.
---------------------------------------
Richard Bowe, M.D.
---------------------------------------
Randolf Lindblad, M.D.
---------------------------------------
Emory J. Ethridge
---------------------------------------
Keith D. Ignotz
---------------------------------------
David Marco
---------------------------------------
POWERVISION, INC.
By:
------------------------------------
Title:
---------------------------------
---------------------------------------
Steven Davis
---------------------------------------
Joseph Calabro
---------------------------------------
Mark Miehle
---------------------------------------
Rogers Badgett
SIGNATURE PAGE TO
NOTE AND WARRANT PURCHASE AGREEMENT
November 6, 1995
-7-
<PAGE> 11
---------------------------------------
John Imhoff, M.D.
---------------------------------------
Dale Rorabaugh, M.D.
---------------------------------------
William Collins, M.D.
---------------------------------------
Charles M. Phillips
---------------------------------------
Steve Maloof
Frank Maloof
SIGNATURE PAGE TO
NOTE AND WARRANT PURCHASE AGREEMENT
November 6, 1995
-8-
<PAGE> 12
EXHIBIT A
SCHEDULE OF INVESTORS
<TABLE>
<CAPTION>
Number of Shares
Warrant Purchasable
Name Note Amount Purchase Price Under Warrant
- -------------------------------------- ------------- ------------- ----------------
<S> <C> <C> <C>
FIRST CLOSING
Hillman Medical Ventures 1995 L.P. $250,000.00 $ 5,000.00 75,000
824 Market Street, Suite 900
Wilmington, DE 19801
Attn: Darlene Clarke
Noro-Moseley Partners II, L.P. $250,000.00 $ 5,000.00 75,000
4200 Northside Parkway, Bldg. 9
Atlanta, GA 30327
Attn: Jack R. Kelly, Jr
----------- ----------- -----------
FIRST CLOSING TOTAL $500,000.00 $ 10,000.00 150,000
SECOND CLOSING
Dr. Lawrence Phillips $ 11,275.00 $ 225.00 3,383
1799 Castleway Lane
Atlanta, GA 30345
Richard Bowe, M.D 25,000.00 500.00 7,500
The Bowe Eye Center
1818 South Union, Suite 2
Tacoma, WA 98405
Randolf Lindblad, M.D 25,000.00 500.00 7,500
2622 Meridian Street, South
Puyallup, WA 98373
Emory J. Ethridge 100,000.00 2,000.00 30,000
211 Mooney Road
Fort Walton Beach, FL 32547
Mr. Keith D. Ignotz 59,804.00 1,196.00 17,941
3151 Willow Green Court
Duluth, GA 30136
David Marco 24,500.00 490.00 7,350
Marco Technologies
11825 Central Parkway
Jacksonville, FL 32216
</TABLE>
<PAGE> 13
<TABLE>
<CAPTION>
Number of Shares
Warrant Purchasable
Name Note Amount Purchase Price Under Warrant
- -------------------------------------- ------------- ------------- ----------------
<S> <C> <C> <C>
PowerVision, Inc. 50,000.00 1,000.00 15,000
Genesis Building
3rd Floor
Grand Cayman
Cayman Islands
British West Indies
Steven Davis 24,500.00 490.00 7,350
19 Ancient Oak Court
Marietta, GA 30076
Joseph Calabro 100,982.00 2,019.64 30,295
2631 South 15th Street
Philadelphia, PA 19145
Mark Miehle 5,000.00 100.00 1,500
Dicon
10373 Roselle Street, #4
San Diego, CA 92121
Rogers Badgett 50,000.00 1,000.00 15,000
1822 North Main
P.O. Drawer H
Madisonville, KY 42431-0600
Dr. John Imhoff 100,000.00 2,000.00 30,000
c/o Ms. Pam Watson
Cottage 441
Sea Island, GA 31561
Dr. Dale Rorabaugh 25,000.00 500.00 7,500
6580 Paseo Del Ias
Rancho Santa Fe, CA 92067
Dr. William Collins 25,000.00 500.00 7,500
266 Concord Drive
Pottstown, PA 19464
Charles M. Phillips 10,000.00 200.00 3,000
5866 Castle Lane
Norcross, GA 30093
Steve Maloof 50,000.00 1,000.00 15,000
2669 Mercedes Drive
Atlanta, GA 30345
</TABLE>
<PAGE> 14
<TABLE>
<CAPTION>
Number of Shares
Warrant Purchasable
Name Note Amount Purchase Price Under Warrant
- -------------------------------------- ------------- ------------- ----------------
<S> <C> <C> <C>
Frank Maloof 50,000.00 1,000.00 15,000
2669 Mercedes Drive
Atlanta, GA 30345
William Chambers 50,000.00 1,000.00 15,000
811 Fleming Street
Mt. Pleasant, TX 75455
Hillman Medical Ventures 1996, L.P. 98,040.00 1,960.00 29,412
824 Market Street, Suite 900
Wilmington, DE 19801
Attn: Darlene Clarke
Noro-Moseley Partners II, L.P. 98,040.00 1,960.00 29,412
4200 Northside Parkway, Bldg. 9
Atlanta, GA 30327
Attn: Jack R. Kelly, Jr
============= ============= =======
SECOND CLOSING TOTAL $ 982,141.00 $ 19,640.64 294,643
============= ============= =======
COMBINED TOTAL $1,482,141.00 $ 29,640.64 444,643
</TABLE>
<PAGE> 15
EXHIBIT B
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER APPLICABLE STATE
SECURITIES LAWS AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY AND NOT WITH A
VIEW TO OR FOR SALE IN CONNECTION WITH ANY DISTRIBUTION THEREOF. THE SECURITIES
MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
AND QUALIFICATION WITHOUT, EXCEPT UNDER CERTAIN SPECIFIC LIMITED CIRCUMSTANCES,
AN OPINION OF COUNSEL FOR THE HOLDER, CONCURRED IN BY COUNSEL FOR THE COMPANY
THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
SPECTRX, INC.
CONVERTIBLE SUBORDINATED PROMISSORY NOTE
Palo Alto, California
November 6, 1995
1. Principal and Interest
SPECTRX, INC. (the "Company"), a Delaware corporation, for value
received, hereby promises to pay to the order of or holder ("Payee") in
lawful money of the United States at the address of Payee set forth below, the
principal amount of , together with simple interest at the rate of ten
percent (10%) per annum.
The principal of and accrued interest on this Note is due and payable
thirty (30) days after written demand for such payment has been made by Payee,
provided, however, that no such demand may be made prior to November 6, 1996.
This Note may be prepaid without penalty, in whole or in part, at any time.
Upon payment in full of all principal and interest payable hereunder,
this Note shall be surrendered to the Company for cancellation.
2. Subordination
(a) "Senior Indebtedness" means the principal of and premium, if any,
and interest on indebtedness of the Company for money borrowed from commercial
banks, equipment lessors or other financial institutions under a secured or
unsecured line of credit, term loan or equipment lease.
<PAGE> 16
(b) The Company agrees and the holder of each Note, by acceptance
thereof, agrees, expressly for the benefit of the present and future holders of
Senior Indebtedness, that, except as otherwise provided herein, upon (i) an
event of default under any Senior Indebtedness, or (ii) any dissolution,
winding up, or liquidation of the Company, whether or not in bankruptcy,
insolvency or receivership proceedings, the Company shall not pay, and the
holder of such Note shall not be entitled to receive, any amount in respect of
the principal and interest of such Note unless and until the Senior
Indebtedness shall have been paid or otherwise discharged. Upon (1) an event of
default under any Senior Indebtedness, or (2) any dissolution, winding up or
liquidation of the Company, any payment or distribution of assets of the
Company, which the holder of this Note would be entitled to receive but for the
provisions hereof, shall be paid by the liquidating trustee or agent or other
person making such payment or distribution directly to the holders of Senior
Indebtedness ratably according to the aggregate amounts remaining unpaid on
Senior Indebtedness after giving effect to any concurrent payment or
distribution to the holders of Senior Indebtedness. Subject to the payment in
full of the Senior Indebtedness and until this Note is paid in full, the holder
of this Note shall be subrogated to the rights of the holders of the Senior
Indebtedness (to the extent of payments or distributions previously made to the
holders of Senior Indebtedness pursuant to this paragraph 2(b) to receive
payments or distributions of assets of the Company applicable to the Senior
Indebtedness.
(c) This Section 2 is not intended to impair, as between the Company,
its creditors (other than the holders of Senior Indebtedness) and the holder of
this Note, the unconditional and absolute obligation of the Company to pay the
principal of an interest on the Note or affect the relative rights of the
holder of this Note and the other creditors of the Company, other than the
holders of Senior Indebtedness. Nothing in this Note shall prevent the holder
of this Note from exercising all remedies otherwise permitted by applicable law
upon default under the Note, subject to the rights, if any, of the holders of
Senior Indebtedness in respect to cash, property or securities of the Company
received upon the exercise of any such remedy.
3. Conversion.
(a) The outstanding principal balance of this Note and all interest
accrued and unpaid thereon shall be automatically converted upon the closing of
the Company's next equity financing (the "Next Financing") involving the
receipt by the Company of more than $5,000,000 (including amounts received on
conversion of debt) into the securities issued in the next equity financing
(the "Securities") at the purchase price paid for the Securities by the
investors in the Next Financing; provided, however that if the closing of the
Next Financing has not occurred by 5:00 p.m. Pacific Time on November 6, 1996,
the outstanding principal balance of this Note and all interest accrued and
unpaid thereon shall be, upon the election of the Payee, converted into shares
of Common Stock of the Company at a conversion price of $1.00 per share.
(b) Upon automatic conversion of this Note, the outstanding principal
and accrued interest of the Notes shall be converted automatically without any
further action by the holder and whether or not the Note is surrendered to the
Company or its transfer agent. The Company shall not be obligated to issue
certificates evidencing the shares of the securities issuable upon conversion
-2-
<PAGE> 17
unless such Notes are either delivered to the Company or its transfer agent, or
the holder notifies the Company or its transfer agent that such Note has been
lost, stolen or destroyed and executes an agreement satisfactory to the Company
to indemnify the Company from any loss incurred by it in connection with such
Note. The Company shall, as soon as practicable after such delivery, or such
agreement and indemnification, issue and deliver at such office to such holder
of such Note, a certificate or certificates for the securities to which the
holder shall be entitled and a check payable to the holder in the amount of any
cash amounts payable as the result of a conversion into fractional shares of
the Securities. Such conversion shall be deemed to have been made immediately
prior to the close of business on the date of closing of the transaction
causing automatic conversion. The person or persons entitled to receive
securities issuable upon such conversion shall be treated for all purposes as
the record holder or holders of such securities on such date.
4. Attorneys Fees. If the indebtedness represented by this Note or any
part thereof is collected in bankruptcy, receivership or other judicial
proceedings or if this Note is placed in the hands of attorneys for collection
after default, Company agrees to pay, in addition to the principal and interest
payable hereunder, reasonable attorneys' fees and costs incurred by Payee.
SPECTRX, INC.
By:
------------------------------------
Title:
---------------------------------
-3-
<PAGE> 18
EXHIBIT C
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.
NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF
1933.
No. STOCK PURCHASE WARRANT
To Purchase Shares of Common Stock of
SPECTRX, INC.
THIS CERTIFIES that, for value received, (the "Investor"), is entitled,
upon the terms and subject to the conditions hereinafter set forth, at any time
on or after the date hereof and on or prior to November 6, 2000, but not
thereafter, to subscribe for and purchase, from SPECTRX, INC. a Delaware
corporation (the "Company"), _______________ shares of Common Stock. The
purchase price per share shall be equal to twenty percent (20%) of the price
per share of equity securities paid in the Company's next private offering of
equity securities, the aggregate gross proceeds from which exceeds $5,000,000
(whether in one transaction or in a series of transactions). The purchase price
and the number of shares for which the Warrant is exercisable shall be subject
to adjustment as provided herein.
1. Title of Warrant. Prior to the expiration hereof and subject to
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company,
referred to in Section 2 hereof, by the holder hereof in person or by duly
authorized attorney, upon surrender of this Warrant together with the
Assignment Form annexed hereto properly endorsed.
2. Exercise of Warrant. The purchase rights represented by this Warrant
are exercisable by the registered holder hereof, in whole or in part, at any
time before the close of business on November 6, 2000 by the surrender of this
Warrant and the Subscription Form annexed hereto duly executed at the office of
the Company, in Norcross, Georgia (or such other office or agency of the
Company as it may designate by notice in writing to the registered holder
hereof at the address of such holder appearing on the books of the Company),
and upon payment of the purchase price of the shares thereby purchased (by cash
or by check or bank draft payable to the order of the Company or by
cancellation of indebtedness of the Company to the holder hereof, if any, at
the time of exercise in an amount equal to the purchase price of the shares
thereby purchased); whereupon the holder of this Warrant shall be entitled to
receive a certificate for the number of shares of Common Stock so
<PAGE> 19
purchased. The Company agrees that if at the time of the surrender of this
Warrant and purchase the holder hereof shall be entitled to exercise this
Warrant, the shares so purchased shall be and be deemed to be issued to such
holder as the record owner of such shares as of the close of business on the
date on which this Warrant shall have been exercised as aforesaid.
Certificates for shares purchased hereunder shall be delivered to the
holder hereof within a reasonable time after the date on which this Warrant
shall have been exercised as aforesaid.
The Company covenants that all shares of Common Stock which may be issued
upon the exercise of rights represented by this Warrant will, upon exercise of
the rights represented by this Warrant, be fully paid and nonassessable and
free from all taxes, liens and charges in respect of the issue thereof (other
than taxes in respect of any transfer occurring contemporaneously with such
issue).
3. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. With respect to any fraction of a share called for upon the exercise
of this Warrant, an amount equal to such fraction multiplied by the then
current price at which each share may be purchased hereunder shall be paid in
cash to the holder of this Warrant.
4. Charges, Taxes and Expenses. Issuance of certificates for shares of
Common Stock upon the exercise of this Warrant shall be made without charge to
the holder hereof for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the holder of this Warrant or in such name or names as may be directed by
the holder of this Warrant; provided, however, that in the event certificates
for shares of Common Stock are to be issued in a name other than the name of
the holder of this Warrant, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the holder
hereof; and provided further, that upon any transfer involved in the issuance
or delivery of any certificates for shares of Common Stock, the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse
it for any transfer tax incidental thereto.
5. No Rights as Shareholders. This Warrant does not entitle the holder
hereof to any voting rights or other rights as a stockholder of the Company
prior to the exercise thereof.
6. Exchange and Registry of Warrant. This Warrant is exchangeable, upon
the surrender hereof by the registered holder at the above-mentioned office or
agency of the Company, for a new Warrant of like tenor and dated as of such
exchange.
The Company shall maintain at the above-mentioned office or agency a
registry showing the name and address of the registered holder of this Warrant.
This Warrant may be surrendered for exchange, transfer or exercise, in
accordance with its terms, at such office or agency of the Company,
-2-
<PAGE> 20
and the Company shall be entitled to rely in all respects, prior to written
notice to the contrary, upon such registry.
7. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
make and deliver a new Warrant of like tenor and dated as of such cancellation,
in lieu of this Warrant.
8. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall be a Saturday or a Sunday or shall be a legal holiday, then such action
may be taken or such right may be exercised on the next succeeding day not a
legal holiday.
9. Early Termination and Dilution.
(a) Merger, Sale of Assets, etc. If at any time the Company proposes
to (i) effect a merger, reorganization or sale of substantially all of the
assets of the Company in which the stockholders of the Company immediately
prior to the transaction will hold less than 50% of the surviving entity (or
its parent) immediately after the transaction, or (ii) effect a registered
public offering of the Company's shares, then the Company shall give the holder
of this Warrant thirty days notice of the proposed effective date of such
transaction and if the Warrant has not been exercised by the effective date of
such transaction it shall terminate.
(b) Reclassification, etc. If the Company at any time shall, by
subdivision, combination or reclassification of securities or otherwise, change
any of the securities to which purchase rights under this Warrant exist into
the same or a different number of securities of any class or classes, this
Warrant shall thereafter be to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities which were subject to the purchase rights under this Warrant
immediately prior to such subdivision, combination, reclassification or other
change. If shares of the Company's Common Stock are subdivided or combined into
a greater or smaller number of shares of Common Stock, the purchase price under
this Warrant shall be proportionately reduced in case of subdivision of shares
or proportionately increased in the case of combination of shares, in both
cases by the ratio which the total number of shares of Common Stock to be
outstanding immediately after such event bears to the total number of shares of
Common Stock outstanding immediately prior to such event.
(c) Cash Distributions. No adjustment on account of cash dividends or
interest on the Company's Common Stock or other securities purchasable
hereunder will be made to the purchase price under this Warrant.
-3-
<PAGE> 21
(d) Authorized Shares. The Company covenants that during the period
the Warrant is outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the issuance of
Common Stock upon the exercise of any purchase rights under this Warrant. The
Company further covenants that its issuance of this Warrant shall constitute
full authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for shares of the
Company's Common Stock upon the exercise of the purchase rights under this
Warrant.
10. Miscellaneous.
(a) Issue Date. The provisions of this Warrant shall be construed and
shall be given effect in all respect as if it had been issued and delivered by
the Company on the date hereof. This Warrant shall be binding upon any
successors or assigns of the Company. This Warrant shall constitute a contract
under the laws of the State of Delaware and for all purposes shall be construed
in accordance with and governed by the laws of said state.
(b) Restrictions. The holder hereof acknowledges that the Common
Stock acquired upon the exercise of this Warrant may have restrictions upon its
resale imposed by state and federal securities laws.
(c) Waivers and Amendments. With the consent of the Holders (as
defined below) holding rights to purchase more than 50% of the shares issuable
upon exercise of the then outstanding Warrants (as defined below), the
obligations of the Company and the right of the Holders may be waived (either
generally or in a particular instance, either retroactively or prospectively
and either for a specified period of time or indefinitely), and with the same
consent the Company may enter into a supplementary agreement for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of the Warrants; provided, however, that no such waiver or
supplemental agreement shall reduce the aforesaid percentage which is required
for consent to any waiver or supplemental agreement, without the consent of all
of the Holders of the then outstanding Warrants. As used in this Section 10(c),
(i) the "Warrants" shall be the warrants issued pursuant to the Company's Note
and Warrant Purchase Agreement of even date herewith, as amended before or
after the date hereof, and (ii) the "Holders" shall be the record holders of
the Warrants.
(d) Investment Representation Statement. If requested by the Company,
the Holder, upon exercise of this Warrant, agrees to execute an investment
representation statement containing representations substantially similar to
those set forth in Section 3 of the Company's Note and Warrant Purchase
Agreement of even date herewith.
-4-
<PAGE> 22
IN WITNESS WHEREOF, SPECTRX, INC. has caused this Warrant to be executed
by its officers thereunto duly authorized.
Dated: November 6, 1995
SPECTRX, INC.
By
-----------------------------
Title
---------------------------
-5-
<PAGE> 23
NOTICE OF EXERCISE
To: SPECTRX, INC.
(1) The undersigned hereby elects to purchase ____________ shares of
Common Stock of SPECTRX, INC. pursuant to the terms of the attached Warrant,
and tenders herewith payment of the purchase price in full, together with all
applicable transfer taxes, if any.
(2) Please issue a certificate of certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
--------------------------
(Name)
-------------------------
(Address)
(3) The undersigned represents that the aforesaid shares of Common Stock
are being acquired for the account of the undersigned for investment and not
with a view to, or for resale in connection with, the distribution thereof and
that the undersigned has no present intention of distributing or reselling such
shares.
-------------------------- --------------------------------
(Date) (Signature)
-6-
<PAGE> 24
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby
are hereby assigned to
- -------------------------------------------------------------------
(Please Print)
whose address is
--------------------------------------------------
(Please Print)
- ------------------------------------------------------------------
Dated: ______________, 19__.
Holder's Signature:
---------------------
Holder's Address:
---------------------
-----------------
Signature Guaranteed:
--------------------------------------------
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatever, and must be guaranteed by a bank or trust company. Officers of
corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.
<PAGE> 1
EXHIBIT 10.5
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
SPECTRX, INC.
6025A Unity Drive
Norcross, GA 30071
<PAGE> 2
<TABLE>
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PAGE
<S> <C>
SECTION 1 Authorization and Sale of Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Sales of Preferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2 Closing Dates; Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Delivery. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.3 Subsequent Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 3 Representations and Warranties of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.1 Organization and Standing; Articles and By-Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.2 Corporate Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.4 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.5 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.6 Labor Agreements and Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.7 Agreements; Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.8 Title to Properties and Assets; Liens, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.9 Compliance with Other Instruments, None Burdensome, etc . . . . . . . . . . . . . . . . . . . . . . . 4
3.10 Litigation, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.11 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.12 Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.13 Governmental Consent, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.14 Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.15 Brokers or Finders; Other Offers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.16 Patents and Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.17 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 4 Representations and Warranties of the Purchasers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.1 Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.2 Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.3 Rule 144 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.4 No Public Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.5 Access to Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.6 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.7 Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.8 Tax Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.9 Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
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TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
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<S> <C>
SECTION 5 Conditions to Closing of Purchasers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.1 Representations and Warranties Correct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.2 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.3 Opinion of Company's Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.4 Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.5 Blue Sky . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.6 Amended and Restated Articles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.7 Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 6 Conditions to Closing of Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.1 Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.2 Blue Sky . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.3 Amended and Restated Articles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.4 Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 7 Affirmative Covenants of the Company and the Purchasers . . . . . . . . . . . . . . . . . . . . . . . . . 9
7.1 Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7.2 Assignment of Rights to Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.3 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.4 Termination of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 8 Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 9 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9.1 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9.2 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9.4 Entire Agreement; Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9.5 Notices, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9.6 Delays or Omissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9.7 California Corporate Securities Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9.8 Georgia Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9.9 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9.10 Finder's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
9.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
9.13 Titles and Subtitles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
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<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
EXHIBITS
<TABLE>
<CAPTION>
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<S> <C>
A Schedule of Purchasers
B Amended and Restated Certificate of Incorporation
C Exceptions to Representations and Warranties
D Proprietary Information Agreement
E Registration Rights Agreement
F Legal Opinion
</TABLE>
-iii-
<PAGE> 5
SPECTRX, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
This Agreement is made as of August 30, 1996 among SpectRx, Inc., a
Delaware corporation located at 6025A Unity Drive, Norcross, Georgia 30071
(the "Company"), and the persons and entities listed on the Schedule of
Purchasers attached hereto as Exhibit A (the "Purchasers").
SECTION 1
AUTHORIZATION AND SALE OF PREFERRED STOCK
1.1 AUTHORIZATION. The Company will authorize the sale and
issuance of up to 937,500 shares of its Series B Preferred Stock (the "Series B
Shares"), having the rights, privileges and preferences as set forth in the
Amended and Restated Certificate of Incorporation (the "Articles") in the form
attached to this Agreement as Exhibit B.
1.2 SALES OF PREFERRED. Subject to the terms and conditions
hereof, the Company will severally issue and sell to each of such Purchasers
and the Purchasers will severally buy from the Company the total number of
Series B Shares set forth in column 2 of the Schedule of Purchasers at the
Closing (as defined below) for the purchase price set forth in column 3 of the
Schedule of Purchasers. The Company's agreements with each of the Purchasers
are separate agreements, and the sales to each of the Purchasers are separate
sales.
SECTION 2
CLOSING DATES; DELIVERY
2.1 CLOSING DATE. The closing of the purchase and sale of the
Series B Shares hereunder (the "Closing") shall be held at the offices of
Wilson, Sonsini, Goodrich & Rosati, Professional Corporation, 650 Page Mill
Road, Palo Alto, California 94304 at 9:00 a.m., local time, on August 30, 1996
or at such other time and place upon which the Company and the Purchasers shall
agree.
2.2 DELIVERY. At the Closing, the Company will deliver to each
Purchaser a certificate, registered in such Purchaser's name, representing the
number of Series B Shares to be purchased by such Purchaser at such Closing as
specified in the Schedule of Purchasers, against payment of the purchase price
therefor by cancellation of indebtedness, by check payable to the Company, or
by wire transfer per the Company's wiring instructions.
<PAGE> 6
2.3 SUBSEQUENT SALES. At any time on or before the 90th day
following the Closing, the Company may sell up to the balance of the authorized
Series B Shares not sold at the Closing. All such sales shall be made on the
terms and conditions set forth in this Agreement and the purchasers thereof
shall be "Purchasers" under this Agreement. Should any such sales be made, the
Company shall prepare and distribute to the Purchasers a revised Exhibit A to
this Agreement reflecting such sales.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on Exhibit C attached hereto, the Company
represents and warrants to the Purchasers as follows:
3.1 ORGANIZATION AND STANDING; ARTICLES AND BY-LAWS. The Company
is a corporation duly organized and validly existing under, and by virtue of,
the laws of the State of Delaware and is in good standing under such laws. The
Company has requisite corporate power and authority to own and operate its
properties and assets, and to carry on its business as presently conducted and
as proposed to be conducted. The Company is not presently qualified to do
business as a foreign corporation in any jurisdiction other than Georgia, and
the failure to be so qualified will not have a material adverse affect on the
Company's business as now conducted or as now proposed to be conducted.
3.2 CORPORATE POWER. The Company will have at the Closing all
requisite legal and corporate power and authority to execute and deliver this
Agreement and the agreements set forth as Exhibits hereto (collectively, the
"Agreements"), to sell and issue the Series B Shares hereunder, to issue the
Common Stock issuable upon conversion of the Series B Shares and the Series B1
Preferred Stock and to carry out and perform its obligations under the terms of
the Agreements.
3.3 SUBSIDIARIES. The Company has no subsidiaries or affiliated
companies and does not otherwise own or control, directly or indirectly, any
equity interest in any corporation, association or business entity.
3.4 CAPITALIZATION. The authorized capital stock of the Company
consists or will, upon the filing of the Articles, consist of 15,000,000 shares
of Common Stock, 3,560,000 shares of Series A Preferred Stock, 3,560,000 shares
of Series A1 Preferred Stock, 1,375,000 shares of Series B Preferred Stock and
1,375,000 shares of Series B1 Preferred Stock (the Series B and Series B1
Preferred Stock shall be referred to as the "Preferred Stock"). Immediately
prior to the Closing 2,083,500 shares of Common Stock and 3,103,784 shares of
Series A Preferred Stock will be outstanding and no other shares of capital
stock will be outstanding. There are also outstanding immediately prior to the
Closing warrants to purchase an aggregate of 1,268,643 shares of Common Stock
and 360,000 shares of Series A Preferred Stock. All of the outstanding shares
of Common Stock and Series A Preferred Stock are duly authorized, validly
issued, fully paid and nonassessable,
-2-
<PAGE> 7
and were issued in compliance with applicable federal and state securities
laws. The Series B Shares, when issued pursuant to the terms of this
Agreement, will be duly authorized, validly issued, fully paid and
nonassessable. The Company has reserved 4,935,000 shares of Common Stock for
issuance upon conversion of the Preferred Stock, and 1,150,000 shares of its
Common Stock for issuance pursuant to its 1995 Incentive Stock Plan. The
Company has also reserved 1,268,643 shares of Common Stock and 360,000 shares
of Series A Preferred Stock for issuance upon the exercise of warrants to
purchase shares of Common Stock and Series A Preferred Stock outstanding as of
the Closing. Except for those set forth in the Agreements, there are no
options, warrants or other rights (including conversion or preemptive rights)
or agreements outstanding to purchase any of the Company's authorized and
unissued capital stock.
3.5 AUTHORIZATION. All corporate action on the part of the
Company, its officers, directors and stockholders necessary for the
authorization, execution, delivery and performance of the Agreements by the
Company, the authorization, sale, issuance and delivery of the Series B Shares
(and the Common Stock issuable upon conversion of the Preferred Stock) and the
performance of all of the Company's obligations under the Agreements has been
taken or will be taken prior to the Closing. The Agreements, when executed and
delivered by the Company, shall constitute valid and binding obligations of the
Company, enforceable in accordance their terms, except as the indemnification
provisions of paragraph 7 of the Registration Rights Agreement (as defined
below) hereof may be limited by principles of public policy, and subject to
laws of general application relating to bankruptcy, insolvency and the relief
of debtors and rules of law governing specific performance, injunctive relief
or other equitable remedies. The Series B Shares, when issued in compliance
with the provisions of this Agreement, will be validly issued, will be fully
paid and nonassessable, and will have the rights, preferences and privileges
described in the Articles; the Common Stock issuable upon conversion of the
Preferred Stock has been duly and validly reserved and, when issued in
compliance with the provisions of this Agreement and the Articles, will be
validly issued, and will be fully paid and nonassessable; and the Preferred
Stock and such Common Stock will be free of any liens or encumbrances, assuming
the Purchasers take the Series B Shares with no notice thereof, other than any
liens or encumbrances created by or imposed upon the holders; provided,
however, that the Preferred Stock (and the Common Stock issuable upon
conversion thereof) may be subject to restrictions on transfer under state
and/or federal securities laws as set forth herein.
3.6 LABOR AGREEMENTS AND ACTIONS. The Company is not bound by or
subject to (and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or arrangement with
any labor union, and no labor union has requested or, to the knowledge of the
Company, has sought to represent any of the employees, representatives or
agents of the Company. There is no strike or other labor dispute involving the
Company pending, or to the knowledge of the Company threatened, which could
have a material adverse effect on the assets, properties, financial condition,
operating results, or business of the Company, nor is the Company aware of any
labor organization activity involving its employees. The Company is not aware
that any officer or key employee, or that any group of key employees, intends
to terminate their employment with the Company, nor does the Company have a
present intention to terminate the employment of any of the foregoing. The
employment of each officer and, to the best of the Company's knowledge, each
employee of the Company is terminable at the will of the Company.
-3-
<PAGE> 8
3.7 AGREEMENTS; ACTION.
(a) Except for agreements explicitly contemplated hereby,
there are no agreements, understandings or proposed transactions between the
Company and any of its officers, directors, affiliates, or any affiliate
thereof nor are there agreements or understandings between any person and/or
entities, which affects or relates to the voting or giving of written consents
with respect to any security or by a director of the Company.
(b) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company is a party or by which it is bound which may involve (i)
obligations (contingent or otherwise) of, or payments to the Company in excess
of, $5,000, or (ii) the license of any patent, copyright, trade secret or other
proprietary right to or from the Company or (iii) provisions restricting or
affecting the development, manufacture or distribution of the Company's
products or services or (iv) indemnification by the Company with respect to
infringements of proprietary rights.
(c) The Company has not (i) declared or paid any
dividends, or authorized or made any distribution upon or with respect to any
class or series of its capital stock, (ii) incurred any indebtedness for money
borrowed or any other liabilities individually in excess of $5,000 or, in the
case of indebtedness and/or liabilities individually less than $5,000, in
excess of $25,000 in the aggregate, (iii) made any loans or advances to any
person, other than ordinary advances for travel expenses, or (iv) sold,
exchanged or otherwise disposed of any of its assets or rights, other than the
sale of its inventory in the ordinary course of business.
(d) For the purposes of subsections (b) and (c) above,
all indebtedness, liabilities, agreements, understandings, instruments,
contracts and proposed transactions involving the same person or entity
(including persons or entities the Company has reason to believe are affiliated
therewith) shall be aggregated for the purpose of meeting the individual
minimum dollar amounts of such subsections.
3.8 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company has
good and marketable title to its properties and assets, and has good title to
all its leasehold interests, in each case subject to no mortgage, pledge, lien,
lease, encumbrance or charge, other than (i) the lien of current taxes not yet
due and payable, and (ii) possible minor liens and encumbrances which do not in
any case materially detract from the value of the property subject thereto or
materially impair the operations of the Company, and which have not arisen
otherwise than in the ordinary course of business.
3.9 COMPLIANCE WITH OTHER INSTRUMENTS, NONE BURDENSOME, ETC. The
Company is not in violation or default of any term of its Articles or Bylaws,
or in any material respect of any term or provision of any material mortgage,
indebtedness, indenture, contract, agreement, instrument, judgment, order or
decree, and to the best of its knowledge is not in violation of any statute,
rule or regulation applicable to the Company where such violation would
materially and adversely affect the Company. The execution, delivery and
performance of and compliance with the Agreements, and the issuance of the
Series B Shares and the Common Stock issuable upon conversion of the Preferred
-4-
<PAGE> 9
Stock, have not resulted and will not result in any material violation of, or
conflict with, or constitute with or without the passage of time and the giving
of notice a material violation or default under, the Company's Articles or
Bylaws or any of its agreements nor result in the creation of, any mortgage,
pledge, lien, encumbrance or charge upon any of the properties or assets of the
Company; and there is no such violation or default which materially and
adversely affects the business of the Company or any of its properties or
assets.
3.10 LITIGATION, ETC. There are no actions, suits, proceedings or
investigations pending against the Company or its properties before any court
or governmental agency (nor, to the best of the Company's knowledge, is there
any reasonable basis therefor or threat thereof). The foregoing includes,
without limitation, actions pending or threatened (or any basis therefor known
to the Company) involving the prior employment of any of the Company's
employees, their use in connection with the Company's business of any
information or techniques allegedly proprietary to any of their former
employers or their obligations under any agreement with their former employers.
The Company is not a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or which the Company intends to initiate.
3.11 EMPLOYEES. To the best of the Company's knowledge, no
employee of the Company is in violation of any term of any employment contract,
patent disclosure agreement or any other contract or agreement relating to the
relationship of such employee with the Company or any other party because of
the nature of the business conducted or to be conducted by the Company. Each
employee of the Company with access to confidential or proprietary information
has executed a Proprietary Information Agreement, the form of which is attached
hereto as Exhibit D.
3.12 REGISTRATION RIGHTS. Except as set forth in the Amended and
Restated Registration Rights Agreement attached hereto as Exhibit E (the
"Registration Rights Agreement"), the Company is not under any contractual
obligation to register (as defined in Section 1 of the Registration Rights
Agreement) any of its presently outstanding securities or any of its securities
which may hereafter be issued.
3.13 GOVERNMENTAL CONSENT, ETC. No consent, approval or
authorization of or designation, declaration or filing with any governmental
authority on the part of the Company is required in connection with the valid
execution and delivery of this Agreement, or the offer, sale or issuance of the
Series B Shares (and the Common Stock issuable upon conversion of the Preferred
Stock), or the consummation of any other transaction contemplated hereby,
except (a) filing of the Articles in the office of the Delaware Secretary of
State, and (b) qualification (or taking such action as may be necessary to
secure an exemption from qualification, if available) of the offer and sale of
the Series B Shares (and the Common Stock issuable upon conversion of the
Preferred Stock) under applicable state securities laws, which filings and
qualifications, if required, will be accomplished in a timely manner.
3.14 OFFERING. Subject to the accuracy of the Purchasers'
representations in Section 4 hereof, the offer, sale and issuance of the Series
B Shares to be issued in conformity with the terms of
-5-
<PAGE> 10
this Agreement, and the issuance of the Common Stock to be issued upon
conversion of the Preferred Stock, constitute transactions exempt from the
registration requirements of Section 5 of the Securities Act of 1933, as
amended (the "Securities Act") and in compliance with applicable state
securities laws.
3.15 BROKERS OR FINDERS; OTHER OFFERS. The Company has not
incurred, and will not incur, directly or indirectly, as a result of any action
taken by the Company, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement.
3.16 PATENTS AND TRADEMARKS. There are no outstanding options,
licenses, or agreements of any kind relating to the intellectual property of
the Company. The Company is not bound by or a party to any options, licenses
or agreements of any kind with respect to the patents, trademarks, service
marks, trade names, copyrights, trade secrets, licenses, information,
proprietary rights and processes of any other person or entity. The Company
has not received any communications alleging that the Company has violated or,
by conducting its business as proposed, would violate any of the patents,
trademarks, service marks, trade names, copyrights or trade secrets or other
proprietary rights of any other person or entity. The Company is not aware
that any of its employees is obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would
interfere with the use of his best efforts to promote the interests of the
Company or that would conflict with the Company's business as proposed to be
conducted. Neither the execution nor delivery of this Agreement, nor the
carrying on of the Company's business by the employees of the Company, nor the
conduct of the Company's business as proposed, will, to the Company's
knowledge, conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any of such employees is now obligated. The Company
does not believe it is or will be necessary to utilize any inventions of any of
its employees (or people it currently intends to hire) made prior to their
employment by the Company.
3.17 DISCLOSURE. This Agreement, together with the Exhibits
attached hereto and all other certificates delivered in connection herewith,
when taken as a whole, does not contain any untrue statement of a material fact
or omit any material fact necessary in order to make the statements contained
herein not misleading in light of the circumstances under which they were made.
The Company has fully provided each Purchaser with all the information such
Purchaser has requested for deciding whether to purchase the Series B Shares
and all information which the Company believes is reasonably necessary to
enable such Purchaser to make such decision.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser hereby severally represents and warrants to the Company
with respect to the purchase of the Series B Shares as follows:
-6-
<PAGE> 11
4.1 EXPERIENCE. It has substantial experience in evaluating and
investing in private placement transactions of securities in companies similar
to the Company so that it is capable of evaluating the merits and risks of its
investment in the Company and has the capacity to protect its own interests.
4.2 INVESTMENT. It is acquiring the Series B Shares and the
Common Stock underlying the Preferred Stock for investment for its own account,
not as a nominee or agent, and not with the view to, or for resale in
connection with, any distribution thereof. It understands that the Series B
Shares to be purchased and the Common Stock underlying the Preferred Stock have
not been, and will not be, registered under the Securities Act by reason of a
specific exemption from the registration provisions of the Securities Act, the
availability of which depends upon, among other things, the bona fide nature
of the investment intent and the accuracy of such Purchaser's representations
as expressed herein.
4.3 RULE 144. It acknowledges that the Preferred Stock and the
underlying Common Stock must be held indefinitely unless subsequently
registered under the Securities Act or unless an exemption from such
registration is available. It is aware of the provisions of Rule 144
promulgated under the Securities Act which permit limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions, including, among other things, the existence of a public market for
the shares, the availability of certain current public information about the
Company, the resale occurring not less than two years after a party has
purchased and paid for the security to be sold, the sale being effected through
a "broker's transaction" or in transactions directly with a "market maker" and
the number of shares being sold during any three-month period not exceeding
specified limitations.
4.4 NO PUBLIC MARKET. It understands that no public market now
exists for any of the securities issued by the Company and that the Company has
made no assurances that a public market will ever exist for the Company's
securities.
4.5 ACCESS TO DATA. It has had an opportunity to discuss the
Company's business, management and financial affairs with its management. It
has also had an opportunity to ask questions of officers of the Company, which
questions were answered to its satisfaction. It understands that such
discussions, as well as any written information issued by the Company, were
intended to describe certain aspects of the Company's business and prospects
but were not a thorough or exhaustive description.
4.6 AUTHORIZATION. This Agreement when executed and delivered by
such Purchaser will constitute a valid and legally binding obligation of the
Purchaser, enforceable in accordance with its terms, except as the
indemnification provisions of paragraph 7 of the Registration Rights Agreement
may be limited by principles of public policy, and subject to laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief or other
equitable remedies.
-7-
<PAGE> 12
4.7 BROKERS OR FINDERS. The Company has not, and will not, incur,
directly or indirectly, as a result of any action taken by such Purchaser, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement.
4.8 TAX LIABILITY. It has reviewed with its own tax advisors the
federal, state, local and foreign tax consequences of this investment and the
transactions contemplated by this Agreement (including any tax consequences
resulting from the recently enacted tax legislation). It relies solely on such
advisors and not on any statements or representations of the Company or any of
its agents. It understands that it (and not the Company) shall be responsible
for its own tax liability that may arise as a result of this investment or the
transactions contemplated by this Agreement.
4.9 LEGEND. It is understood that the certificates evidencing the
Series B Shares will bear the following legend: "THESE SECURITIES HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION
STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT."
SECTION 5
CONDITIONS TO CLOSING OF PURCHASERS
The Purchasers' obligations to purchase the Series B Shares at the
Closing are, at the option of the Purchasers, subject to the fulfillment of the
following conditions:
5.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations
and warranties made by the Company in Section 3 hereof shall be true and
correct in all material respects as of the Closing.
5.2 COVENANTS. All covenants, agreements and conditions contained
in this Agreement to be performed by the Company on or prior to the Closing
shall have been performed or complied with in all material respects.
5.3 OPINION OF COMPANY'S COUNSEL. The Purchasers shall have
received from Wilson, Sonsini, Goodrich & Rosati, counsel to the Company, an
opinion addressed to them, dated the Closing Date, in substantially the form of
Exhibit F.
5.4 COMPLIANCE CERTIFICATE. The Company shall have delivered to
the Purchasers a certificate of the Company executed by the President of the
Company, dated as of the Closing certifying to the fulfillment of the
conditions specified in Sections 5.1 and 5.2 of this Agreement.
-8-
<PAGE> 13
5.5 BLUE SKY. The Company shall have obtained all necessary state
securities law permits and qualifications, or have the availability of
exemptions therefrom, required by any state for the offer and sale of the
Series B Shares and the Common Stock issuable upon conversion of the Preferred
Stock.
5.6 AMENDED AND RESTATED ARTICLES. The Articles shall have been
filed with the Delaware Secretary of State.
5.7 REGISTRATION RIGHTS AGREEMENT. The Company and the parties
listed thereon shall have executed and delivered the Registration Rights
Agreement in substantially the form attached hereto as Exhibit E.
SECTION 6
CONDITIONS TO CLOSING OF COMPANY
The Company's obligation to sell and issue the Series B Shares at the
Closing is, at the option of the Company, subject to the fulfillment as of the
Closing of the following conditions:
6.1 REPRESENTATIONS. The representations made by the Purchasers
in Section 4 hereof shall be true and correct when made, and shall be true and
correct on the Closing.
6.2 BLUE SKY. The Company shall have obtained all necessary state
securities law permits and qualifications, or have the availability of
exemptions therefrom, required by any state for the offer and sale of the
Series B Shares and the Common Stock issuable upon conversion of the Preferred
Stock.
6.3 AMENDED AND RESTATED ARTICLES. The Articles shall have been
filed with the Delaware Secretary of State.
6.4 LEGAL MATTERS. All material matters of a legal nature which
pertain to this Agreement, and the transactions contemplated hereby, shall have
been reasonably approved by counsel to the Company.
SECTION 7
AFFIRMATIVE COVENANTS OF THE COMPANY AND THE PURCHASERS
The Company hereby covenants and agrees as follows:
7.1 FINANCIAL INFORMATION. As long as a Purchaser holds not less
than 100,000 shares of Preferred Stock and/or Common Stock issued upon
conversion of the Preferred Stock:
-9-
<PAGE> 14
(a) As soon as practicable after the end of each fiscal
year, and in any event within 120 days thereafter, consolidated balance sheets
of the Company and its subsidiaries, if any, as of the end of such fiscal year,
and consolidated statements of income and consolidated statements of changes in
financial position of the Company and its subsidiaries, if any, for such year,
prepared in accordance with generally accepted accounting principles and
setting forth in each case in comparative form the figures for the previous
fiscal year (or, at the election of the Company, setting forth in comparative
form the budgeted figures for the fiscal year then reported), all in reasonable
detail and audited by independent public accountants of national standing
selected by the Company.
(b) As soon as practicable after the end of each calendar
quarter, and in any event within 15 days thereafter, an unaudited quarterly
report including a balance sheet, profit and loss statement cash flow analysis
(prepared in accordance with generally accepted accounting principles other
than for accompanying notes and subject to changes resulting from year-end
audit adjustments).
7.2 ASSIGNMENT OF RIGHTS TO FINANCIAL INFORMATION. The rights
granted pursuant to Section 7.1 may not be assigned or otherwise conveyed by
any Purchaser or by any subsequent transferee of any such rights without the
prior written consent of the Company; provided, however, that any Purchaser may
assign to any transferee, other than a competitor of the Company, and after
giving notice to the Company, the rights granted pursuant to Section 7.1 to (i)
a transferee who acquires at least 100,000 shares of Preferred Stock and/or
Common Stock issued upon conversion of the Preferred Stock (appropriately
adjusted for Recapitalizations) or (ii) any constituent partner of a Purchaser.
7.3 INSPECTION. The Company shall permit each Purchaser, at such
Purchaser's expense, to visit and inspect the Company's properties, to examine
its books of account and records and to discuss the Company's affairs, finances
and accounts with its officers, all at such reasonable times as may be
requested by the Purchaser, provided, however, that the Company shall not be
obligated pursuant to this Section 7.3 to provide access to any information
which it reasonably considers to be a trade secret or similar confidential
information.
7.4 TERMINATION OF COVENANTS. The covenants set forth in Sections
7.1, 7.2 and 7.3 shall terminate and be of no further force or effect at such
time as the Company is required to file reports pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended.
SECTION 8
REGISTRATION RIGHTS
The Purchasers shall have the registration rights set forth in the
Registration Rights Agreement attached hereto as Exhibit E.
-10-
<PAGE> 15
SECTION 9
MISCELLANEOUS
9.1 GOVERNING LAW. This Agreement shall be governed in all
respects by the internal laws of the State of Delaware as applied to agreements
entered into among Delaware residents to be performed entirely within Delaware.
9.2 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by any Purchaser
and the closing of the transactions contemplated hereby.
9.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto,
provided, however, that the rights of a Purchaser to purchase the Preferred
shall not be assignable without the consent of the Company.
9.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other
documents delivered pursuant hereto at the Closing constitute the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof, and no party shall be liable or bound to any other
party in any manner by any warranties, representations or covenants except as
specifically set forth herein or therein. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged
or terminated other than by a written instrument signed by the party against
whom enforcement of any such amendment, waiver, discharge or termination is
sought; provided, however, that holders of a majority of the Common Stock
issued or issuable upon conversion of the Preferred Stock may, with the
Company's prior written consent, waive, modify or amend on behalf of all
Purchasers, any provision hereof.
9.5 NOTICES, ETC. All notices and other communications required
or permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by
messenger, addressed (a) if to a Purchaser, at such Purchaser's address set
forth in Exhibit A, or at such other address as such Purchaser shall have
furnished to the Company in writing, or (b) if to any other holder of any
Shares, at such address as such holder shall have furnished the Company in
writing, or, until any such holder so furnishes an address to the Company, then
to and at the address of the last holder of such Shares who has so furnished
an address to the Company, or (c) if to the Company, one copy should be sent to
its address set forth on the cover page of this Agreement and addressed to the
attention of the Corporate Secretary, or at such other address as the Company
shall have furnished to the Purchasers.
Each such notice or other communication shall for all purposes
of this Agreement be treated as effective or having been given when delivered
if delivered personally, or, if sent by mail, at the earlier of its receipt or
72 hours after the same has been deposited in a regularly maintained receptacle
for the deposit of the United States mail, addressed and mailed as aforesaid.
-11-
<PAGE> 16
9.6 DELAYS OR OMISSIONS. Except as expressly provided herein, no
delay or omission to exercise any right, power or remedy accruing to any holder
of any Shares, upon any breach or default of the Company under this Agreement,
shall impair any such right, power or remedy of such holder nor shall it be
construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any
other breach or default theretofore or thereafter occurring. Any waiver,
permit, consent or approval of any kind or character on the part of any holder
of any breach or default under this Agreement, or any waiver on the part of any
holder of any provisions or conditions of this agreement, must be in writing
and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement or by law or otherwise
afforded to any holder, shall be cumulative and not alternative.
9.7 CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE
SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF
SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION
THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE OF SECURITIES
IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100, 25102, OR 25105 OF THE
CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE
EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE
IS SO EXEMPT.
9.8 GEORGIA LEGEND. The Purchasers acknowledge that each
certificate shall bear the following legend: THESE SECURITIES HAVE BEEN ISSUED
OR SOLD IN RELIANCE ON PARAGRAPH 13 OF CODE SECTION 10-5-9 OF THE GEORGIA
SECURITIES ACT OF 1973, AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN A
TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT OR PURSUANT TO AN EFFECTIVE
REGISTRATION UNDER SUCH ACT.
9.9 EXPENSES.
(a) The Company and each Purchaser shall bear its own
legal and other expenses with respect to this Agreement.
(b) If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement (including any exhibit or
schedule hereto), the prevailing party shall be entitled to reasonable
attorney's fees, costs and necessary disbursements in addition to any other
relief to which such party may be entitled.
9.10 FINDER'S FEES. With respect to any finder's fees arising out
of the purchase of the Series B Shares pursuant to this Agreement:
-12-
<PAGE> 17
(a) The Company hereby agrees to indemnify and to hold
the Purchasers harmless of and from any liability for any commission or
compensation in the nature of a finder's fee to any broker or other person or
firm (and the costs and expenses of defending against such liability or
asserted liability) for which the Company or any of its employees or
representatives are responsible.
(b) Each Purchaser hereby agrees to indemnify and to hold
the Company harmless of and from any liability for any commission or
compensation in the nature of a finder's fee to any broker or other person or
firm (and the costs and expenses of defending against such liability or
asserted liability) for which such Purchaser or any of its employees or
representatives, are responsible.
9.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which may be executed by less than all of the Purchasers,
each of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
9.12 SEVERABILITY. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that no such severability shall be
effective if it materially changes the economic benefit of this Agreement to
any party.
9.13 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
-13-
<PAGE> 18
The foregoing agreement is hereby executed as of the date first above written.
"COMPANY" "PURCHASERS"
SPECTRX, INC. HILLMAN MEDICAL VENTURES 1995
a Delaware corporation L.P., a Delaware limited
partnership
By: By: Hillman/Dover Limited
------------------------------ Partnership, general partner
Title:
--------------------------- By: Wilmington Securities, Inc.,
its sole general partner
By:
------------------------------
Title:
---------------------------
HILLMAN MEDICAL VENTURES 1996
L.P., a Delaware limited partnership
By: Hillman/Dover Limited
Partnership, general partner
By: Wilmington Securities, Inc.,
its sole general partner
By:
------------------------------
Title:
---------------------------
-14-
<PAGE> 19
NORO-MOSELEY PARTNERS II, L.P.,
a Georgia limited partnership
By: Moseley & Company, II,
general partner
By:
--------------------------------
Jack R. Kelly Jr.
Title: General Partner
------------------------------------
Rogers Badett
------------------------------------
Richard Bowe, M.D.
------------------------------------
Joseph Calabro
------------------------------------
William Chambers
------------------------------------
Dr. William Collins
------------------------------------
Steven Davis
------------------------------------
Emory J. Ethridge
------------------------------------
Jimmy Funderburke
-15-
<PAGE> 20
-----------------------------------
R. Andrew Garrett
-----------------------------------
Nelson Gold
The Gavin Herbert, Jr.
Successor Trust
By:
-------------------------------
Title: Trustee
By:
-------------------------------
Title: Trustee
-----------------------------------
Keith D. Ignotz
-----------------------------------
John Imhoff
-----------------------------------
Randolf Lindblad, M.D.
-----------------------------------
Dean Maloof
-----------------------------------
Frank Maloof
-----------------------------------
Steve Maloof
-16-
<PAGE> 21
----------------------------------
David Marco
----------------------------------
Mark Miehle
----------------------------------
Peter Mondalek
----------------------------------
Michael Paul Moore
----------------------------------
Charles M. Phillips
----------------------------------
Dr. Lawrence Phillips
POWERVISION, INC.
By:
------------------------------
Title:
---------------------------
----------------------------------
Dr. Dale Rorabaugh
----------------------------------
Mark A. Samuels
----------------------------------
William Zachary
-17-
<PAGE> 22
EXHIBIT A
SCHEDULE OF PURCHASERS
<PAGE> 23
EXHIBIT A
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
(1) (2) (3)
NUMBER OF SHARES OF AGGREGATE PURCHASE PRICE
NAME AND ADDRESS SERIES B PREFERRED OF SERIES B PREFERRED
- ---------------------------------- ------------------ ---------------------
<S> <C> <C>
Hillman Medical Ventures 1995 L.P. 67,603 $ 270,412
824 Market Street, Suite 900
Wilmington, DE 19801
Attn: Darlene Clarke
Hillman Medical Ventures 1996, L.P. 562,930 $ 2,251,720
824 Market Street, Suite 900
Wilmington, DE 19801
Attn: Darlene Clarke
Noro-Moseley Partners II, L.P. 193,033 $ 772,132
4200 Northside Parkway, Bldg. 9
Atlanta, GA 30327
Attn: Jack Kelly
Rogers Badgett 62,969 $ 251,876
1822 North Main St
P. O. Drawer H
Madisonville, KY 42431
Richard Bowe, M.D 6,484 $ 25,936
The Bowe Eye Center
1818 South Union, Suite 2
Tacoma, WA 98405
Joseph Calabro 26,193 $ 104,772
2631 South 15th Street
Philadelphia, PA 19145
William Chambers 27,969 $ 111,876
811 Fleming Street
Mt. Pleasant, TX 75455
I. William Collins, O.D 6,484 $ 25,936
266 Concord Drive
Pottstown, PA 19464
Steven Davis 6,355 $ 25,420
19 Ancient Oak Court
Marietta, GA 30076
</TABLE>
<PAGE> 24
<TABLE>
<CAPTION>
(1) (2) (3)
NUMBER OF SHARES OF AGGREGATE PURCHASE PRICE
NAME AND ADDRESS SERIES B PREFERRED OF SERIES B PREFERRED
- ---------------------------------- ------------------ ---------------------
<S> <C> <C>
Emory J. Ethridge 30,938 $ 123,753
211 Mooney Road
Fort Walton Beach, FL 32547
Ilse Fong 18,750 $ 75,000
P.O. Box 550246
Atlanta, Georgia 30355
Jimmy Funderburke 12,500 $ 50,000
One Special Money Boulevard
Atlanta, GA 30340
R. Andrew Garrett 1,250 $ 5,000
950 East Paces Ferry Road
Suite 1475
Atlanta, GA 30326
Nelson Gold 500 $ 2,000
6250 Mountain Brook Lane
Atlanta, GA 30328
Keith D. Ignotz 28,012 $ 112,048
3151 Willow Green Court
Duluth, GA 30136
John Imhoff 50,938 $ 203,752
c/o Ms. Pam Watson
Cottage 441
Sea Island, GA 31561
Randolf Lindblad, M.D 6,484 $ 25,936
2622 Meridian Street South
Puyallup, WA 98373
Frank Maloof 42,969 $ 171,876
2669 Mercedes Drive N.E
Atlanta, GA 30345
Steve Maloof 37,969 $ 151,876
2669 Mercedes Drive N.E
Atlanta, GA 30345
David Marco 8,855 $ 35,420
c/o Marco Technologies
11825 Central Parkway
Jacksonville, FL 32216
</TABLE>
<PAGE> 25
<TABLE>
<CAPTION>
(1) (2) (3)
NUMBER OF SHARES OF AGGREGATE PURCHASE PRICE
NAME AND ADDRESS SERIES B PREFERRED OF SERIES B PREFERRED
- ---------------------------------- ------------------ ---------------------
<S> <C> <C>
Mark Miehle 1,296 $ 5,184
c/o Dicon
10373 Roselle St., #4
San Diego, CA 92121
PPM, Inc. 5,500 $ 22,000
c/o Peter Mondalek
42111 Ridgehurst Drive
Smyrna, GA 30080
Michael Paul Moore 3,000 $ 12,000
c/o J.C. Brandford & Company
5 Concourse Parkway, Ste. 2750
Doug Myers 1,100 $ 4,400
8940 Nesbit Lake Drive
Alpharetta, Georgia 30202
Charles M. Phillips 4,093 $ 16,372
5866 Castle Lane
Norcross, GA 30093
Dr. Lawrence Phillips 2,924 $ 11,696
1799 Castleway Lane
Atlanta, GA 30345
PowerVision, Inc. 12,969 $ 51,876
Genesis Building, 3rd. Floor
Grand Cayman
Cayman Islands
British West Indies
Dr. Dale Rorabaugh 6,484 $ 25,936
6580 Paseo Del Ias
Rancho Santa Fe, CA 92067
William Zachary 35,500 $ 142,000
1000 Commerce Drive
Decatur, GA 30030
========= ============
Total 1,272,051 $ 5,088,205
</TABLE>
<PAGE> 26
EXHIBIT B
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
<PAGE> 27
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
----------------------------------
I, EDWARD J. FREEL, SECRETARY OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED CERTIFICATE OF
"SPECTRX, INC." FILED IN THIS OFFICE ON THE THIRTIETH DAY OF AUGUST, A.D. 1996,
AT 9 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
* * * * * * * * * *
[SEAL OF THE SECRETARY OF STATE]
--------------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 8087989
DATE: 08-30-96
<PAGE> 28
RESTATED CERTIFICATE OF INCORPORATION
OF
SPECTRX, INC.
SpectRx, Inc., a Corporation organized and existing under the laws of
the State of Delaware (the "Corporation"), hereby certifies that:
1. The name of the Corporation is SpectRx, Inc. The Corporation
was originally incorporated under the same name, and the original Certificate
of Incorporation was filed with the Secretary of State of the State of Delaware
on October 27, 1992.
2. This Certificate restates and amends the provisions of the
Corporation's Restated Certificate of Incorporation to read as set forth in
Exhibit A attached to this Certificate.
3. This restatement and amendment of the Corporation's
Certificate of Incorporation has been duly adopted by the Corporation's Board
of Directors in accordance with Sections 242 and 245 of the General Corporation
Law of the State of Delaware, and by the holders of each class of outstanding
stock entitled to vote thereon as a class by written consent given in
accordance with Section 228 of the General Corporation Law of the State of
Delaware. Written notice pursuant to Section 228 has been given to those
stockholders of the Corporation who have not consented in writing to this
action.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Restatement of Certificate of Incorporation to be signed by Mark A. Samuels,
its President, and attested by Robert D. Brownell, its Assistant Secretary,
this 28 day of August, 1996.
SPECTRX, INC.
By: /s/ Mark A. Samuels
--------------------------------
Mark A. Samuels, President
ATTEST:
/s/ Robert D. Brownell
- ------------------------------
Robert D. Brownell,
Assistant Secretary
<PAGE> 29
EXHIBIT A
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
SPECTRX, INC.
I
The name of this corporation is SpectRx, Inc. (the "Corporation").
II
The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle, Zip Code 19801. The name of its registered
agent at such address is The Corporation Trust Company.
III
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
IV
The Corporation is authorized to issue two classes of capital stock:
Preferred Stock, $0.001 par value per share, and Common Stock, $0.001 par value
per share. The total number of shares of Preferred Stock which the Corporation
shall have the authority to issue is 9,870,000 of which 3,560,000 shares shall
be designated Series A Preferred Stock ("Series A Preferred Stock"), 3,560,000
shares shall be designated Series A1 Preferred Stock ("Series A1 Preferred
Stock"), 1,375,000 shares shall be designated Series B Preferred Stock ("Series
B Preferred Stock"), and 1,375,000 shares shall be designated Series B1
Preferred Stock ("Series B1 Preferred Stock"). The total number of shares of
Common Stock which the Corporation shall have the authority to issue is
15,000,000. The Series A Preferred Stock, Series A1 Preferred Stock, Series B
Preferred Stock and Series B1 Preferred Stock are herein collectively referred
to as the "Preferred Stock."
V
The rights, preferences, privileges and restrictions granted to or
imposed upon the Common Stock and the Preferred Stock are as follows:
1. Dividends. The holders of Series A Preferred Stock, Series A1
Preferred Stock, Series B Preferred Stock and Series B1 Preferred Stock shall
be entitled, when and if declared by the board of directors of the Corporation,
to dividends out of assets of the Corporation legally available
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therefor at the rate of $0.10, $0.10, $0.40 and $0.40 per share, per annum,
respectively. Dividends on the Preferred Stock shall be payable in preference
and prior to any payment of any dividend on the Common Stock of the
Corporation. Thereafter, the holders of Common Stock shall be entitled, when
and if declared by the board of directors of the Corporation, to dividends out
of assets of the Corporation legally available therefor. Notwithstanding
anything set forth in this paragraph 1, no dividends shall be payable on any
shares of Common Stock issued with respect to shares of Series A1 Preferred
Stock and Series B1 Preferred Stock issued pursuant to paragraph 4(e)(ii)(A)
and 4(e)(ii)(B). The right to dividends on shares of Common Stock and
Preferred Stock shall not be cumulative, and no right shall accrue to holders
of Common Stock or Preferred Stock by reason of the fact that dividends on said
shares are not declared in any prior period.
2. Liquidation Preference.
(a) Preference. In the event of any liquidation,
dissolution or winding up of the Corporation, either voluntarily or
involuntarily, the holders of Preferred Stock shall be entitled to receive,
prior and in preference to any distribution of any of the assets or surplus
funds of the Corporation to the holders of Common Stock of the Corporation by
reason of their ownership thereof, an amount equal to $1.00, $1.00, $4.00 and
$4.00 per share for each outstanding share of Series A Preferred Stock, Series
A1 Preferred Stock, Series B Preferred Stock and Series B1 Preferred Stock,
respectively, plus any declared but unpaid dividends on such share. If upon
such liquidation, dissolution or winding up of the Corporation, the assets of
the Corporation are insufficient to provide for the cash payment described
above to the holders of Preferred Stock, such assets as are available shall be
paid to the holders of Preferred Stock in proportion to the full preferential
amount each such holder is otherwise entitled to receive.
After the payment or setting apart of payment to the holders
of Preferred Stock of the preferential amounts so payable to them, the holders
of Common Stock shall be entitled to receive any remaining assets of the
Corporation on a pro rata basis, based upon the number of shares held.
(b) Reorganization or Merger. A reorganization or merger of
the Corporation with or into any other corporation or corporations, or a sale
of all or substantially all of the assets of the Corporation shall be deemed to
be a liquidation within the meaning of this paragraph 2; provided that the
holders of Preferred Stock and Common Stock shall be paid in cash or in
securities received or in a combination thereof (which combination shall be in
the same proportions as the consideration received in the transaction). Any
securities to be delivered to the holders of the Preferred Stock and Common
Stock upon a merger, reorganization or sale of substantially all of the assets
of the Corporation shall be valued as follows:
(i) If traded on a securities exchange, the value shall be
deemed to be the average of the closing prices of the securities on such
exchange over the 30-day period ending three (3) business days prior to the
closing;
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(ii) If actively traded over-the-counter, the
value shall be deemed to be the average of the closing bid prices over the
30-day period ending three (3) business days prior to the closing; and
(iii) If there is no active public market, the
value shall be the fair market value thereof, as mutually determined by the
Corporation and the holders of not less than a majority of the outstanding
shares of Preferred Stock, provided that if the Corporation and the holders of
a majority of the outstanding shares of Preferred Stock are unable to reach
agreement, then by independent appraisal by an investment banker hired and paid
by the Corporation, but acceptable to the holders of a majority of the
outstanding shares of Preferred Stock.
(c) Noncash Distributions. If any of the assets of the
Corporation are to be distributed other than in cash under this paragraph 2 or
for any purpose, then the board of directors of the Corporation shall promptly
engage independent competent appraisers to determine the value of the assets to
be distributed to the holders of Preferred Stock or Common Stock. The
Corporation shall, upon receipt of such appraiser's valuation, give prompt
written notice to each holder of shares of Preferred Stock or Common Stock of
the appraiser's valuation.
3. Voting Rights.
(a) The holder of each share of Preferred Stock shall be
entitled to the number of votes equal to the number of shares of Common Stock
into which each share of Preferred Stock could be converted on the record date
for the vote or written consent of stockholders and, except as otherwise
required by law, shall have voting rights and powers equal to the voting rights
and powers of the Common Stock. The holder of each share of Preferred Stock
shall be entitled to notice of any stockholders' meeting in accordance with the
bylaws of the Corporation and shall vote with holders of the Common Stock upon
all matters submitted to a vote of stockholders, except those matters required
to be submitted to a class or series vote pursuant to paragraph 5 herein or by
law. Fractional votes shall not, however, be permitted and any fractional
voting rights resulting from the above formula (after aggregating all shares of
Common Stock into which shares of Preferred Stock held by each holder could be
converted) shall be rounded to the nearest whole number (with one-half rounded
upward to one).
(b) Notwithstanding the foregoing, as long as more than
800,000 shares of Preferred Stock are outstanding, the holders of Preferred
Stock, voting as a class, shall have the right to elect two members of the
Corporation's board of directors. The holders of Common Stock, voting as a
single class, shall have the right to elect all other members of the
Corporation's board of directors. Notwithstanding any Bylaw provisions to the
contrary, the stockholders entitled to elect a particular director shall be
entitled to remove such director or to fill a vacancy in the seat formerly held
by such a director, all in accordance with the applicable provisions provided
in the General Corporation Law of the State of Delaware.
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4. Conversion. The holders of the Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Preferred Stock
shall be convertible without the payment of any additional consideration by the
holder thereof and, at the option of the holder thereof, at any time after the
date of issuance of such share at the office of the Corporation or any transfer
agent for the Preferred Stock. Each share of each series of Preferred Stock
shall be convertible into the number of fully paid and nonassessable shares of
Common Stock which results from dividing the Conversion Price (as hereinafter
defined) per share in effect for such series of Preferred Stock at the time of
conversion into the per share Conversion Value (as hereinafter defined) of such
series. Upon the filing of this Amended and Restated Certificate of
Incorporation with the Delaware Secretary of State, the initial Conversion
Price per share of Series A Preferred Stock, Series A1 Preferred Stock, Series
B Preferred Stock and Series B1 Preferred Stock shall be $1.00, $1.00, $4.00
and $4.00, respectively. The per share Conversion Value of the Series A
Preferred Stock, the Series A1 Preferred Stock, the Series B Preferred Stock
and the Series B1 Preferred Stock shall be $1.00, $1.00, $4.00 and $4.00,
respectively. The initial Conversion Price of the Series A Preferred Stock,
the Series A1 Preferred Stock, the Series B Preferred Stock and the Series B1
Preferred Stock shall be subject to adjustments from time to time as provided
below. The number of shares of Common Stock into which a share of Preferred
Stock is convertible is hereinafter referred to as the "Conversion Rate" of
such series.
(b) Automatic Conversion. Each share of Preferred Stock
shall automatically be converted into shares of Common Stock at its then
effective Conversion Rate immediately upon the closing of a firm commitment
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offer and sale of
Common Stock of which the aggregate gross proceeds attributable to sales for
the account of the Corporation exceed $10,000,000 at a per share issuance price
of at least $5.00 per share.
(c) Mechanics of Conversion. Before any holder of
Preferred Stock shall be entitled to convert the same into shares of Common
Stock, such holder shall surrender the certificate(s) therefor, duly endorsed,
at the office of the Corporation or of any transfer agent for the Preferred
Stock and shall give written notice to the Corporation at such office that the
holder elects to convert the same (except that no such written notice of
election to convert shall be necessary in the event of an automatic conversion
pursuant to paragraph 4(b) hereof). The Corporation shall, as soon as
practicable thereafter, issue and deliver at such office to such holder of
Preferred Stock certificate(s) for the number of shares of Common Stock to
which the holder shall be entitled as aforesaid. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the shares of Preferred Stock to be converted (except that
in the case of an automatic conversion pursuant to paragraph 4(b) hereof such
conversion shall be deemed to have been made immediately prior to the closing
of the offering referred to in paragraph 4(b)) and the person(s) entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder(s) of such shares of Common Stock
on such date.
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(d) Fractional Shares. In lieu of any fractional shares
to which the holder of Preferred Stock would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the fair market
value of one share of Common Stock as determined by the board of directors of
the Corporation. Whether or not fractional shares of Common Stock are issuable
upon such conversion shall be determined on the basis of the total number of
shares of Preferred Stock of each holder at the time converting into Common
Stock and the number of shares of Common Stock issuable upon such aggregate
conversion.
(e) Adjustment of Conversion Price.
(i) Special Definitions. For purposes of this
paragraph 4(e), the following definitions shall apply:
(A) "Excluded Stock" shall mean:
(1) all shares of Common Stock issued
and outstanding on the date this document is filed with the Delaware Secretary
of State and all shares of Common Stock issued or issuable upon conversion of
Preferred Stock; and
(2) all shares of Common Stock or other
securities issued or issuable to officers, directors, consultants or employees
of the Corporation or lessors, lenders or licensors to the Corporation which
are approved by of the board of directors of the Corporation. All outstanding
shares of Excluded Stock (including shares of Common Stock issuable upon
conversion of the Preferred Stock) shall be deemed to be outstanding for all
purposes of the computations of subparagraph 4(e)(iii) below.
(B) "Financing" means any issuance of Common Stock
(including securities exercisable for or convertible into Common Stock) in a
transaction with gross proceeds to the Corporation equal to or greater than
$100,000 where the holders of Preferred Stock are offered an opportunity to
purchase their Preferred Stock Pro Rata Share of the additional shares of
Common Stock (including securities exercisable for or convertible into Common
Stock) issued in such transaction.
(C) "Preferred Stock Pro Rata Share" shall mean the
amount determined by multiplying the total number of shares of Common Stock
(including securities exercisable for or convertible into Common Stock) offered
for sale by the Corporation in a Financing to all parties by a fraction, (x)
the numerator of which is the total number of shares of Common Stock (including
securities convertible into Common Stock) held by such stockholder and (y) the
denominator of which is the total number of shares of Common Stock (including
securities convertible into Common Stock) then outstanding plus any shares
reserved for issuance pursuant to plans approved by the board of directors of
the Corporation.
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(D) "Series A Dilutive Issuance" shall
mean an issuance of Common Stock (including securities exercisable for or
convertible into Common Stock) in a Financing for a consideration per share
less than the Conversion Price of the Series A Preferred Stock in effect on the
date of and immediately prior to such issue.
(E) "Series B Dilutive Issuance" shall
mean an issuance of Common Stock (including securities exercisable for or
convertible into Common Stock) in a Financing for a consideration per share
less than the Conversion Price of the Series B Preferred Stock in effect on the
date of and immediately prior to such issue.
(F) "Participating Investor" shall mean
any holder of Preferred Stock that purchases at least its Preferred Stock Pro
Rata Share of either a Series A Dilutive Issuance or Series B Dilutive
Issuance.
(G) "Non-Participating Investor" shall
mean any holder of Preferred Stock that is not a Participating Investor.
(ii) Shadow Preferred.
(A) Series A Preferred Stock. In the
event the Corporation issues additional shares of Common Stock (including
securities exercisable for or convertible into Common Stock) in a Series A
Dilutive Issuance, each share of Series A Preferred Stock held by each and
every Nonparticipating Investor shall, immediately prior to the closing of the
applicable Series A Dilutive Issuance (the "Closing"), be converted into one
fully paid and nonassessable share of Series A1 Preferred Stock plus such
number of fully paid and nonassessable shares of Common Stock as is determined
by multiplying one by the Forced Conversion Rate. The Forced Conversion Rate
shall be equal to (X) minus one, where (X) equals the per share Conversion
Price of Series A Preferred Stock immediately prior to the Closing divided into
the per share Conversion Value of Series A Preferred Stock. Upon the
conversion of Series A Preferred Stock held by a Nonparticipating Investor as
set forth herein, such shares of Series A Preferred Stock shall no longer be
outstanding on the books of the Corporation and the Nonparticipating Investor
shall be treated for all purposes as the record holder of such shares of Series
A1 Preferred Stock and, if applicable, Common Stock upon the Closing of the
applicable Series A Dilutive Issuance.
(B) Series B Preferred Stock. In the
event the Corporation issues additional shares of Common Stock (including
securities exercisable for or convertible into Common Stock) in a Series B
Dilutive Issuance, each share of Series B Preferred Stock held by each and
every Nonparticipating Investor shall, immediately prior to the closing of the
applicable Series B Dilutive Issuance (the "Closing"), be converted into one
fully paid and nonassessable share of Series B1 Preferred Stock plus such
number of fully paid and nonassessable shares of Common Stock as is determined
by multiplying one by the Forced Conversion Rate. The Forced Conversion Rate
shall be equal to (X) minus one, where (X) equals the per share Conversion
Price of Series B Preferred Stock immediately prior to the Closing divided into
the per share Conversion Value of Series B Preferred
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Stock. Upon the conversion of Series B Preferred Stock held by a
Nonparticipating Investor as set forth herein, such shares of Series B
Preferred Stock shall no longer be outstanding on the books of the Corporation
and the Nonparticipating Investor shall be treated for all purposes as the
record holder of such shares of Series B1 Preferred Stock and, if applicable,
Common Stock upon the Closing of the applicable Series B Dilutive Issuance.
(iii) Adjustment of Conversion Price for Issuance
of Common Stock. No adjustment in the Conversion Price of Series A1 Preferred
Stock or Series B1 Preferred Stock shall be made in respect of the issuance of
additional shares of Common Stock or securities exercisable for or convertible
into Common Stock (other than in the event of stock dividends, subdivisions,
split-ups, combinations, dividends or recapitalizations which are covered by
paragraphs 4(e)(iv), (v) and (vi) hereof).
The Conversion Price of each series of Preferred
Stock shall be subject to adjustment from time to time as follows:
If the Corporation shall issue any Common Stock other
than Excluded Stock for a consideration per share less than the Conversion
Price in effect immediately prior to the issuance of such Common Stock
(excluding stock dividends, subdivisions, split-ups, combinations, dividends or
recapitalizations which are covered by paragraphs 4(e)(iv), (v) and (vi)), the
Conversion Price in effect immediately after each such issuance shall forthwith
(except as provided in this paragraph 4(e)) be adjusted to a price equal to the
quotient obtained by dividing:
(1) an amount equal to the sum of
(x) the total number of shares of Common
Stock outstanding (including any shares of Common Stock issuable upon
conversion of the Preferred Stock, or deemed to have been issued pursuant to
subdivision (C) of this clause (iii)) immediately prior to such issuance
multiplied by the Conversion Price in effect immediately prior to such
issuance, plus
(y) the consideration received by the
Corporation upon such issuance, by
(2) the total number of shares of Common
Stock outstanding (including any shares of Common Stock issuable upon
conversion of the Preferred Stock or deemed to have been issued pursuant to
subdivision (C) of this clause (iii)) immediately after the issuance of such
Common Stock.
For the purposes of this clause (iii), the following
provisions shall be applicable:
(A) 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 any
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discounts or commissions paid or incurred by the Corporation in connection with
the issuance and sale thereof.
(B) 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 value thereof as
determined by the board of directors of the Corporation, in accordance with
generally accepted accounting treatment; provided, however, that if, at the
time of such determination, the Corporation's Common Stock is traded in the
over-the-counter market or on a national or regional securities exchange, such
fair market value as determined by the board of directors of the Corporation
shall not exceed the aggregate "Current Market Price" (as defined below) of the
shares of Common Stock being issued.
(C) In the case of the issuance of
(i) options to purchase or rights to subscribe for Common Stock (other than
Excluded Stock), (ii) securities by their terms convertible into or
exchangeable for Common Stock (other than Excluded Stock), or (iii) options to
purchase or rights to subscribe for such convertible or exchangeable securities
(other than Excluded Stock):
(1) 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), if any, received by the Corporation 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;
(2) 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 conversion or exchange 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
Corporation for any such securities and related options or rights (excluding
any cash received on account of accrued interest or accrued dividends), plus
the minimum additional consideration, if any, to be received by the Corporation
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);
(3) 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,
or on any change in the minimum purchase price of such options, rights or
securities, other than a change resulting from the antidilution provisions of
such options, rights or securities, the Conversion Price shall forthwith be
readjusted to such
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Conversion Price as would have obtained had the adjustment made upon (x) the
issuance of such options, rights or securities not exercised, converted or
exchanged prior to such change, as the case may be, been made upon the basis of
such change or (y) the options or rights related to such securities not
converted or exchanged prior to such change, as the case may be, been made upon
the basis of such change; and
(4) 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 Conversion Price shall forthwith be readjusted to
such Conversion Price as would have obtained had the adjustment made upon the
issuance of such options, rights, convertible or exchangeable securities or
options or rights related to such convertible or exchangeable securities, as
the case may be, been made upon the basis of the issuance of only the number of
shares of Common Stock actually issued upon the exercise of such options or
rights, upon the conversion or exchange of such convertible or exchangeable
securities or upon the exercise of the options or rights related to such
convertible or exchangeable securities, as the case may be.
(iv) If the number of shares of Common Stock
outstanding at any time after the date hereof 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, on the date such payment is made or such change is
effective, the Conversion Price of a series of Preferred Stock shall be
appropriately decreased so that the number of shares of Common Stock issuable
on conversion of any shares of such series of Preferred Stock shall be
increased in proportion to such increase of outstanding shares of Common Stock.
(v) If the number of shares of Common Stock
outstanding at any time after the date hereof is decreased by a combination of
the outstanding shares of Common Stock, then, on the effective date of such
combination, the Conversion Price of a series of Preferred Stock shall be
appropriately increased so that the number of shares of Common Stock issuable
on conversion of any shares of a series of Preferred Stock shall be decreased
in proportion to such decrease in outstanding shares of Common Stock.
(vi) In case, at any time after the date hereof,
of any capital reorganization (other than a reorganization covered by paragraph
2(b) above), or any reclassification of the stock of the Corporation (other
than as a result of a stock dividend or subdivision, split-up or combination of
shares of stock), the shares of a series of Preferred Stock shall, after such
capital reorganization or reclassification, be convertible into the kind and
number of shares of stock or other securities or property of the Corporation or
otherwise to which such holder would have been entitled if immediately prior to
such capital reorganization or reclassification he had converted his shares of
such series of Preferred Stock into Common Stock. The provisions of this
clause (vi) shall similarly apply to successive reorganizations,
reclassifications, consolidations, mergers, sales or other dispositions.
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(vii) All calculations under this paragraph 4 shall
be made to the nearest cent or to the nearest one hundredth (1/100) of a share
of stock, as the case may be.
(viii) For the purpose of any computation pursuant
to this paragraph 4(e), the "Current Market Price" at any date of one share of
Common Stock, shall be deemed to be the average of the highest reported bid and
the lowest reported offer prices on the preceding business day as furnished by
the National Quotation Bureau, Incorporated (or equivalent recognized source of
quotations) or the closing sale price, if reported; provided, however, that if
the Common Stock is not traded in such manner that the quotations referred to
in this clause (viii) are available for the period required hereunder, Current
Market Price shall be determined in good faith by the board of directors of the
Corporation, but if challenged by the holders of more than 50% of the
outstanding shares of Preferred Stock, then as determined by an independent
appraiser selected by the board of directors of the Corporation, the cost of
such appraisal to be borne by the challenging parties.
(f) Minimal Adjustments. No adjustment in the Conversion
Price need be made if such adjustment would result in a change in the
Conversion Price of less than $0.01. Any adjustment of less than $0.01 which
is not made shall be carried forward and shall be made at the time of and
together with any subsequent adjustment which, on a cumulative basis, amounts
to an adjustment of $0.01 or more in the Conversion Price.
(g) No Impairment. The Corporation will not through any
reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Corporation, but will at all times in
good faith assist in the carrying out of all the provisions of this paragraph 4
and in the taking of all such action as may be necessary or appropriate in
order to protect the Conversion Rights of the holders of Preferred Stock
against impairment.
(h) Certificate as to Adjustments. Upon the occurrence
of each adjustment or readjustment of the Conversion Rate pursuant to this
paragraph 4, the Corporation at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare and
furnish to each holder of Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon written
request at any time of any holder of Preferred Stock, furnish or cause to be
furnished to such holder a like certificate setting forth (i) such adjustments
and readjustments, (ii) the Conversion Rate of such series of Preferred Stock
at the time in effect, and (iii) the number of shares of Common Stock and the
amount, if any, of other property which at the time would be received upon the
conversion of such holder's shares of Preferred Stock.
(i) Notices of Record Date. In the event of any taking
by the Corporation of a record of the holders of any class of securities for
the purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class
or any other securities or
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property or to receive any right, the Corporation shall mail to each holder of
Preferred Stock at least ten (10) days prior to such record date, a notice
specifying the date on which any such record is to be taken for the purpose of
such dividend or distribution or right, and the amount and character of such
dividend, distribution or right.
(j) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of Preferred Stock such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of Preferred Stock, the
Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares of stock as shall be sufficient for such
purpose.
(k) Notices. Any notice required by the provisions of
this paragraph 4 to be given to the holder of shares of Preferred Stock shall
be deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at such holder's address appearing on the
books of the Corporation.
(l) Reissuance of Converted Shares. No shares of
Preferred Stock which have been converted into Common Stock after the original
issuance thereof shall ever again be reissued and all such shares of Preferred
Stock so converted shall upon such conversion cease to be a part of the
authorized shares of stock of the Corporation.
5. Protective Provisions.
(a) Preferred Stock. In addition to any other class vote
that may be required by law, so long as any of the Preferred Stock shall be
outstanding the Corporation shall not, without first obtaining the approval (by
vote or written consent, as provided by law) of the holders of at least a
majority of the then outstanding shares of Preferred Stock, voting together as
a class:
(i) Change of Rights. Materially and adversely
alter or change the rights, preferences or privileges of the Preferred Stock;
(ii) Create a New Class. Create, or obligate
itself to create, any new class or series of shares of stock having preferences
over or being on a parity with any outstanding shares of Preferred Stock as to
dividends, assets, liquidation preferences, conversion rights or voting rights
or being otherwise superior to or on a parity with any such preference or
priority of any outstanding shares of Preferred Stock, or authorize or issue
shares of stock of any class or series (or any bonds, debentures, notes or
other obligations convertible into or exchangeable for, or having option rights
to purchase, any shares of stock of this Corporation) having any such
preference or priority or being otherwise superior to or being on a parity with
any such preference or priority; or
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(iii) merge or consolidate with any other
Corporation or sell, lease, or convey substantially all of the assets of the
corporation or otherwise effect a recapitalization or reorganization of the
Corporation.
VI
1. Limitation of Directors' Liability. The liability of the
directors of this Corporation for monetary damages shall be eliminated to the
fullest extent permissible under the laws of the State of Delaware.
2. Indemnification of Corporate Agents. This Corporation is
authorized to indemnify the directors and officers of the Corporation to the
fullest extent permissible under the laws of the State of Delaware.
3. Repeal or Modification. Any repeal or modification of the
foregoing provisions of this Section VI shall not adversely affect any right of
indemnification or limitation of liability of an agent of this Corporation
relating to acts or omissions occurring prior to such repeal or modification.
VII
The Corporation is to have perpetual existence.
VIII
In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter, amend
or repeal the bylaws of the Corporation.
IX
The number of directors which will constitute the whole Board of
Directors of the Corporation shall be as specified in the bylaws of the
Corporation.
X
The election of directors need not be by written ballot unless the
bylaws of the Corporation shall so provide.
XI
Meeting of stockholders may be held within or without the State of
Delaware, as the bylaws may provide. The books of the Corporation may be kept
(subject to any provisions contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the bylaws of the Corporation.
-12-
<PAGE> 41
XII
Advance notice of new business and stockholder nomination for the
election of directors shall be given in the manner and to the extent provided
in the bylaws of the Corporation.
XIII
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Restated Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
-13-
<PAGE> 42
EXHIBIT C
EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES
<PAGE> 43
EXHIBIT C
SCHEDULE OF EXCEPTIONS
This Schedule of Exceptions, dated as of August 30, 1996, is made and
given pursuant to Section 3 of the SpectRx, Inc. Series B Preferred Stock
Purchase Agreement dated August 30, 1996 (the "Agreement"). The Section
numbers in this Schedule of Exceptions correspond to the section numbers in the
Agreement; however, any information disclosed herein under any section number
shall be deemed to be disclosed and incorporated into any other section number
under this Agreement where such disclosure would be appropriate. Any terms
defined in the Agreement shall have the same meaning when used in this Schedule
of Exceptions as when used in the Agreement unless the context otherwise
requires.
3.3 Subsidiaries. The Company is currently in the process of
forming a subsidiary (the "Subsidiary") for the purpose of commercializing
certain technology of the Company. The Company intends to own approximately
65% of the Subsidiary, and the remaining stock of the Subsidiary will be owned
by the Subsidiary's management.
3.4 Capitalization. One of the warrants outstanding as of the
Closing, for the purchase of up to 824,000 shares of Common Stock, is not
currently exercisable and will only become exercisable upon the occurrence of
certain events as specified in the warrant.
3.7 Agreements; Action.
- The Company has entered into an agreement with one of its
officers, Jonathon Eppstein, Vice President of Research and
Development (the "Officer"), and two corporations controlled
by the Officer, pursuant to which the Company received a
license to certain technology owned by the Officer's
corporations. In return, the Company paid a license fee,
agreed to pay a royalty and issued a warrant to the
corporations which, upon the occurrence of certain events,
will become exercisable.
- Mark Samuels and Keith Ignotz, the Company's chief executive
officer and chioef operating officer, respectively, purchased
shares of Common Stock of the Company and paid for such shares
by delivering a promissory note to the Company. The aggregate
amount owed under the notes was approximately $48,525 as of
the Closing.
- The Company has entered into a development and licensing
agreement with Boehringer Mannheim Corporation.
- The Company has entered into a development and licensing
agreement with Healthdyne Technologies.
- The Company has entered into a development and licensing
agreement with Teijin Limited.
- The Company has entered into a licensing agreement with Joseph
R. Lakowicz.
- The Company has entered into a licensing agreement with M.D.
Andersen Cancer Center, University of Texas.
<PAGE> 44
- The Company has entered into a licensing agreement with
Georgia Institute of Technology.
3.10 Litigation, etc. The Company has received a demand notice for
payment of a $20,000 license fee due under an expired license from Martin
Marietta Energy Systems. The Company is presently in the process of
negotiating a resolution of this dispute.
3.16 Patents and Trademarks
The Company purchased all of the technology and other intellectual
property, relating to non-invasive means of diagnosing disease through the use
of fluorescence spectroscopy, of Laser Atlanta Optics, Inc.
-2-
<PAGE> 45
EXHIBIT D
PROPRIETARY INFORMATION AGREEMENT
<PAGE> 46
SPECTRX, INC.
EMPLOYEE PROPRIETARY INFORMATION AGREEMENT
As a condition of my employment with Spectrx, Inc., its subsidiaries,
affiliates, successors or assigns (together the "COMPANY"), and in
consideration of my employment with the Company and my receipt of the
compensation now and hereafter paid to me by Company, I agree to the following:
1. At-Will Employment. I understand and acknowledge that my
employment with the Company is for an unspecified duration and constitutes
"at-will" employment. I acknowledge that this employment relationship may be
terminated at any time, with or without good cause or for any or no cause, at
the option either of the Company or myself, with or without notice.
2. Confidential Information.
(a) Company Information. I agree at all times during the term
of my employment and thereafter, to hold in strictest confidence, and not to
use, except for the benefit of the Company, or to disclose to any person, firm
or corporation without written authorization of the Board of Directors of the
Company, any Confidential Information of the Company. I understand that
"CONFIDENTIAL INFORMATION" means any Company proprietary information, technical
data, trade secrets or know-how, including, but not limited to, research,
product plans, products, services, customer lists and customers (including, but
not limited to, customers of the Company on whom I called or with whom I became
acquainted during the term of my employment), markets, software, developments,
inventions, processes, formulas, technology, designs, drawings, engineering,
hardware configuration information, marketing, finances or other business
information disclosed to me by the Company either directly or indirectly, in
writing, orally, by drawings, or by observation of parts or equipment. I
further understand that Confidential Information does not include any of the
foregoing items which has become publicly known and made generally available
through no wrongful act of mine or of others who were under confidentiality
obligations as to the item or items involved.
(b) Former Employer Information. I agree that I will not,
during my employment with the Company, improperly use or disclose any
proprietary information or trade secrets of any former or concurrent employer
or other person or entity and that I will not bring onto the premises of the
Company any unpublished document or proprietary information belonging to any
such employer, person or entity unless consented to in writing by such
employer, person or entity.
(c) Third Party Information. I recognize that the Company has
received and in the future will receive from third parties their confidential
or proprietary information subject to a duty on the Company's part to maintain
the confidentiality of such information and to use it only for certain limited
purposes. I agree to hold all such confidential or proprietary information in
the strictest confidence and not to disclose it to any person, firm or
corporation or to use it except as necessary in carrying out my work for the
Company consistent with the Company's agreement with such third party.
3. Inventions.
(a) Inventions Retained and Licensed. I have attached hereto,
as Exhibit A, a list describing all inventions, original works of authorship,
developments, improvements, and trade secrets which were made by me prior to my
employment with the Company, which belong to me, which relate to the Company's
proposed business, products or research and development, and which are not
assigned to the Company hereunder (collectively referred to as "Prior
Inventions"); or, if no such list is attached, I represent that there are no
such Prior Inventions. If in the course of my employment with the Company, I
incorporate into any invention, improvement, development, product,
copyrightable material or trade secret any invention, improvement, development,
concept, discovery or other proprietary information owned by me or in which I
have an interest, the Company is hereby granted and shall have a nonexclusive,
royalty-free, irrevocable, perpetual, worldwide license to make, have made,
modify, use and sell such item as part of or in connection with such product,
process or machine.
(b) Assignment of Inventions. I agree that I will promptly make
full written disclosure to the Company, will hold in trust for the sole right
and benefit of the Company, and hereby assign to the Company, or its designee,
all my right, title, and interest in and to any and all inventions, original
works of authorship, developments, concepts, improvements or trade secrets,
<PAGE> 47
whether or not patentable or registrable under copyright or similar laws, which
I may solely or jointly conceive or develop or reduce to practice, or cause to
be conceived or developed or reduced to practice, during the period of time I
am in the employ of the Company (collectively referred to as "INVENTIONS"),
except as provided in Section 3(f) below. I further acknowledge that all
original works of authorship which are made by me (solely or jointly with
others) within the scope of and during the period of my employment with the
Company and which are protectible by copyright are "works made for hire," as
that term is defined in the United States Copyright Act.
(c) Inventions Assigned to the United States. I agree to assign
to the United States government all my right, title, and interest in and to any
and all Inventions whenever such full title is required to be in the United
States by a contract between the Company and the United States or any of its
agencies.
(d) Maintenance of Records. I agree to keep and maintain
adequate and current written records of all Inventions made by me (solely or
jointly with others) during the term of my employment with the Company. The
records will be in the form of notes, sketches, drawings, and any other format
that may be specified by the Company. The records will be available to and
remain the sole property of the Company at all times.
(e) Patent and Copyright Registrations. I agree to assist the
Company, or its designee, at the Company's expense, in every proper way to
secure the Company's rights in the Inventions and any copyrights, patents, mask
work rights or other intellectual property rights relating thereto in any and
all countries, including the disclosure to the Company of all pertinent
information and data with respect thereto, the execution of all applications,
specifications, oaths, assignments and all other instruments which the Company
shall deem necessary in order to apply for and obtain such rights and in order
to assign and convey to the Company, its successors, assigns and nominees the
sole and exclusive rights, title and interest in and to such Inventions, and
any copyrights, patents, mask work rights or other intellectual property rights
relating thereto. I further agree that my obligation to execute or cause to be
executed, when it is in my power to do so, any such instrument or papers shall
continue after the termination of this Agreement. If the Company is unable
because of my mental or physical incapacity or for any other reason to secure
my signature to apply for or to pursue any application for any United States or
foreign patents or copyright registrations covering Inventions or original
works of authorship assigned to the Company as above, then I hereby irrevocably
designate and appoint the Company and its duly authorized officers and agents
as my agent and attorney in fact, to act for and in my behalf and stead to
execute and file any such applications and to do all other lawfully permitted
acts to further the prosecution and issuance of letters patent or copyright
registrations thereon with the same legal force and effect as if executed by
me.
(f) Exception to Assignments. I understand that the provisions
of this Agreement requiring assignment of Inventions to the Company do not
apply to any invention which qualifies under the provisions of Exhibit B
attached hereto. I will advise the Company promptly in writing of any
inventions that I believe meet the criteria of Exhibit B.
4. Conflicting Employment. I agree that, during the term of my
employment with the Company, I will not engage in any other employment,
occupation, consulting or other business activity directly related to the
business in which the Company is now involved or becomes involved during the
term of my employment, nor will I engage in any other activities that conflict
with my obligations to the Company.
5. Returning Company Documents. I agree that, at the time of leaving
the employ of the Company, I will deliver to the Company (and will not keep in
my possession, recreate or deliver to anyone else) any and all devices,
records, data, notes, reports, proposals, lists, correspondence,
specifications, drawings, blueprints, sketches, materials, equipment, other
documents or property, or reproductions of any aforementioned items developed
by me pursuant to my employment with the Company or otherwise belonging to the
Company, its successors or assigns. In the event of the termination of my
employment, I agree to sign and deliver the "TERMINATION CERTIFICATION"
attached hereto as Exhibit C.
6. Notification to New Employer. In the event that I leave the employ
of the Company, I hereby grant consent to notification by the Company to my new
employer about my rights and obligations under this Agreement.
7. Solicitation of Employees. I agree that for a period of twelve
(12) months immediately following the termination of my relationship with the
Company for any reason, whether with or without cause, I shall not either
directly or indirectly solicit,
-2-
<PAGE> 48
induce, recruit or encourage any of the Company's employees to leave their
employment, or take away such employees, or attempt to solicit, induce,
recruit, encourage or take away employees of the Company, either for myself or
for any other person or entity.
8. Representations. I agree to execute any proper oath or verify any
proper document required to carry out the terms of this Agreement. I represent
that my performance of all the terms of this Agreement will not breach any
agreement to keep in confidence proprietary information acquired by me in
confidence or in trust prior to my employment by the Company. I have not
entered into, and I agree I will not enter into, any oral or written agreement
in conflict herewith.
9. Arbitration and Equitable Relief.
(a) Arbitration. Except as provided in Section 9(b) below, I
agree that any dispute or controversy arising out of or relating to any
interpretation, construction, performance or breach of this Agreement, shall be
settled by arbitration to be held in Norcross, Georgia in accordance with the
rules then in effect of the American Arbitration Association. The arbitrator
may grant injunctions or other relief in such dispute or controversy. The
decision of the arbitrator shall be final, conclusive and binding on the
parties to the arbitration. Judgement may be entered on the arbitrator's
decision in any court having jurisdiction. The Company and I shall each pay
one-half of the costs and expenses of such arbitration, and each of us shall
separately pay our counsel fees and expenses.
(b) Equitable Remedies. I agree that it would be impossible or
inadequate to measure and calculate the Company's damages from any breach of
the covenants set forth in Sections 2, 3, and 5 herein. Accordingly, I agree
that if I breach any of such Sections, the Company will have available, in
addition to any other right or remedy available, the right to obtain an
injunction from a court of competent jurisdiction restraining such breach or
threatened breach and to specific performance of any such provision of this
Agreement. I further agree that no bond or other security shall be required in
obtaining such equitable relief and I hereby consent to the issuance of such
injunction and to the ordering of specific performance.
-3-
<PAGE> 49
10. General Provisions
(a) Governing Law; Consent to Personal Jurisdiction. This
Agreement will be governed by the laws of the State of Georgia. I hereby
expressly consent to the personal jurisdiction of the state and federal courts
located in Georgia for any lawsuit filed there against me by the Company
arising from or relating to this Agreement.
(b) Entire Agreement. This Agreement sets forth the entire
agreement and understanding between the Company and me relating to the subject
matter herein and merges all prior discussions between us. No modification of
or amendment to this Agreement, nor any waiver of any rights under this
agreement, will be effective unless in writing signed by the party to be
charged. Any subsequent change or changes in my duties, salary or compensation
will not affect the validity or scope of this Agreement.
(c) Severability. If one or more of the provisions in this
Agreement are deemed void by law, then the remaining provisions will continue
in full force and effect.
(d) Successors and Assigns. This Agreement may not be assigned
without the prior written consent of the Company. Subject to the foregoing
sentence, this Agreement will be binding upon my heirs, executors,
administrators and other legal representatives and will be for the benefit of
the Company, its successors, and its assigns.
Date:__________________
______________________________
(Name)
_____________________
Witness
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<PAGE> 50
EXHIBIT A
LIST OF PRIOR INVENTIONS
AND ORIGINAL WORKS OF AUTHORSHIP
<TABLE>
<CAPTION>
Identifying
Number of
Title Date Brief Description
- -------------------------- ----------------------- -----------------
<S> <C> <C>
__ No inventions or improvements
__ Additional Sheets Attached
Signature of Employee: ___________________________
(Name)
Date: _______________________
</TABLE>
<PAGE> 51
EXHIBIT B
EXCEPTION TO ASSIGNMENTS
The assignment provisions shall not apply to an invention that the
employee developed entirely on his or her own time without using the employer's
equipment, supplies, facilities, or trade secret information except for those
inventions that either:
(1) Relate at the time of conception or reduction to practice of
the invention to the employer's business, or actual or demonstrably anticipated
research or development of the employer.
(2) Result from any work performed by the employee for the
employer.
<PAGE> 52
EXHIBIT C
SPECTRX, INC.
TERMINATION CERTIFICATION
This is to certify that I do not have in my possession, nor have I failed
to return, any devices, records, data, notes, reports, proposals, lists,
correspondence, specifications, drawings, blueprints, sketches, materials,
equipment, other documents or property, or reproductions of any aforementioned
items belonging to Spectrx, Inc., its subsidiaries, affiliates, successors or
assigns (together, the "COMPANY").
I further certify that I have complied with all the terms of the
Company's Employee Proprietary Information Agreement signed by me, including
the reporting of any inventions and original works of authorship (as defined
therein), conceived or made by me (solely or jointly with others) covered by
that agreement.
I further agree that, in compliance with the Employee Proprietary
Information Agreement, I will preserve as confidential all trade secrets,
confidential knowledge, data or other proprietary information relating to
products, processes, know-how, designs, formulas, developmental or experimental
work, computer programs, data bases, other original works of authorship,
customer lists, business plans, financial information or other subject matter
pertaining to any business of the Company or any of its employees, clients,
consultants or licensees.
I further agree that for twelve (12) months from this date, I will not
hire any employees of the Company and I will not solicit, induce, recruit or
encourage any of the Company's employees to leave their employment.
Date:__________________
______________________________
(Name)
<PAGE> 53
EXHIBIT E
REGISTRATION RIGHTS AGREEMENT
<PAGE> 54
EXHIBIT E
SPECTRX, INC.
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
This Amended and Restated Registration Rights Agreement (the
"Agreement") amends and restates each of the Prior Registration Rights
Agreements (as defined in Section 1 hereof) and is effective as of August 30,
1996 by and among SpectRx, Inc., a Delaware corporation (the "Company"), the
holders of Registrable Securities (as such term is defined in the Prior
Registration Rights Agreements) and the purchasers of the Company's Series B
Preferred Stock.
NOW THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement and in the agreements pursuant to which the holders of Registrable
Securities acquired their Registrable Securities in the Company, the parties
hereby agree as follows:
1. Amendment of Prior Registration Rights Agreements. This
Agreement amends and restates each of the Prior Registration Rights Agreements
in their entirety. Such amendment and restatement is effective upon the
execution of this Agreement by the holders of at least a majority of the
Registrable Securities (as such term is defined in the Prior Registration
Rights Agreements) outstanding as of the date of this Agreement. For purposes
of this Agreement, the term "Prior Registration Rights Agreements" shall mean,
collectively, (i) that certain Amended and Restated Registration Rights
Agreement dated April 6, 1994, (ii) that certain Amended and Restated
Registration Rights Agreement dated April 14, 1994, and (iii) that certain
Amended and Restated Registration Rights Agreement dated June 15, 1994.
2. Certain Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:
"Act" shall mean the Securities Act of 1933, as amended.
"Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Act.
"Holder" shall mean any person owning or having the right to
acquire Registrable Securities and any person holding Registrable Securities to
whom the rights under this Agreement have been transferred in accordance with
paragraph 11 hereof.
"Initiating Holders" shall mean any Holders who in the
aggregate possess more than 50% of the Registrable Securities.
"Register," "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Act, and the declaration or ordering of the effectiveness
of such registration statement.
<PAGE> 55
"Registrable Securities" shall mean (i) the Common Stock
issuable or issued upon conversion of the Series A Preferred Stock, (ii) the
Common Stock issuable or issued upon conversion of the Series A1 Preferred
Stock, (iii) the Common Stock issuable upon conversion of the Series A
Preferred Stock issuable or issued upon exercise of certain warrants issued
pursuant to the Note and Warrant Purchase Agreement dated April 6, 1994, (iv)
the Common Stock issuable upon conversion of the Series A Preferred Stock
issuable or issued upon exercise of certain warrants issued pursuant to the
Note and Warrant Purchase Agreement dated April 29, 1994, (v) the Common Stock
issuable upon conversion of the Series A Preferred Stock issuable or issued
upon exercise of certain warrants issued pursuant to the Note and Warrant
Purchase Agreement dated June 15, 1994, (vi) the Common Stock issuable or
issued upon conversion of the Series B Preferred Stock, (vii) the Common Stock
issuable or issued upon conversion of the Series B1 Preferred Stock, and (viii)
any Common Stock or other securities issued or issuable with respect to such
Series A Preferred Stock, Series A1 Preferred Stock, Series B Preferred Stock,
Series B1 Preferred Stock or Common Stock upon any stock split, stock dividend,
recapitalization, or similar event, or any Common Stock otherwise issued or
issuable with respect to such Series A Preferred Stock, Series A1 Preferred
Stock, Series B Preferred Stock, Series B1 Preferred Stock or Common Stock;
provided, however, that shares of Common Stock or other securities shall only
be treated as Registrable Securities if and so long as they have not been (i)
sold to or through a broker or dealer or underwriter in a public distribution
or a public securities transaction or (ii) sold by a person in a transaction in
which their rights under this Agreement are not assigned.
"Registration Expenses" shall mean all expenses, except
Selling Expenses as otherwise stated below, incurred by the Company in
complying with paragraphs 3, 4 and 5 hereof, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Company, blue sky fees and expenses,
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,
selling commissions, stock transfer taxes applicable to the securities
registered by the Holders, and any fees and expenses of special counsel of a
selling stockholder.
3. Requested Registration.
(a) Request for Registration. In case the Company shall
receive from Initiating Holders a written request that the Company effect any
registration, qualification or compliance with respect to at least 80% of the
shares of Registrable Securities held by them (or any lesser number of shares
of Registrable Securities having an expected aggregate offering price, net of
underwriting discounts and commissions, greater than $7,500,000), the Company
will:
(i) promptly give written notice of the
proposed registration, qualification or compliance to all other Holders; and
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<PAGE> 56
(ii) as soon as practicable, use its
best efforts to effect such registration, qualification or compliance
(including, without limitation, appropriate qualification under applicable blue
sky or other state securities laws and appropriate compliance with applicable
regulations issued under the Act and any other governmental requirements or
regulations) as may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of such Registrable Securities as are
specified in such request, together with all or such portion of the Registrable
Securities of any Holder or Holders joining in such request as are specified in
a written request received by the Company within 20 days after receipt of such
written notice from the Company.
Provided, however, that the Company shall not be
obligated to take any action to effect any such registration, qualification or
compliance pursuant to this paragraph 3:
(1) In any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required
by the Act;
(2) Prior to the earlier of (i) September 1,
1998 or (ii) six months after the effective date of the Company's first
registered public offering of its stock;
(3) During the period starting with the date
sixty (60) days prior to the Company's estimated date of filing of, and ending
on the date three (3) months immediately following the effective date of, any
registration statement pertaining to securities of the Company (other than a
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan), provided that the Company is actively employing in good
faith all reasonable efforts to cause such registration statement to become
effective;
(4) After the Company has effected two such
registrations pursuant to this paragraph 3(a), and such registrations have been
declared or ordered effective; or
(5) If the Company shall furnish to such Holders
a certificate signed by the President of the Company that in the good faith
judgment of the Board of Directors it would be seriously detrimental to the
Company or its stockholders for a registration statement to be filed at such
time, then the Company's obligation to use its best efforts to register,
qualify or comply under this paragraph 3 shall be deferred for a period not to
exceed 90 days from the date of receipt of written request from the Initiating
Holders, provided, however, that the Company may not make such certification
more than once every calendar year.
Subject to the foregoing clauses (1) through (5), the Company
shall file a registration statement covering the Registrable Securities so
requested to be registered as soon as practicable, after receipt of the request
or requests of the Initiating Holders and in any event within one hundred
eighty (180) days after receipt of such request.
-3-
<PAGE> 57
(b) Underwriting. In the event that a registration
pursuant to this paragraph 3 is for a registered public offering involving an
underwriting, the Company shall so advise the Holders as part of the notice
given pursuant to paragraph 3(a)(i). In such event, the right of any Holder to
such registration shall be conditioned upon such Holder's participation in the
underwriting arrangements required by this paragraph 3, and the inclusion of
such Holder's Registrable Securities in the underwriting to the extent
requested shall be limited to the extent provided herein.
The Company shall (together with all Holders proposing to
distribute their securities through such underwriting) enter into an
underwriting agreement in customary form with the managing underwriter selected
for such underwriting by a majority in interest of the Initiating Holders, but
subject to the Company's reasonable approval. Notwithstanding any other
provision of this paragraph 3, if the managing underwriter advises the
Initiating Holders in writing that marketing factors require a limitation of
the number of shares to be underwritten, then the Company shall so advise all
holders of Registrable Securities and the number of shares of Registrable
Securities that may be included in the registration and underwriting shall be
allocated among all Holders thereof (except those Holders who have indicated to
the Company their decision not to distribute any of their Registrable
Securities through such underwriting) in proportion, as nearly as practicable,
to the respective amounts of Registrable Securities held by such Holders at the
time of filing the registration statement, provided, however, that the number
of shares of Registrable Securities to be included in such underwriting shall
not be reduced unless all other securities are first entirely excluded from the
underwriting. No Registrable Securities excluded from the underwriting by
reason of the underwriter's marketing limitation shall be included in such
registration. To facilitate the allocation of shares in accordance with the
above provisions, the Company or the underwriters may round the number of
shares allocated to any Holder to the nearest 100 shares.
If any Holder of Registrable Securities disapproves of the
terms of the underwriting, such person may elect to withdraw therefrom by
written notice to the Company, the managing underwriter and the Initiating
Holders. The Registrable Securities and/or other securities so withdrawn shall
also be withdrawn from registration, and such Registrable Securities shall not
be transferred in a public distribution prior to 90 days after the effective
date of such registration, or such other shorter period of time as the
underwriters may require.
4. Company Registration.
(a) Notice of Registration. If at any time or from time
to time the Company shall determine to register any of its securities, either
for its own account or the account of a security holder or holders, other than
(i) in connection with the Company's initial public offering, (ii) a
registration relating solely to employee benefit plans, or (iii) a registration
relating solely to a Commission Rule 145 transaction, the Company will:
(i) promptly give to each Holder written
notice thereof; and
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<PAGE> 58
(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 within 20 days after receipt of such written
notice from the Company, by any Holder.
(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 a part of the written
notice given pursuant to paragraph 4(a)(i). In such event the right of any
Holder to registration pursuant to this paragraph 4 shall be conditioned upon
such Holder's participation in such underwriting and the inclusion of
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 and the other holders distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the managing underwriter selected for such underwriting by
the Company.
Notwithstanding any other provision of this paragraph 4, if
the managing underwriter determines that marketing factors require a limitation
of the number of shares to be underwritten, the managing underwriter may limit
the Registrable Securities or other securities to be included in such
registration or exclude them entirely. The Company shall so advise all Holders
and other holders distributing their securities through such underwriting and
the number of shares of Registrable Securities and other securities that may be
included in the registration and underwriting shall be allocated among the
holders thereof in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities and other securities held by such holders at
the time of filing the registration statement. To facilitate the allocation of
shares in accordance with the above provisions, the Company may round the
number of shares allocated to any Holder or holder to the nearest 100 shares.
If any Holder or holder disapproves of the terms of any such
underwriting, he may elect to withdraw therefrom by written notice to the
Company and the managing underwriter. Any securities excluded or withdrawn
from such underwriting shall be withdrawn from such registration, and shall not
be transferred in a public distribution prior to 90 days after the effective
date of the registration statement relating thereto, or such other shorter
period of time as the underwriters may require.
(c) Right to Terminate Registration. The Company shall
have the right to terminate or withdraw any registration initiated by it under
this paragraph 4 prior to the effectiveness of such registration whether or not
any Holder has elected to include securities in such registration.
5. Registration on Form S-3.
(a) If any Holder or Holders request that the Company
file a registration statement on Form S-3 (or any successor form to Form S-3)
for a public offering of shares of the Registrable Securities the reasonably
anticipated aggregate price to the public of which, net of underwriting
discounts and commissions, would exceed $500,000, and the Company is a
registrant entitled to use
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<PAGE> 59
Form S-3 to register the Registrable Securities for such an offering, the
Company shall use its best efforts to cause such Registrable Securities to be
registered for the offering on such form and to cause such Registrable
Securities to be qualified in such jurisdictions as the Holder or Holders may
reasonably request; provided, however, that the Company shall not be required
to effect more than one registration pursuant to this paragraph 5 in any
calendar year. The substantive provisions of paragraph 4(b) shall be
applicable to each registration under this paragraph 5.
(b) Notwithstanding the foregoing, the Company shall not
be obligated to take any action pursuant to this paragraph 5: (i) in any
particular jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such registration,
qualification or compliance unless the Company is already subject to service in
such jurisdiction and except as may be required by the Act; (ii) if the
Company, within ten (10) days of the receipt of the request of the initiating
Holders, gives notice of its bona fide intention to effect the filing of a
registration statement with the Commission within ninety (90) days of receipt
of such request (other than with respect to a registration statement relating
to a Rule 145 transaction, an offering solely to employees or any other
registration which is not appropriate for the registration of Registrable
Securities); (iii) during the period starting with the date sixty (60) days
prior to the Company's estimated date of filing of, and ending on the date six
(6) months immediately following, the effective date of any registration
statement pertaining to securities of the Company (other than a registration of
securities in a Rule 145 transaction or with respect to an employee benefit
plan), provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective; or
(iv) if the Company shall furnish to such Holder a certificate signed by the
President of the Company stating that in the good faith judgment of the Board
of Directors it would be seriously detrimental to the Company or its
stockholders for registration statements to be filed at such time, then the
Company's obligation to use its best efforts to file a registration statement
shall be deferred for a period not to exceed 90 days from the receipt of the
request to file such registration by such Holder provided that the Company may
not make such certification more than once every calendar year.
6. Expenses of Registration. All Registration Expenses
(exclusive of underwriting discounts and commissions or fees of special counsel
for a selling Holder) incurred in connection with (i) two registrations
pursuant to paragraph 3 and (ii) all registrations pursuant to paragraphs 4 and
5 shall be borne by the Company.
7. Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Agreement,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will:
(a) Prepare and file with the Commission a registration
statement with respect to such securities and use its best efforts to cause
such registration statement to become and remain effective for at least one
hundred and twenty (120) days or until the distribution described in the
Registration Statement has been completed;
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<PAGE> 60
(b) Prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the Act with respect to the disposition of all securities
covered by such registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by them.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities
or Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in
usual and customary form, with the managing underwriter of such offering. Each
Holder participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered
by such registration statement at any time when a prospectus relating thereto
is required to be delivered under the Act of the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(g) Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Agreement, on the date
that such Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Agreement, (i) an opinion,
dated such date, of the counsel representing the Company for the purposes of
such registration, in form and substance as is customarily given to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities
and (ii) a letter dated such date, from the independent accountants of the
Company, in form and substance as is customarily given by independent
accountants to underwriters in an underwritten public offering, addressed to
the underwriters, if any, and to the Holders requesting registration of
Registrable Securities.
8. Indemnification.
(a) The Company will indemnify each Holder, each of its
officers and directors and partners, and each person controlling such Holder
within the meaning of Section 15 of the Act, with respect to which
registration, qualification or compliance has been effected pursuant to this
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<PAGE> 61
Agreement, and each underwriter, if any, and each person who controls any
underwriter within the meaning of Section 15 of the Act, against all expenses,
claims, losses, damages or liabilities (or actions in respect thereof),
including any of the foregoing incurred in settlement of any litigation,
commenced or threatened, arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any registration
statement, prospectus, offering circular or other document, or any amendment or
supplement thereto, 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, in light of the circumstances in which they were made, not misleading,
or any violation by the Company of any federal, state or common law rule or
regulation applicable to the Company in connection with any such registration,
qualification or compliance, and the Company will reimburse each such Holder,
each of its officers and directors, and each person controlling such Holder,
each such underwriter and each person who controls any such underwriter, for
any legal and any other expenses reasonably incurred in connection with
investigating, preparing or defending any such claim, loss, damage, liability
or action, provided that the Company will not be liable in any such case to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on any untrue statement or omission or alleged untrue statement or
omission, made in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by such Holder,
controlling person or underwriter and stated to be specifically for use
therein.
(b) Each Holder will, if Registrable Securities held by
such Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company or such underwriter within the meaning of Section 15 of the Act,
and each other such Holder, each of its officers and directors and each person
controlling such Holder within the meaning of Section 15 of the Act, 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,
such Holders, such directors, officers, persons, 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 in reliance upon and in conformity with written information furnished
to the Company by an instrument duly executed by such Holder and stated to be
specifically for use therein. Notwithstanding the foregoing, the liability of
each Holder under this subsection (b) shall be limited in an amount equal to
the public offering price of the shares sold by such Holder, unless such
liability arises out of or is based on willful conduct by such Holder.
(c) Each party entitled to indemnification under this
paragraph 8 (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
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<PAGE> 62
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 litigation,
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, provided, however, that the Indemnifying Party
shall bear the expense of independent counsel for the Indemnified Party if the
Indemnified Party reasonably determines that representation of both parties by
the same counsel would be inappropriate due to actual or potential conflicts of
interest, 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 Agreement unless the failure to give such notice is
materially prejudicial to an Indemnifying Party's ability to defend such action
and provided further, that the Indemnifying Party shall not assume the defense
for matters as to which there is a conflict of interest or separate and
different defenses. 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.
9. Information by Holder. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the Registrable Securities held
by them and the distribution proposed by such Holder or Holders as the Company
may request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Agreement.
10. Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Registrable Securities to the public without
registration, after such time as a public market exists for the Common Stock of
the Company, the Company agrees to use its best efforts to:
(a) Make and keep public information available, as those
terms are understood and defined in Rule 144 under the Act, at all times after
the effective date that the Company becomes subject to the reporting
requirements of the Act or the Securities Exchange Act of 1934, as amended.
(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 Act and the Securities Exchange Act of 1934, as amended (at any time after
it has become subject to such reporting requirements);
(c) So long as a Holder owns any Registrable Securities
to furnish to the Holder forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144
(at any time after 90 days after the effective date of the first registration
statement filed by the Company for an offering of its securities to the general
public), and of the Act and the Securities Exchange Act of 1934 (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 of the Company and other information in the possession of or
reasonably obtainable by the Company as a Holder may reasonably request in
availing itself of any
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<PAGE> 63
rule or regulation of the Commission allowing a Holder to sell any such
securities without registration.
11. Transfer of Registration Rights. The rights to cause the
Company to register securities granted Holders under paragraphs 3, 4 and 5 may
be assigned to a transferee or assignee in connection with any transfer or
assignment of Registrable Securities by a Holder provided that: (i) such
transfer may otherwise be effected in accordance with applicable securities
laws, and (ii) such assignee or transferee acquires at least 400,000 shares of
Registrable Securities. Notwithstanding the foregoing, the rights to cause the
Company to register securities may be assigned, in connection with a
distribution by such Holder, to any parent or subsidiary company or to any
partner, former partner, or the estate of any such partner without compliance
with item (ii) above, provided written notice thereof is promptly given to the
Company.
12. Standoff Agreement. Each Holder agrees, in connection with
the Company's initial public offering of the Company's securities that, upon
request of the Company or the underwriters managing any underwritten offering
of the Company's securities, not to sell, make any short sale of, loan, grant
any option for the purchase of, or otherwise dispose of any Common Stock of the
Company (other than those included in the registration) without the prior
written consent of the Company or such underwriters, as the case may be, for
such period of time (not to exceed one hundred eighty (180) days) from the
effective date of such registration as may be requested by the underwriters,
provided that the officers and directors of the Company enter into similar
agreements.
13. Termination of Registration Rights. All rights of the
Holders under this Agreement shall terminate four (4) years from the date of
the Company's initial public offering.
14. Amendment of Registration Rights. Any provision of the
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Registrable Securities then outstanding. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any Registrable Securities then outstanding, each future holder of
all such Registrable Securities, and the Company.
15. Limitations on Subsequent Registration Rights. From and
after the date of this Agreement, the Company shall not, without the prior
written consent of the Holders of a majority of the then outstanding
Registrable Securities, enter into any agreement with any holder or prospective
holder of any securities of the Company which would allow such holder or
prospective holder (a) to include such securities in any registration filed
under paragraph 3 hereof, unless under the terms of such agreement, such holder
or prospective holder may include such securities in any such registration only
to the extent that the inclusion of his securities will not reduce the amount
of the Registrable Securities of the Holders which is included or (b) to make a
demand registration which could result in such registration statement being
declared effective prior to the earlier of either of the dates set forth in
subparagraph 3(a)(ii)(2) or within one hundred twenty (120) days of the
effective date of any registration effected pursuant to paragraph 3.
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<PAGE> 64
16. Entire Agreement. This Agreement constitutes the full and
entire understanding and agreement among the parties with regard to the subject
matter hereof. Nothing in this Agreement, express or implied, is intended to
confer upon any person or entity, other than the parties hereto and their
respective successors and assigns, any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
herein.
17. Governing Law. This Agreement shall be governed in all
respects by the laws of the State of Delaware as such laws are applied to
agreements between Delaware residents entered into and to be performed entirely
within Delaware.
18. Successors and Assigns. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto.
19. Notices, etc. All notices and other communications required
or permitted hereunder shall be effective upon receipt and shall be in writing
and may be delivered in person, by telecopy, electronic mail, overnight
delivery service or U.S. mail, in which event it may be mailed by first-class,
certified or registered, postage prepaid, addressed (a) if to a Holder, at such
Holder's address set forth at the end of this Agreement, or at such other
address as such Holder shall have furnished the Company in writing, or, until
any such holder so furnishes an address to the Company, then to and at the
address of the last holder of such shares who has so furnished an address to
the Company, or (b) if to the Company, at its address set forth at the end of
this Agreement, or at such other address as the Company shall have furnished to
the Holders and each such other holder in writing.
20. Severability. Any invalidity, illegality or limitation on
the enforceability of the Agreement or any part thereof, by any Holder whether
arising by reason of the law of the respective Holder's domicile or otherwise,
shall in no way affect or impair the validity, legality or enforceability of
this Agreement with respect to other Holders. If any provision of this
Agreement shall be judicially determined to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
21. Titles and Subtitles. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
22. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
23. Delays or Omissions. It is agreed that no delay or omission
to exercise any right, power or remedy accruing to the Holders, upon any breach
or default of the Company under this Agreement, shall impair any such right,
power or remedy, nor shall it be construed to be a waiver of any such breach or
default, or any acquiescence therein, or of any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. It is further agreed that any waiver, permit, consent or approval
of any kind or character by a Holder of any breach or default under this
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<PAGE> 65
Agreement, or any waiver by a Holder of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in writing and that all remedies, either under this
Agreement, or by law or otherwise afforded to a Holder, shall be cumulative and
not alternative.
24. Attorneys' Fees. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first written above.
COMPANY: SPECTRX, INC.
By:
---------------------------------------
Title:
------------------------------------
INVESTORS: HILLMAN MEDICAL VENTURES 1993 L.P.,
a Delaware limited partnership
By: Hillman/Dover Limited
Partnership, general partner
By: Wilmington Securities, Inc., its
sole general partner
By:
--------------------------------------
Title:
-----------------------------------
NORO-MOSELEY PARTNERS II, L.P., a
Georgia limited partnership
By: Moseley & Company, II,
general partner
By:
--------------------------------------
Jack R. Kelly Jr.
Title: General Partner
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<PAGE> 66
HILLMAN MEDICAL VENTURES 1994 L.P.,
a Delaware limited partnership
By: Hillman/Dover Limited
Partnership, general partner
By: Wilmington Securities, Inc., its
sole general partner
By:
-------------------------------------
Title:
----------------------------------
HILLMAN MEDICAL VENTURES 1995 L.P.,
a Delaware limited partnership
By: Hillman/Dover Limited
Partnership, general partner
By: Wilmington Securities, Inc., its
sole general partner
By:
-------------------------------------
Title:
----------------------------------
HILLMAN MEDICAL VENTURES 1996 L.P.,
a Delaware limited partnership
By: Hillman/Dover Limited
Partnership, general partner
By: Wilmington Securities, Inc., its
sole general partner
By:
-------------------------------------
Title:
----------------------------------
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<PAGE> 67
----------------------------------------
Dean Maloof
----------------------------------------
Frank Maloof
----------------------------------------
Stephen G. Maloof
----------------------------------------
Peter M. Mondalek
----------------------------------------
Karen Etheridge
----------------------------------------
William Chambers
----------------------------------------
Rogers Badgett
----------------------------------------
Michael P. Moore
----------------------------------------
William Zachary, Jr.
----------------------------------------
Dr. John Imhoff
----------------------------------------
Keith D. Ignotz
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<PAGE> 68
---------------------------------------
Richard Bowe, M.D.
---------------------------------------
Joseph Calabro
---------------------------------------
Dr. William Collins
---------------------------------------
Steven Davis
---------------------------------------
Emory J. Ethridge
---------------------------------------
Jimmy Funderburke
---------------------------------------
R. Andrew Garrett
The Gavin Herbert, Inc. Successor Trust
By:
-----------------------------------
Title: Trustee
By:
-----------------------------------
Title: Trustee
---------------------------------------
Randolf Lindblad, M.D.
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<PAGE> 69
-----------------------------
David Marco
-----------------------------
Mark Miehle
-----------------------------
Charles M. Phillips
-----------------------------
Dr. Lawrence Phillips
POWERVISION, INC.
By:
-------------------------
Title:
----------------------
-----------------------------
Dr. Dale Rorabaugh
-----------------------------
Mark A. Samuels
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<PAGE> 70
EXHIBIT F
LEGAL OPINION
<PAGE> 71
August 30, 1996
To the Purchasers Listed in
Exhibit A to the SpectRx, Inc.
Series B Preferred Stock Purchase Agreement
Dated as of August 30, 1996
Ladies and Gentlemen:
Reference is made to the Series B Preferred Stock Purchase Agreement,
dated as of August 30, 1996 (the "Agreement"), complete with all listed
exhibits thereto, by and among SpectRx, Inc., a Delaware corporation (the
"Company"), and the persons and entities listed in Exhibit A to the Agreement
(the "Purchasers"), which provides for the issuance by the Company to the
Purchasers of shares of Series B Preferred Stock of the Company (the "Series B
Shares"). This opinion is rendered to you pursuant to Section 5.3 of the
Agreement, and all terms used herein have the meanings defined for them in the
Agreement unless otherwise defined herein.
We have acted as counsel for the Company in connection with the
negotiation of the Agreement and the issuance of the Series B Shares. As such
counsel, we have made such legal and factual examinations and inquiries as we
have deemed advisable or necessary for the purpose of rendering this opinion.
In addition, we have examined originals or copies of such corporate records of
the Company, certificates of public officials and such other documents which we
consider necessary or advisable for the purpose of rendering this opinion. In
such examination we have assumed the genuineness of all signatures on original
documents, the authenticity and completeness of all documents submitted to us
as originals, the conformity to original documents of all copies submitted to
us and the due execution and delivery of all documents (except as to due
execution and delivery by the Company) where due execution and delivery are a
prerequisite to the effectiveness thereof.
As used in this opinion, the expression "to our knowledge," "known to
us" or similar language with reference to matters of fact means that, after an
examination of documents made available to us by the Company, and after
inquiries of officers of the Company, but without any further independent
factual investigation, we find no reason to believe that the opinions expressed
herein are factually incorrect. Further, the expression "to our knowledge",
"known to us" or similar language with reference to matters of fact refers to
the current actual knowledge of the attorneys of this firm who have worked on
matters for the Company solely in connection with the Agreement and the
transactions contemplated thereby. Except to the extent expressly set forth
herein or as we otherwise believe to be necessary to our opinion, we have not
undertaken any independent investigation to determine the existence or absence
of any fact,
<PAGE> 72
and no inference as to our knowledge of the existence or absence of any fact
should be drawn from our representation of the Company or the rendering of the
opinion set forth below.
For purposes of this opinion, we are assuming that you have all
requisite power and authority, and have taken any and all necessary corporate
or partnership action, to execute and deliver the Agreement, and we are
assuming that the representations and warranties made by the Purchasers in the
Agreement and pursuant thereto are true and correct. We are also assuming that
the Purchasers have purchased the Series B Shares for value, in good faith and
without notice of any adverse claims within the meaning of the California
Uniform Commercial Code.
The opinions hereinafter expressed are subject to the following
qualifications:
(a) We express no opinion as to the effect of applicable
bankruptcy, insolvency, reorganization, moratorium or other similar federal or
state laws affecting the rights of creditors;
(b) We express no opinion as to the effect of rules of
law governing specific performance, injunctive relief or other equitable
remedies (regardless of whether any such remedy is considered in a proceeding
at law or in equity);
(c) We express no opinion as to compliance with the
anti-fraud provisions of applicable securities laws;
(d) We express no opinion as to the enforceability of the
indemnification provisions of Section 7 of the Registration Rights Agreement to
the extent the provisions thereof may be subject to limitations of public
policy and the effect of applicable statutes and judicial decisions;
(e) We are members of the Bar of the State of California
and, except as set forth in paragraph 7 below with respect to the securities
laws of other states, we express no opinion as to any matter relating to the
laws of any jurisdiction other than the federal laws of the United States of
America and the laws of the State of California. To the extent this opinion
addresses applicable securities laws of states other than the State of
California, we have not retained nor relied on the opinion of counsel admitted
to the bar of such states, but rather have relied on compilations of the
securities laws of such states contained in reporting services presently
available to us.
Based upon and subject to the foregoing, and except as set forth in
the Schedule of Exceptions to the Agreement, we are of the opinion that:
1. The Company is a corporation duly organized and validly
existing under, and by virtue of, the laws of the State of Delaware and is in
good standing under such laws. The Company has requisite corporate power to
own and operate its properties and assets, and to carry on its business as
presently conducted. The Company is qualified to do business as a foreign
corporation in the State of Georgia.
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<PAGE> 73
2. The Company has all requisite legal and corporate power to
execute and deliver the Agreement, to sell and issue the Series B Shares
thereunder, to issue the Common Stock issuable upon conversion of the Series B
Shares and to carry out and perform its obligations under the terms of the
Agreement.
3. The authorized capital stock of the Company consists of
15,000,000 shares of Common, 2,083,500 shares of which are issued and
outstanding, 3,560,000 shares of Series A Preferred of which 3,103,784 shares
are issued and outstanding, 3,560,000 shares of Series A1 Preferred none of
which are issued and outstanding, 1,375,000 shares of Series B Preferred of
which 1,172,071 shares of Series B Preferred are to be issued and outstanding,
and 1,375,000 shares of Series B1 Preferred none of which are issued and
outstanding. There are also options outstanding to purchase an aggregate of
458,351 shares of Common Stock and warrants to purchase an aggregate of
1,268,643 shares of Common Stock and 360,000 shares of Series A Preferred
Stock. All such issued and outstanding shares of Preferred Stock and Common
Stock have been duly authorized and validly issued and are fully paid and
nonassessable and free of any preemptive or similar rights contained in the
Certificate of Incorporation or Bylaws of the Company or, to our knowledge, in
any agreement to which the Company is a party. The Common Stock issuable upon
conversion of the Series B Shares has been duly and validly reserved, and when
issued in accordance with the Company's Certificate of Incorporation will be
validly issued, fully paid and nonassessable. The Series B Shares issued under
the Agreement will be validly issued, fully paid and nonassessable and free of
any liens, encumbrances and preemptive or similar rights contained in the
Certificate of Incorporation or Bylaws of the Company, or, to our knowledge, in
any agreement by which the Company is a party, except as specifically provided
in the Agreement and in that certain Series A Preferred Stock Purchase
Agreement dated as of February 5, 1993; provided, however, that the Series B
Shares (and the Common Stock issuable upon conversion thereof) may be subject
to restrictions on transfer under state and/or federal securities laws as set
forth in the Agreement. To our knowledge, except for rights described in the
Agreement and the Certificate of Incorporation, there are no other options,
warrants, conversion privileges or other rights presently outstanding to
purchase or otherwise acquire any authorized but unissued shares of capital
stock or other securities of the Company, or any other agreements to issue any
such securities or rights.
4. All corporate action on the part of the Company, its directors
and stockholders necessary for the authorization, execution and delivery of the
Agreement by the Company, the authorization, sale, issuance and delivery of the
Series B Shares (and the Common Stock issuable upon conversion thereof) and the
performance of the Company's obligations under the Agreement has been taken.
The Agreement has been duly and validly executed and delivered by the Company
and constitutes a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms.
5. The execution, delivery and performance of and compliance with
the terms of the Agreement, and the issuance of the Series B Shares (and the
Common Stock issuable upon conversion thereof), do not violate any provision of
the Certificate of Incorporation or Bylaws, or, to our knowledge, any provision
of any applicable federal or state law, rule or regulation. To our knowledge,
the execution, delivery and performance of and compliance with the Agreement,
and the issuance of the Series B Shares (and the Common Stock issuable upon
conversion thereof) do not violate, or constitute a default under, any material
contract, agreement, instrument, judgment or decree binding upon the Company.
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<PAGE> 74
6. Except as identified in the Agreement, to our knowledge, there
are no actions, suits, proceedings or investigations pending against the
Company or its properties before any court or governmental agency (nor, to our
knowledge, has the Company received any written threat thereof), which, either
in any case or in the aggregate, are likely to result in any material adverse
change in the business or financial condition of the Company or any of its
properties, or in any material impairment of the right or ability of the
Company to carry on its business as now conducted, or which questions the
validity of the Agreement or any action taken or to be taken by the Company in
connection therewith.
7. No consent, approval or authorization of or designation,
declaration or filing with any governmental authority on the part of the
Company is required in connection with the valid execution and delivery of the
Agreement, or the offer, sale or issuance of the Series B Shares (and the
Common Stock issuable upon conversion thereof) or the consummation of any other
transaction contemplated by the Agreement, except (a) filing of the Amended and
Restated Certificate of Incorporation in the Office of the Secretary of State
of the State of Delaware, and (b) qualification (or taking such action as may
be necessary to secure an exemption from qualification, if available) under the
Delaware General Corporation Law and other applicable blue sky laws (but
excluding jurisdictions outside of the United States) of the offer and sale of
the Series B Shares (and the Common Stock issuable upon conversion thereof) and
the modification of rights of shareholders contemplated by the Agreement. The
filing referred to in clause (a) above has been accomplished and is effective.
Our opinion herein is otherwise subject to the timely and proper completion of
all filings and other actions contemplated herein where such filings and
actions are to be undertaken on or after the date hereof.
8. Subject to the accuracy of the Purchasers' Representations and
Warranties in Section 4 of the Agreement and their responses (if any) to the
Company's inquiries, we are of the opinion that the offer, sale and issuance of
the Series B Shares in conformity with the terms of the Agreement constitute
transactions exempt from the registration requirements of Section 5 of the
Securities Act of 1933, as amended.
This opinion is furnished to the Purchasers solely for their benefit
in connection with the purchase of the Series B Shares, and may not be relied
upon by any other person or for any other purpose without our prior written
consent.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
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<PAGE> 1
EXHIBIT 10.6
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
SPECTRX, INC.
6025A Unity Drive
Norcross, GA 30071
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TABLE OF CONTENTS
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SECTION 1 Authorization and Sale of Preferred Stock . . . . . . . . . . . . . . . . . . . . . 1
1.1 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Sales of Preferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2 Closing Dates; Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Delivery. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.3 Subsequent Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 3 Representations and Warranties of the Company . . . . . . . . . . . . . . . . . . . 2
3.1 Organization and Standing; Articles and By-Laws . . . . . . . . . . . . . . . 2
3.2 Corporate Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.4 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.5 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.6 Labor Agreements and Actions . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.7 Agreements; Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.8 Title to Properties and Assets; Liens, etc . . . . . . . . . . . . . . . . . . 4
3.9 Compliance with Other Instruments, None Burdensome, etc . . . . . . . . . . . 4
3.10 Litigation, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.11 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.12 Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.13 Governmental Consent, etc . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.14 Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.15 Brokers or Finders; Other Offers . . . . . . . . . . . . . . . . . . . . . . . 6
3.16 Patents and Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.17 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 4 Representations and Warranties of the Purchaser . . . . . . . . . . . . . . . . . . 6
4.1 Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.2 Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.3 Rule 144 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.4 No Public Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.5 Access to Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.6 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.7 Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
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(CONTINUED)
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4.8 Tax Liability . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.9 Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 5 Conditions to Closing of Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.1 Representations and Warranties Correct . . . . . . . . . . . . . . . . . . . . 8
5.2 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.3 Opinion of Company's Counsel . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.4 Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.5 Blue Sky . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.6 Amended and Restated Articles . . . . . . . . . . . . . . . . . . . . . . . . 9
5.7 Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 6 Conditions to Closing of Company . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.1 Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.2 Blue Sky . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.3 Amended and Restated Articles . . . . . . . . . . . . . . . . . . . . . . . . 9
6.4 Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 7 Affirmative Covenants of the Company and the Purchaser . . . . . . . . . . . . . . . 9
7.1 Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7.2 Assignment of Rights to Financial Information . . . . . . . . . . . . . . . 10
7.3 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.4 Termination of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 8 Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 9 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9.1 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9.2 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9.4 Entire Agreement; Amendment . . . . . . . . . . . . . . . . . . . . . . . . 11
9.5 Notices, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9.6 Delays or Omissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9.7 California Corporate Securities Law . . . . . . . . . . . . . . . . . . . . 12
9.8 Georgia Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9.9 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
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9.10 Finder's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
9.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
9.13 Titles and Subtitles . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
EXHIBITS
A Amended and Restated Certificate of Incorporation
B Exceptions to Representations and Warranties
C Proprietary Information Agreement
D Amended and Restated Registration Rights Agreement
E Legal Opinion
F License Agreement
</TABLE>
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<PAGE> 5
SPECTRX, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
This Agreement is made as of October ___, 1996 between SpectRx, Inc.,
a Delaware corporation located at 6025A Unity Drive, Norcross, Georgia 30071
(the "Company"), and Abbott Laboratories, an Illinois corporation located at
100 Abbott Park Road, Abbott Park, Illinois 60064 (the "Purchaser").
SECTION 1
AUTHORIZATION AND SALE OF PREFERRED STOCK
1.1 AUTHORIZATION. The Company will authorize the sale and
issuance of up to 500,000 shares of its Series C Preferred Stock (the "Series C
Shares"), having the rights, privileges and preferences as set forth in the
Amended and Restated Certificate of Incorporation (the "Articles") in the form
attached to this Agreement as Exhibit A.
1.2 SALES OF PREFERRED. Subject to the terms and conditions
hereof, the Company will severally issue and sell to the Purchaser and the
Purchaser will buy from the Company 500,000 Series C Shares the Closing (as
defined below) for the purchase price of $6.00 per share.
SECTION 2
CLOSING DATES; DELIVERY
2.1 CLOSING DATE. The closing of the purchase and sale of the
Series C Shares hereunder (the "Closing") shall be held at the offices of
Wilson, Sonsini, Goodrich & Rosati, Professional Corporation, 650 Page Mill
Road, Palo Alto, California 94304 at 9:00 a.m., local time, on October ___,
1996 or at such other time and place upon which the Company and the Purchaser
shall agree. The Closing shall occur simultaneously with or promptly after
execution and delivery of this Agreement by the Purchaser and the Company, but
in any event within ten (10) days of the satisfaction of the conditions set
forth in Section 5.
2.2 DELIVERY. At the Closing, the Company will deliver to the
Purchaser a certificate, registered in the Purchaser's name, representing the
500,000 Series C Shares to be purchased by the Purchaser at the Closing,
against payment of the purchase price therefor by cancellation of indebtedness,
by check payable to the Company, or by wire transfer per the Company's wiring
instructions.
<PAGE> 6
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on Exhibit B attached hereto, the Company
represents and warrants to the Purchaser as follows:
3.1 ORGANIZATION AND STANDING; ARTICLES AND BY-LAWS. The Company
is a corporation duly organized and validly existing under, and by virtue of,
the laws of the State of Delaware and is in good standing under such laws. The
Company has requisite corporate power and authority to own and operate its
properties and assets, and to carry on its business as presently conducted and
as proposed to be conducted. The Company is not presently qualified to do
business as a foreign corporation in any jurisdiction other than Georgia, and
the failure to be so qualified will not have a material adverse affect on the
Company's business as now conducted or as now proposed to be conducted.
3.2 CORPORATE POWER. The Company will have at the Closing all
requisite legal and corporate power and authority to execute and deliver this
Agreement and the agreements set forth as Exhibits hereto (collectively, the
"Agreements"), to sell and issue the Series C Shares hereunder, to issue the
Common Stock issuable upon conversion of the Series C Shares and the Series C1
Preferred Stock and to carry out and perform its obligations under the terms of
the Agreements.
3.3 SUBSIDIARIES. The Company has no subsidiaries or affiliated
companies and does not otherwise own or control, directly or indirectly, any
equity interest in any corporation, association or business entity.
3.4 CAPITALIZATION. The authorized capital stock of the Company
consists or will, upon the filing of the Articles, consist of 15,000,000 shares
of Common Stock, 3,560,000 shares of Series A Preferred Stock, 3,560,000 shares
of Series A1 Preferred Stock, 1,375,000 shares of Series B Preferred Stock,
1,375,000 shares of Series B1 Preferred Stock, 500,000shares of Series C
Preferred Stock and 500,000 shares of Series C1 Preferred Stock (the Series C
and Series C1 Preferred Stock shall be referred to as the "Preferred Stock").
Immediately prior to the Closing 2,083,500 shares of Common Stock, 3,103,784
shares of Series A Preferred Stock and 1,300,000 shares of Series B Preferred
Stock will be outstanding and no other shares of capital stock will be
outstanding. There are also outstanding immediately prior to the Closing
warrants to purchase an aggregate of 1,268,643 shares of Common Stock and
360,000 shares of Series A Preferred Stock. All of the outstanding shares of
Common Stock, Series A Preferred Stock and Series B Preferred Stock are duly
authorized, validly issued, fully paid and nonassessable, and were issued in
compliance with applicable federal and state securities laws. The Series C
Shares, when issued pursuant to the terms of this Agreement, will be duly
authorized, validly issued, fully paid and nonassessable. The Company has
reserved 5,435,000 shares of Common Stock for issuance upon conversion of the
Preferred Stock, and 1,150,000 shares of its Common Stock for issuance pursuant
to its 1995 Incentive Stock Plan. The Company has also reserved 1,268,643
shares of Common Stock and 360,000 shares of Series A Preferred Stock for
issuance upon the exercise of warrants to purchase
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<PAGE> 7
shares of Common Stock and Series A Preferred Stock outstanding as of the
Closing. Except for those set forth in the Agreements, there are no options,
warrants or other rights (including conversion or preemptive rights) or
agreements outstanding to purchase any of the Company's authorized and unissued
capital stock.
3.5 AUTHORIZATION. All corporate action on the part of the
Company, its officers, directors and stockholders necessary for the
authorization, execution, delivery and performance of the Agreements by the
Company, the authorization, sale, issuance and delivery of the Series C Shares
(and the Common Stock issuable upon conversion of the Preferred Stock) and the
performance of all of the Company's obligations under the Agreements has been
taken or will be taken prior to the Closing. The Agreements, when executed and
delivered by the Company, shall constitute valid and binding obligations of the
Company, enforceable in accordance with their terms, except as the
indemnification provisions of paragraph 7 of the Registration Rights Agreement
(as defined below) hereof may be limited by principles of public policy, and
subject to laws of general application relating to bankruptcy, insolvency and
the relief of debtors and rules of law governing specific performance,
injunctive relief or other equitable remedies. The Series C Shares, when
issued in compliance with the provisions of this Agreement, will be validly
issued, will be fully paid and nonassessable, and will have the rights,
preferences and privileges described in the Articles; the Common Stock issuable
upon conversion of the Preferred Stock has been duly and validly reserved and,
when issued in compliance with the provisions of this Agreement and the
Articles, will be validly issued, and will be fully paid and nonassessable; and
the Preferred Stock and such Common Stock will be free of any liens or
encumbrances, assuming the Purchaser takes the Series C Shares with no notice
thereof, other than any liens or encumbrances created by or imposed upon the
holders; provided, however, that the Preferred Stock (and the Common Stock
issuable upon conversion thereof) may be subject to restrictions on transfer
under state and/or federal securities laws as set forth herein.
3.6 LABOR AGREEMENTS AND ACTIONS. The Company is not bound by or
subject to (and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or arrangement with
any labor union, and no labor union has requested or, to the knowledge of the
Company, has sought to represent any of the employees, representatives or
agents of the Company. There is no strike or other labor dispute involving the
Company pending, or to the knowledge of the Company threatened, which could
have a material adverse effect on the assets, properties, financial condition,
operating results, or business of the Company, nor is the Company aware of any
labor organization activity involving its employees. The Company is not aware
that any officer or key employee, or that any group of key employees, intends
to terminate their employment with the Company, nor does the Company have a
present intention to terminate the employment of any of the foregoing. The
employment of each officer and, to the best of the Company's knowledge, each
employee of the Company is terminable at the will of the Company.
3.7 AGREEMENTS; ACTION.
(a) Except for agreements explicitly contemplated hereby,
there are no agreements, understandings or proposed transactions between the
Company and any of its officers, directors, affiliates, or any affiliate
thereof nor are there agreements or understandings between any
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<PAGE> 8
person and/or entities, which affects or relates to the voting or giving of
written consents with respect to any security or by a director of the Company.
(b) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company is a party or by which it is bound which may involve (i)
obligations (contingent or otherwise) of, or payments to the Company in excess
of, $5,000, or (ii) the license of any patent, copyright, trade secret or other
proprietary right to or from the Company or (iii) provisions restricting or
affecting the development, manufacture or distribution of the Company's
products or services or (iv) indemnification by the Company with respect to
infringements of proprietary rights.
(c) The Company has not (i) declared or paid any
dividends, or authorized or made any distribution upon or with respect to any
class or series of its capital stock, (ii) incurred any indebtedness for money
borrowed or any other liabilities individually in excess of $5,000 or, in the
case of indebtedness and/or liabilities individually less than $5,000, in
excess of $25,000 in the aggregate, (iii) made any loans or advances to any
person, other than ordinary advances for travel expenses, or (iv) sold,
exchanged or otherwise disposed of any of its assets or rights, other than the
sale of its inventory in the ordinary course of business.
(d) For the purposes of subsections (b) and (c) above,
all indebtedness, liabilities, agreements, understandings, instruments,
contracts and proposed transactions involving the same person or entity
(including persons or entities the Company has reason to believe are affiliated
therewith) shall be aggregated for the purpose of meeting the individual
minimum dollar amounts of such subsections.
3.8 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company has
good and marketable title to its properties and assets, and has good title to
all its leasehold interests, in each case subject to no mortgage, pledge, lien,
lease, encumbrance or charge, other than (i) the lien of current taxes not yet
due and payable, and (ii) possible minor liens and encumbrances which do not in
any case materially detract from the value of the property subject thereto or
materially impair the operations of the Company, and which have not arisen
otherwise than in the ordinary course of business. The Company has timely
filed or will file with appropriate taxing authorities all returns and other
information required with respect to taxes (regardless of form) for all taxable
periods ending on or prior to the Closing; all such returns shall be or have
been complete and accurate in all material respects.
3.9 COMPLIANCE WITH OTHER INSTRUMENTS, NONE BURDENSOME, ETC. The
Company is not in violation or default of any term of its Articles or Bylaws,
or in any material respect of any term or provision of any material mortgage,
indebtedness, indenture, contract, agreement, instrument, judgment, order or
decree, and to the best of its knowledge is not in violation of any statute,
rule or regulation applicable to the Company where such violation would
materially and adversely affect the Company. The execution, delivery and
performance of and compliance with the Agreements, and the issuance of the
Series C Shares and the Common Stock issuable upon conversion of the Preferred
Stock, have not resulted and will not result in any material violation of, or
conflict with, or constitute,
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<PAGE> 9
with or without the passage of time and the giving of notice, a material
violation or default under the Company's Articles or Bylaws or any of its
agreements, nor result in the creation of any mortgage, pledge, lien,
encumbrance or charge upon any of the properties or assets of the Company; and
there is no such violation or default which materially and adversely affects
the business of the Company or any of its properties or assets.
3.10 LITIGATION, ETC. There are no actions, suits, proceedings or
investigations pending against the Company or its properties before any court
or governmental agency (nor, to the best of the Company's knowledge, is there
any reasonable basis therefor or threat thereof). The foregoing includes,
without limitation, actions pending or threatened (or any basis therefor known
to the Company) involving the prior employment of any of the Company's
employees, their use in connection with the Company's business of any
information or techniques allegedly proprietary to any of their former
employers or their obligations under any agreement with their former employers.
The Company is not a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or which the Company intends to initiate.
3.11 EMPLOYEES. To the best of the Company's knowledge, no
employee of the Company is in violation of any term of any employment contract,
patent disclosure agreement or any other contract or agreement relating to the
relationship of such employee with the Company or any other party because of
the nature of the business conducted or to be conducted by the Company. Each
employee of the Company with access to confidential or proprietary information
has executed a Proprietary Information Agreement, the form of which is attached
hereto as Exhibit D.
3.12 REGISTRATION RIGHTS. Except as set forth in the Amended and
Restated Registration Rights Agreement attached hereto as Exhibit D (the
"Registration Rights Agreement"), the Company is not under any contractual
obligation to register (as defined in Section 1 of the Registration Rights
Agreement) any of its presently outstanding securities or any of its securities
which may hereafter be issued.
3.13 GOVERNMENTAL CONSENT, ETC. No consent, approval or
authorization of or designation, declaration or filing with any governmental
authority on the part of the Company is required in connection with the valid
execution and delivery of this Agreement, or the offer, sale or issuance of the
Series C Shares (and the Common Stock issuable upon conversion of the Preferred
Stock), or the consummation of any other transaction contemplated hereby,
except (a) filing of the Articles in the office of the Delaware Secretary of
State, and (b) qualification (or taking such action as may be necessary to
secure an exemption from qualification, if available) of the offer and sale of
the Series C Shares (and the Common Stock issuable upon conversion of the
Preferred Stock) under applicable state securities laws, which filings and
qualifications, if required, will be accomplished in a timely manner.
3.14 OFFERING. Subject to the accuracy of the Purchaser's
representations in Section 4 hereof, the offer, sale and issuance of the Series
C Shares to be issued in conformity with the terms of this Agreement, and the
issuance of the Common Stock to be issued upon conversion of the Preferred
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<PAGE> 10
Stock, constitute transactions exempt from the registration requirements of
Section 5 of the Securities Act of 1933, as amended (the "Securities Act") and
in compliance with applicable state securities laws.
3.15 BROKERS OR FINDERS; OTHER OFFERS. The Company has not
incurred, and will not incur, directly or indirectly, as a result of any action
taken by the Company, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement.
3.16 PATENTS AND TRADEMARKS. There are no outstanding options,
licenses, or agreements of any kind relating to the intellectual property of
the Company. The Company is not bound by or a party to any options, licenses
or agreements of any kind with respect to the patents, trademarks, service
marks, trade names, copyrights, trade secrets, licenses, information,
proprietary rights and processes of any other person or entity. The Company
has not received any communications alleging that the Company has violated or,
by conducting its business as proposed, would violate any of the patents,
trademarks, service marks, trade names, copyrights or trade secrets or other
proprietary rights of any other person or entity. The Company is not aware
that any of its employees is obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would
interfere with the use of his best efforts to promote the interests of the
Company or that would conflict with the Company's business as proposed to be
conducted. Neither the execution nor delivery of this Agreement, nor the
carrying on of the Company's business by the employees of the Company, nor the
conduct of the Company's business as proposed, will, to the Company's
knowledge, conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any of such employees is now obligated. The Company
does not believe it is or will be necessary to utilize any inventions of any of
its employees (or people it currently intends to hire) made prior to their
employment by the Company.
3.17 FINANCIAL STATEMENTS; NO MATERIAL ADVERSE CHANGE. The audited
financial statements of the Company for the fiscal years ended December 31,
1993, December 31, 1994 and December 31, 1995 (the "Financial Statements"),
which include audited balance sheets, statements of operations, statements of
stockholders' equity and statements of cash flows as of such dates and for the
periods then ended, have been prepared in accordance with generally accepted
accounting principles consistently applied and fairly present the financial
condition and results of operations of the Company as of such dates and for the
periods then ended. Except as set forth in the Schedule of Exceptions or as
set forth in the Financial Statements (including the footnotes thereto), there
are no liabilities, debts, claims or obligations, whether accrued, absolute,
contingent or otherwise, of or affecting the Company or its property or assets.
Except as set forth in the Schedule of Exceptions, since December 31, 1995
there has been no material adverse change in the financial condition, operating
results, assets, operation or business prospects of the Company.
3.18 DISCLOSURE. This Agreement, together with the Exhibits
attached hereto and all other certificates delivered in connection herewith,
when taken as a whole, does not contain any untrue statement of a material fact
or omit any material fact necessary in order to make the statements contained
herein not misleading in light of the circumstances under which they were made.
The
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<PAGE> 11
Company has fully provided each Purchaser with all the information such
Purchaser has requested for deciding whether to purchase the Series C Shares
and all information which the Company believes is reasonably necessary to
enable such Purchaser to make such decision.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby severally represents and warrants to the Company
with respect to the purchase of the Series C Shares as follows:
4.1 EXPERIENCE. It has substantial experience in evaluating and
investing in private placement transactions of securities in companies similar
to the Company so that it is capable of evaluating the merits and risks of its
investment in the Company and has the capacity to protect its own interests.
4.2 INVESTMENT. It is acquiring the Series C Shares and the
Common Stock underlying the Preferred Stock for investment for its own account,
not as a nominee or agent, and not with the view to, or for resale in
connection with, any distribution thereof. It understands that the Series C
Shares to be purchased and the Common Stock underlying the Preferred Stock have
not been, and will not be, registered under the Securities Act by reason of a
specific exemption from the registration provisions of the Securities Act, the
availability of which depends upon, among other things, the bona fide nature
of the investment intent and the accuracy of such Purchaser's representations
as expressed herein.
4.3 RULE 144. It acknowledges that the Preferred Stock and the
underlying Common Stock must be held indefinitely unless subsequently
registered under the Securities Act or unless an exemption from such
registration is available. It is aware of the provisions of Rule 144
promulgated under the Securities Act which permit limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions, including, among other things, the existence of a public market for
the shares, the availability of certain current public information about the
Company, the resale occurring not less than two years after a party has
purchased and paid for the security to be sold, the sale being effected through
a "broker's transaction" or in transactions directly with a "market maker" and
the number of shares being sold during any three-month period not exceeding
specified limitations.
4.4 NO PUBLIC MARKET. It understands that no public market now
exists for any of the securities issued by the Company and that the Company has
made no assurances that a public market will ever exist for the Company's
securities.
4.5 ACCESS TO DATA. It has had an opportunity to discuss the
Company's business, management and financial affairs with its management. It
has also had an opportunity to ask questions of officers of the Company, which
questions were answered to its satisfaction. It
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<PAGE> 12
understands that such discussions, as well as any written information issued by
the Company, were intended to describe certain aspects of the Company's
business and prospects but were not a thorough or exhaustive description.
4.6 AUTHORIZATION. This Agreement when executed and delivered by
such Purchaser will constitute a valid and legally binding obligation of the
Purchaser, enforceable in accordance with its terms, except as the
indemnification provisions of paragraph 7 of the Registration Rights Agreement
may be limited by principles of public policy, and subject to laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief or other
equitable remedies.
4.7 BROKERS OR FINDERS. The Company has not, and will not, incur,
directly or indirectly, as a result of any action taken by such Purchaser, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement.
4.8 TAX LIABILITY. It has reviewed with its own tax advisors the
federal, state, local and foreign tax consequences of this investment and the
transactions contemplated by this Agreement (including any tax consequences
resulting from the recently enacted tax legislation). It relies solely on such
advisors and not on any statements or representations of the Company or any of
its agents. It understands that it (and not the Company) shall be responsible
for its own tax liability that may arise as a result of this investment or the
transactions contemplated by this Agreement.
4.9 LEGEND. It is understood that the certificates evidencing the
Series C Shares will bear the following legend: "THESE SECURITIES HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION
STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT."
SECTION 5
CONDITIONS TO CLOSING OF PURCHASER
The Purchaser's obligation to purchase the Series C Shares at the
Closing is, at the option of the Purchaser, subject to the fulfillment of the
following conditions:
5.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations
and warranties made by the Company in Section 3 hereof shall be true and
correct in all material respects as of the Closing.
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<PAGE> 13
5.2 COVENANTS. All covenants, agreements and conditions contained
in this Agreement to be performed by the Company on or prior to the Closing
shall have been performed or complied with in all material respects.
5.3 OPINION OF COMPANY'S COUNSEL. The Purchaser shall have
received from Wilson, Sonsini, Goodrich & Rosati, counsel to the Company, an
opinion addressed to it, dated the Closing Date, in substantially the form of
Exhibit E.
5.4 COMPLIANCE CERTIFICATE. The Company shall have delivered to
the Purchaser a certificate of the Company executed by the President of the
Company, dated as of the Closing certifying to the fulfillment of the
conditions specified in Sections 5.1 and 5.2 of this Agreement.
5.5 BLUE SKY. The Company shall have obtained all necessary state
securities law permits and qualifications, or have the availability of
exemptions therefrom, required by any state for the offer and sale of the
Series C Shares and the Common Stock issuable upon conversion of the Preferred
Stock.
5.6 AMENDED AND RESTATED ARTICLES. The Articles shall have been
filed with the Delaware Secretary of State.
5.7 REGISTRATION RIGHTS AGREEMENT. The Company and the parties
listed thereon shall have executed and delivered the Registration Rights
Agreement in substantially the form attached hereto as Exhibit D.
5.8 DEVELOPMENT AND LICENSE AGREEMENT. The Company and the
Purchaser shall have entered into a research and development and license
agreement in the form attached hereto as Exhibit F.
5.9 SECRETARY'S CERTIFICATE. The Company shall have delivered to
the Purchaser a certificate of the Company executed by the Secretary of the
Company, dated as of the Closing, certifying (i) resolutions adopted by the
Board of Directors and the stockholders of the Company authorizing the
execution of the Agreement, the filing of the Restated Articles and the
transactions contemplated hereby; (ii) the Restated Articles and Bylaws of the
Company; copies of third party consents, approvals and filings required in
connection with the consummation of the transactions contemplated by the
Agreement; and (iii) such other documents relating to the transactions
contemplated by the Agreement.
SECTION 6
CONDITIONS TO CLOSING OF COMPANY
The Company's obligation to sell and issue the Series C Shares at the
Closing is, at the option of the Company, subject to the fulfillment as of the
Closing of the following conditions:
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<PAGE> 14
6.1 REPRESENTATIONS. The representations made by the Purchaser in
Section 4 hereof shall be true and correct when made, and shall be true and
correct on the Closing.
6.2 BLUE SKY. The Company shall have obtained all necessary state
securities law permits and qualifications, or have the availability of
exemptions therefrom, required by any state for the offer and sale of the
Series C Shares and the Common Stock issuable upon conversion of the Preferred
Stock.
6.3 AMENDED AND RESTATED ARTICLES. The Articles shall have been
filed with the Delaware Secretary of State.
6.4 LEGAL MATTERS. All material matters of a legal nature which
pertain to this Agreement, and the transactions contemplated hereby, shall have
been reasonably approved by counsel to the Company.
SECTION 7
AFFIRMATIVE COVENANTS OF THE COMPANY AND THE PURCHASER
The Company hereby covenants and agrees as follows:
7.1 FINANCIAL INFORMATION. As long as the Purchaser holds not
less than 66,700 shares of Preferred Stock and/or Common Stock issued upon
conversion of the Preferred Stock, to furnish to the Purchaser:
(a) As soon as practicable after the end of each fiscal
year, and in any event within 120 days thereafter, consolidated balance sheets
of the Company and its subsidiaries, if any, as of the end of such fiscal year,
and consolidated statements of income and consolidated statements of changes in
financial position of the Company and its subsidiaries, if any, for such year,
prepared in accordance with generally accepted accounting principles and
setting forth in each case in comparative form the figures for the previous
fiscal year (or, at the election of the Company, setting forth in comparative
form the budgeted figures for the fiscal year then reported), all in reasonable
detail and audited by independent public accountants of national standing
selected by the Company.
(b) As soon as practicable after the end of each calendar
quarter, and in any event within 15 days thereafter, an unaudited quarterly
report including a balance sheet, profit and loss statement cash flow analysis
(prepared in accordance with generally accepted accounting principles other
than for accompanying notes and subject to changes resulting from year-end
audit adjustments).
7.2 ASSIGNMENT OF RIGHTS TO FINANCIAL INFORMATION. The rights
granted pursuant to Section 7.1 may not be assigned or otherwise conveyed by
any Purchaser or by any subsequent transferee of any such rights without the
prior written consent of the Company; provided, however, that any Purchaser may
assign to any transferee, other than a competitor of the Company, and after
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<PAGE> 15
giving notice to the Company, the rights granted pursuant to Section 7.1 to (i)
a transferee who acquires at least 66,700 shares of Preferred Stock and/or
Common Stock issued upon conversion of the Preferred Stock (appropriately
adjusted for recapitalizations) or (ii) any constituent partner of a Purchaser.
7.3 INSPECTION. The Company shall permit the Purchaser, at such
Purchaser's expense, to visit and inspect the Company's properties, to examine
its books of account and records and to discuss the Company's affairs, finances
and accounts with its officers, all at such reasonable times as may be
requested by the Purchaser, provided, however, that the Company shall not be
obligated pursuant to this Section 7.3 to provide access to any information
which it reasonably considers to be a trade secret or similar confidential
information.
7.4 TERMINATION OF COVENANTS. The covenants set forth in Sections
7.1, 7.2 and 7.3 shall terminate and be of no further force or effect at such
time as the Company is required to file reports pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended.
SECTION 8
REGISTRATION RIGHTS
The Purchaser shall have the registration rights set forth in the
Registration Rights Agreement attached hereto as Exhibit D.
SECTION 9
MISCELLANEOUS
9.1 GOVERNING LAW. This Agreement shall be governed in all
respects by the internal laws of the State of Delaware as applied to agreements
entered into among Delaware residents to be performed entirely within Delaware.
9.2 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by the Purchaser
and the Closing of the transactions contemplated hereby.
9.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto,
provided, however, that the rights of the Purchaser to purchase the Preferred
Stock shall not be assignable without the consent of the Company.
9.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other
documents delivered pursuant hereto at the Closing constitute the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof, and no party shall be liable or
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<PAGE> 16
bound to any other party in any manner by any warranties, representations or
covenants except as specifically set forth herein or therein. Except as
expressly provided herein, neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated other than by a written instrument
signed by the party against whom enforcement of any such amendment, waiver,
discharge or termination is sought; provided, however, that holders of a
majority of the Common Stock issued or issuable upon conversion of the
Preferred Stock may, with the Company's prior written consent, waive, modify or
amend on behalf of the Purchaser, any provision hereof.
9.5 NOTICES, ETC. All notices and other communications required
or permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or by facsimile transmission, or otherwise
delivered by hand or by messenger, addressed (a) if to the Purchaser, at the
Purchaser's address set forth above, or at such other address as such Purchaser
shall have furnished to the Company in writing, or (b) if to any other holder
of any shares, at such address as such holder shall have furnished the Company
in writing, or, until any such holder so furnishes an address to the Company,
then to and at the address of the last holder of such shares who has so
furnished an address to the Company, or (c) if to the Company, one copy should
be sent to its address set forth on the cover page of this Agreement and
addressed to the attention of the Corporate Secretary, or at such other address
as the Company shall have furnished to the Purchaser.
Each such notice or other communication shall for all purposes
of this Agreement be treated as effective or having been given when delivered
if delivered personally, or, if sent by mail, at the earlier of its receipt or
72 hours after the same has been deposited in a regularly maintained receptacle
for the deposit of the United States mail, addressed and mailed as aforesaid,
or if by facsimile transmission, as indicated by the facsimile imprint date.
9.6 DELAYS OR OMISSIONS. Except as expressly provided herein, no
delay or omission to exercise any right, power or remedy accruing to any holder
of any shares, upon any breach or default of the Company under this Agreement,
shall impair any such right, power or remedy of such holder nor shall it be
construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any
other breach or default theretofore or thereafter occurring. Any waiver,
permit, consent or approval of any kind or character on the part of any holder
of any breach or default under this Agreement, or any waiver on the part of any
holder of any provisions or conditions of this agreement, must be in writing
and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement or by law or otherwise
afforded to any holder, shall be cumulative and not alternative.
9.7 GEORGIA LEGEND. The Purchaser acknowledges that each
certificate shall bear the following legend: THESE SECURITIES HAVE BEEN ISSUED
OR SOLD IN RELIANCE ON PARAGRAPH 13 OF CODE SECTION 10-5-9 OF THE GEORGIA
SECURITIES ACT OF 1973, AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN A
TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT OR PURSUANT TO AN EFFECTIVE
REGISTRATION UNDER SUCH ACT.
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<PAGE> 17
9.8 EXPENSES. The Company and the Purchaser shall bear its own
legal and other expenses with respect to this Agreement.
9.9 FINDER'S FEES. With respect to any finder's fees arising out
of the purchase of the Series C Shares pursuant to this Agreement:
(a) The Company hereby agrees to indemnify and to hold
the Purchaser harmless of and from any liability for any commission or
compensation in the nature of a finder's fee to any broker or other person or
firm (and the costs and expenses of defending against such liability or
asserted liability) for which the Company or any of its employees or
representatives are responsible.
(b) The Purchaser hereby agrees to indemnify and to hold
the Company harmless of and from any liability for any commission or
compensation in the nature of a finder's fee to any broker or other person or
firm (and the costs and expenses of defending against such liability or
asserted liability) for which such Purchaser or any of its employees or
representatives, are responsible.
9.10 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
9.11 SEVERABILITY. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that no such severability shall be
effective if it materially changes the economic benefit of this Agreement to
any party.
9.12 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
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<PAGE> 18
The foregoing agreement is hereby executed as of the date first above
written.
"COMPANY" "PURCHASER"
SPECTRX, INC. ABBOTT LABORATORIES,
a Delaware corporation an Illinois corporation
By: By:
------------------------------ --------------------------------
Title: Title:
--------------------------- -----------------------------
<PAGE> 19
EXHIBIT A
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
<PAGE> 20
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
_________________________________
I, EDWARD J. FREEL, SECRETARY OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED CERTIFICATE OF
"SPECTRX, INC." FILED IN THIS OFFICE ON THE THIRTIETH DAY OF SEPTEMBER, A.D.
1996, AT 4:30 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
* * * * * * * * * *
[SEAL OF THE SECRETARY OF STATE]
Edward J. Freel, Secretary of State
2313878 8100
AUTHENTICATION: 8128301
960284480 DATE: 10-01-96
<PAGE> 21
RESTATED CERTIFICATE OF INCORPORATION
OF
SPECTRX, INC.
SpectRx, Inc., a Corporation organized and existing under the laws of
the State of Delaware (the "Corporation"), hereby certifies that:
1. The name of the Corporation is SpectRx, Inc. The Corporation
was originally incorporated under the same name, and the original Certificate
of Incorporation was filed with the Secretary of State of the State of Delaware
on October 27, 1992.
2. This Certificate restates and amends the provisions of the
Corporation's Restated Certificate of Incorporation to read as set forth in
Exhibit A attached to this Certificate.
3. This restatement and amendment of the Corporation's
Certificate of Incorporation has been duly adopted by the Corporation's Board
of Directors in accordance with Sections 242 and 245 of the General Corporation
Law of the State of Delaware, and by the holders of each class of outstanding
stock entitled to vote thereon as a class by written consent given in
accordance with Section 228 of the General Corporation Law of the State of
Delaware. Written notice pursuant to Section 228 has been given to those
stockholders of the Corporation who have not consented in writing to this
action.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Restatement of Certificate of Incorporation to be signed by Mark A. Samuels,
its President, and attested by Robert D. Brownell, its Assistant Secretary,
this 27th day of September, 1996.
SPECTRX, INC.
By:/s/ Mark A. Samuels
--------------------------------
Mark A. Samuels, President
ATTEST:
/s/ Robert D. Brownell
- ----------------------------------
Robert D. Brownell,
Assistant Secretary
<PAGE> 22
EXHIBIT A
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
SPECTRX, INC.
I
The name of this corporation is SpectRx, Inc. (the "Corporation").
II
The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle, Zip Code 19801. The name of its registered
agent at such address is The Corporation Trust Company.
III
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
IV
The Corporation is authorized to issue two classes of capital stock:
Preferred Stock, $0.001 par value per share, and Common Stock, $0.001 par value
per share. The total number of shares of Preferred Stock which the Corporation
shall have the authority to issue is 10,870,000 of which 3,560,000 shares shall
be designated Series A Preferred Stock ("Series A Preferred Stock"), 3,560,000
shares shall be designated Series A1 Preferred Stock ("Series A1 Preferred
Stock"), 1,375,000 shares shall be designated Series B Preferred Stock ("Series
B Preferred Stock"), 1,375,000 shares shall be designated Series B1 Preferred
Stock ("Series B1 Preferred Stock"), 500,000 shares shall be designated Series
C Preferred Stock ("Series C Preferred Stock"), and 500,000 shares shall be
designated Series C1 Preferred Stock ("Series C1 Preferred Stock"). The total
number of shares of Common Stock which the Corporation shall have the authority
to issue is 15,000,000. The Series A Preferred Stock, Series A1 Preferred
Stock, Series B Preferred Stock, Series B1 Preferred Stock, Series C Preferred
Stock and Series C1 Preferred Stock are herein collectively referred to as the
"Preferred Stock."
V
The rights, preferences, privileges and restrictions granted to or
imposed upon the Common Stock and the Preferred Stock are as follows:
<PAGE> 23
1. Dividends. The holders of Series A Preferred Stock, Series A1
Preferred Stock, Series B Preferred Stock, Series B1 Preferred Stock, Series C
Preferred Stock and Series C1 Preferred Stock shall be entitled, when and if
declared by the board of directors of the Corporation, to dividends out of
assets of the Corporation legally available therefor at the rate of $0.10,
$0.10, $0.40, $0.40, $0.60 and$0.60 per share, per annum, respectively.
Dividends on the Preferred Stock shall be payable in preference and prior to
any payment of any dividend on the Common Stock of the Corporation.
Thereafter, the holders of Common Stock shall be entitled, when and if declared
by the board of directors of the Corporation, to dividends out of assets of the
Corporation legally available therefor. Notwithstanding anything set forth in
this paragraph 1, no dividends shall be payable on any shares of Common Stock
issued with respect to shares of Series A1 Preferred Stock, Series B1 Preferred
Stock and Series C1 Preferred Stock issued pursuant to paragraph 4(e)(ii)(A)
and 4(e)(ii)(B). The right to dividends on shares of Common Stock and
Preferred Stock shall not be cumulative, and no right shall accrue to holders
of Common Stock or Preferred Stock by reason of the fact that dividends on said
shares are not declared in any prior period.
2. Liquidation Preference.
(a) Preference. In the event of any liquidation,
dissolution or winding up of the Corporation, either voluntarily or
involuntarily, the holders of Preferred Stock shall, subject to the right of
each such holder to convert such holder's shares of Preferred Stock into shares
of Common Stock pursuant to the provisions of Section 4 below, be entitled to
receive, prior and in preference to any distribution of any of the assets or
surplus funds of the Corporation to the holders of Common Stock of the
Corporation by reason of their ownership thereof, an amount equal to $1.00,
$1.00, $4.00, $4.00, $6.00 and $6.00 per share for each outstanding share of
Series A Preferred Stock, Series A1 Preferred Stock, Series B Preferred Stock,
Series B1 Preferred Stock, Series C Preferred Stock and Series C1 Preferred
Stock, respectively, plus any declared but unpaid dividends on such share. If
upon such liquidation, dissolution or winding up of the Corporation, the assets
of the Corporation are insufficient to provide for the cash payment described
above to the holders of Preferred Stock, such assets as are available shall be
paid to the holders of Preferred Stock in proportion to the full preferential
amount each such holder is otherwise entitled to receive.
After the payment or setting apart of payment to the holders
of Preferred Stock of the preferential amounts so payable to them, the holders
of Common Stock shall be entitled to receive any remaining assets of the
Corporation on a pro rata basis, based upon the number of shares held.
(b) Reorganization or Merger. A reorganization or merger
of the Corporation with or into any other corporation or corporations, or a
sale of all or substantially all of the assets of the Corporation shall be
deemed to be a liquidation within the meaning of this paragraph 2; provided
that the holders of Preferred Stock and Common Stock shall be paid in cash or
in securities received or in a combination thereof (which combination shall be
in the same proportions as the consideration received in the transaction). Any
securities to be delivered to the holders of the Preferred Stock and Common
Stock upon a merger, reorganization or sale of substantially all of the assets
of the Corporation shall be valued as follows:
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<PAGE> 24
(i) If traded on a securities exchange, the value
shall be deemed to be the average of the closing prices of the securities on
such exchange over the 30-day period ending three (3) business days prior to
the closing;
(ii) If actively traded over-the-counter, the
value shall be deemed to be the average of the closing bid prices over the
30-day period ending three (3) business days prior to the closing; and
(iii) If there is no active public market, the
value shall be the fair market value thereof, as mutually determined by the
Corporation and the holders of not less than a majority of the outstanding
shares of Preferred Stock, provided that if the Corporation and the holders of
a majority of the outstanding shares of Preferred Stock are unable to reach
agreement, then by independent appraisal by an investment banker hired and paid
by the Corporation, but acceptable to the holders of a majority of the
outstanding shares of Preferred Stock.
(c) Noncash Distributions. If any of the assets of the
Corporation are to be distributed other than in cash under this paragraph 2 or
for any purpose, then the board of directors of the Corporation shall promptly
engage independent competent appraisers to determine the value of the assets to
be distributed to the holders of Preferred Stock or Common Stock. The
Corporation shall, upon receipt of such appraiser's valuation, give prompt
written notice to each holder of shares of Preferred Stock or Common Stock of
the appraiser's valuation.
3. Voting Rights.
(a) The holder of each share of Preferred Stock shall be
entitled to the number of votes equal to the number of shares of Common Stock
into which each share of Preferred Stock could be converted on the record date
for the vote or written consent of stockholders and, except as otherwise
required by law, shall have voting rights and powers equal to the voting rights
and powers of the Common Stock. The holder of each share of Preferred Stock
shall be entitled to notice of any stockholders' meeting in accordance with the
bylaws of the Corporation and shall vote with holders of the Common Stock upon
all matters submitted to a vote of stockholders, except those matters required
to be submitted to a class or series vote pursuant to paragraph 5 herein or by
law. Fractional votes shall not, however, be permitted and any fractional
voting rights resulting from the above formula (after aggregating all shares of
Common Stock into which shares of Preferred Stock held by each holder could be
converted) shall be rounded to the nearest whole number (with one-half rounded
upward to one).
(b) Notwithstanding the foregoing, as long as more than
800,000 shares of Preferred Stock are outstanding, the holders of Preferred
Stock, voting as a class, shall have the right to elect two members of the
Corporation's board of directors. The holders of Common Stock, voting as a
single class, shall have the right to elect all other members of the
Corporation's board of directors. Notwithstanding any Bylaw provisions to the
contrary, the stockholders entitled to elect a particular director shall be
entitled to remove such director or to fill a vacancy in the seat formerly held
by such a director, all in accordance with the applicable provisions provided
in the General Corporation Law of the State of Delaware.
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<PAGE> 25
4. Conversion. The holders of the Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Preferred Stock
shall be convertible without the payment of any additional consideration by the
holder thereof and, at the option of the holder thereof, at any time after the
date of issuance of such share at the office of the Corporation or any transfer
agent for the Preferred Stock. Each share of each series of Preferred Stock
shall be convertible into the number of fully paid and nonassessable shares of
Common Stock which results from dividing the Conversion Price (as hereinafter
defined) per share in effect for such series of Preferred Stock at the time of
conversion into the per share Conversion Value (as hereinafter defined) of such
series. Upon the filing of this Amended and Restated Certificate of
Incorporation with the Delaware Secretary of State, the initial Conversion
Price per share of Series A Preferred Stock, Series A1 Preferred Stock, Series
B Preferred Stock, Series B1 Preferred Stock, Series C Preferred Stock and
Series C1 Preferred Stock shall be $1.00, $1.00, $4.00, $4.00, $6.00 and $6.00,
respectively. The per share Conversion Value of the Series A Preferred Stock,
the Series A1 Preferred Stock, the Series B Preferred Stock, the Series B1
Preferred Stock, the Series C Preferred Stock and the Series C1 Preferred Stock
shall be $1.00, $1.00, $4.00, $4.00, $6.00 and $6.00, respectively. The
initial Conversion Price of the Series A Preferred Stock, the Series A1
Preferred Stock, the Series B Preferred Stock, the Series B1 Preferred Stock,
the Series C Preferred Stock and the Series C1 Preferred Stock shall be subject
to adjustments from time to time as provided below. The number of shares of
Common Stock into which a share of Preferred Stock is convertible is
hereinafter referred to as the "Conversion Rate" of such series.
(b) Automatic Conversion. Each share of Preferred Stock
shall automatically be converted into shares of Common Stock at its then
effective Conversion Rate immediately upon the closing of a firm commitment
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offer and sale of
Common Stock of which the aggregate gross proceeds attributable to sales for
the account of the Corporation exceed $10,000,000 at a per share issuance price
of at least $9.00 per share.
(c) Mechanics of Conversion. Before any holder of
Preferred Stock shall be entitled to convert the same into shares of Common
Stock, such holder shall surrender the certificate(s) therefor, duly endorsed,
at the office of the Corporation or of any transfer agent for the Preferred
Stock and shall give written notice to the Corporation at such office that the
holder elects to convert the same (except that no such written notice of
election to convert shall be necessary in the event of an automatic conversion
pursuant to paragraph 4(b) hereof). The Corporation shall, as soon as
practicable thereafter, issue and deliver at such office to such holder of
Preferred Stock certificate(s) for the number of shares of Common Stock to
which the holder shall be entitled as aforesaid. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the shares of Preferred Stock to be converted (except that
in the case of an automatic conversion pursuant to paragraph 4(b) hereof such
conversion shall be deemed to have been made immediately prior to the closing
of the offering referred to in paragraph 4(b)) and the person(s) entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder(s) of such shares of Common Stock
on such date.
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<PAGE> 26
(d) Fractional Shares. In lieu of any fractional shares
to which the holder of Preferred Stock would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the fair market
value of one share of Common Stock as determined by the board of directors of
the Corporation. Whether or not fractional shares of Common Stock are issuable
upon such conversion shall be determined on the basis of the total number of
shares of Preferred Stock of each holder at the time converting into Common
Stock and the number of shares of Common Stock issuable upon such aggregate
conversion.
(e) Adjustment of Conversion Price.
(i) Special Definitions. For purposes of this
paragraph 4(e), the following definitions shall apply:
(A) "Excluded Stock" shall mean:
(1) all shares of Common Stock
issued and outstanding on the date this document is filed with the Delaware
Secretary of State and all shares of Common Stock issued or issuable upon
conversion of Preferred Stock; and
(2) all shares of Common Stock or
other securities issued or issuable to officers, directors, consultants or
employees of the Corporation or lessors, lenders or licensors to the
Corporation which are approved by of the board of directors of the Corporation.
All outstanding shares of Excluded Stock (including shares of Common Stock
issuable upon conversion of the Preferred Stock) shall be deemed to be
outstanding for all purposes of the computations of subparagraph 4(e)(iii)
below.
(B) "Financing" means any issuance of
Common Stock (including securities exercisable for or convertible into Common
Stock) in a transaction with gross proceeds to the Corporation equal to or
greater than $100,000 where the holders of Preferred Stock are offered an
opportunity to purchase their Preferred Stock Pro Rata Share of the additional
shares of Common Stock (including securities exercisable for or convertible
into Common Stock) issued in such transaction.
(C) "Preferred Stock Pro Rata Share"
shall mean the amount determined by multiplying the total number of shares of
Common Stock (including securities exercisable for or convertible into Common
Stock) offered for sale by the Corporation in a Financing to all parties by a
fraction, (x) the numerator of which is the total number of shares of Common
Stock (including securities convertible into Common Stock) held by such
stockholder and (y) the denominator of which is the total number of shares of
Common Stock (including securities convertible into Common Stock) then
outstanding plus any shares reserved for issuance pursuant to plans approved by
the board of directors of the Corporation.
(D) "Series A Dilutive Issuance" shall
mean an issuance of Common Stock (including securities exercisable for or
convertible into Common Stock) in a Financing for a
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<PAGE> 27
consideration per share less than the Conversion Price of the Series A
Preferred Stock in effect on the date of and immediately prior to such issue.
(E) "Series B Dilutive Issuance" shall
mean an issuance of Common Stock (including securities exercisable for or
convertible into Common Stock) in a Financing for a consideration per share
less than the Conversion Price of the Series B Preferred Stock in effect on the
date of and immediately prior to such issue.
(F) "Series C Dilutive Issuance" shall
mean an issuance of Common Stock (including securities exercisable for or
convertible into Common Stock) in a Financing for a consideration per share
less than the Conversion Price of the Series C Preferred Stock in effect on the
date of and immediately prior to such issue.
(G) "Participating Investor" shall mean
any holder of Preferred Stock that purchases at least its Preferred Stock Pro
Rata Share of either a Series A Dilutive Issuance or Series B Dilutive
Issuance.
(H) "Non-Participating Investor" shall
mean any holder of Preferred Stock that is not a Participating Investor.
(ii) Shadow Preferred.
(A) Series A Preferred Stock. In the
event the Corporation issues additional shares of Common Stock (including
securities exercisable for or convertible into Common Stock) in a Series A
Dilutive Issuance, each share of Series A Preferred Stock held by each and
every Nonparticipating Investor shall, immediately prior to the closing of the
applicable Series A Dilutive Issuance (the "Closing"), be converted into one
fully paid and nonassessable share of Series A1 Preferred Stock plus such
number of fully paid and nonassessable shares of Common Stock as is determined
by multiplying one by the Forced Conversion Rate. The Forced Conversion Rate
shall be equal to (X) minus one, where (X) equals the per share Conversion
Price of Series A Preferred Stock immediately prior to the Closing divided into
the per share Conversion Value of Series A Preferred Stock. Upon the
conversion of Series A Preferred Stock held by a Nonparticipating Investor as
set forth herein, such shares of Series A Preferred Stock shall no longer be
outstanding on the books of the Corporation and the Nonparticipating Investor
shall be treated for all purposes as the record holder of such shares of Series
A1 Preferred Stock and, if applicable, Common Stock upon the Closing of the
applicable Series A Dilutive Issuance.
(B) Series B Preferred Stock. In the
event the Corporation issues additional shares of Common Stock (including
securities exercisable for or convertible into Common Stock) in a Series B
Dilutive Issuance, each share of Series B Preferred Stock held by each and
every Nonparticipating Investor shall, immediately prior to the closing of the
applicable Series B Dilutive Issuance (the "Closing"), be converted into one
fully paid and nonassessable share of Series B1 Preferred Stock plus such
number of fully paid and nonassessable shares of Common Stock as is determined
by multiplying one by the Forced Conversion Rate. The Forced Conversion Rate
shall be equal to (X) minus
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<PAGE> 28
one, where (X) equals the per share Conversion Price of Series B Preferred
Stock immediately prior to the Closing divided into the per share Conversion
Value of Series B Preferred Stock. Upon the conversion of Series B Preferred
Stock held by a Nonparticipating Investor as set forth herein, such shares of
Series B Preferred Stock shall no longer be outstanding on the books of the
Corporation and the Nonparticipating Investor shall be treated for all purposes
as the record holder of such shares of Series B1 Preferred Stock and, if
applicable, Common Stock upon the Closing of the applicable Series B Dilutive
Issuance.
(C) Series C Preferred Stock. In the
event the Corporation issues additional shares of Common Stock (including
securities exercisable for or convertible into Common Stock) in a Series C
Dilutive Issuance, each share of Series C Preferred Stock held by each and
every Nonparticipating Investor shall, immediately prior to the closing of the
applicable Series C Dilutive Issuance (the "Closing"), be converted into one
fully paid and nonassessable share of Series C1 Preferred Stock plus such
number of fully paid and nonassessable shares of Common Stock as is determined
by multiplying one by the Forced Conversion Rate. The Forced Conversion Rate
shall be equal to (X) minus one, where (X) equals the per share Conversion
Price of Series C Preferred Stock immediately prior to the Closing divided into
the per share Conversion Value of Series C Preferred Stock. Upon the
conversion of Series C Preferred Stock held by a Nonparticipating Investor as
set forth herein, such shares of Series C Preferred Stock shall no longer be
outstanding on the books of the Corporation and the Nonparticipating Investor
shall be treated for all purposes as the record holder of such shares of Series
C1 Preferred Stock and, if applicable, Common Stock upon the Closing of the
applicable Series C Dilutive Issuance.
(iii) Adjustment of Conversion Price for Issuance
of Common Stock. No adjustment in the Conversion Price of Series A1 Preferred
Stock or Series B1 Preferred Stock or Series C1 Preferred Stock shall be made
in respect of the issuance of additional shares of Common Stock or securities
exercisable for or convertible into Common Stock (other than in the event of
stock dividends, subdivisions, split-ups, combinations, dividends or
recapitalizations which are covered by paragraphs 4(e)(iv), (v) and (vi)
hereof).
The Conversion Price of each series of Preferred
Stock shall be subject to adjustment from time to time as follows:
If the Corporation shall issue any Common Stock other
than Excluded Stock for a consideration per share less than the Conversion
Price in effect immediately prior to the issuance of such Common Stock
(excluding stock dividends, subdivisions, split-ups, combinations, dividends or
recapitalizations which are covered by paragraphs 4(e)(iv), (v) and (vi)), the
Conversion Price in effect immediately after each such issuance shall forthwith
(except as provided in this paragraph 4(e)) be adjusted to a price equal to the
quotient obtained by dividing:
(1) an amount equal to the sum of
(x) the total number of shares of
Common Stock outstanding (including any shares of Common Stock issuable upon
conversion of the Preferred Stock, or deemed to
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<PAGE> 29
have been issued pursuant to subdivision (C) of this clause (iii)) immediately
prior to such issuance multiplied by the Conversion Price in effect immediately
prior to such issuance, plus
(y) the consideration received by
the Corporation upon such issuance, by
(2) the total number of shares of Common
Stock outstanding (including any shares of Common Stock issuable upon
conversion of the Preferred Stock or deemed to have been issued pursuant to
subdivision (C) of this clause (iii)) immediately after the issuance of such
Common Stock.
For the purposes of this clause (iii), the
following provisions shall be applicable:
(A) 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 any discounts or commissions paid or
incurred by the Corporation in connection with the issuance and sale thereof.
(B) 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 value thereof as
determined by the board of directors of the Corporation, in accordance with
generally accepted accounting treatment; provided, however, that if, at the
time of such determination, the Corporation's Common Stock is traded in the
over-the- counter market or on a national or regional securities exchange, such
fair market value as determined by the board of directors of the Corporation
shall not exceed the aggregate "Current Market Price" (as defined below) of the
shares of Common Stock being issued.
(C) In the case of the issuance of
(i) options to purchase or rights to subscribe for Common Stock (other than
Excluded Stock), (ii) securities by their terms convertible into or
exchangeable for Common Stock (other than Excluded Stock), or (iii) options to
purchase or rights to subscribe for such convertible or exchangeable securities
(other than Excluded Stock):
(1) 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), if any, received by the Corporation 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;
(2) 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 conversion or exchange thereof, shall be deemed to
have been
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<PAGE> 30
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
Corporation for any such securities and related options or rights (excluding
any cash received on account of accrued interest or accrued dividends), plus
the minimum additional consideration, if any, to be received by the Corporation
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);
(3) 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, or on any change in the minimum purchase price of such options,
rights or securities, other than a change resulting from the antidilution
provisions of such options, rights or securities, the Conversion Price shall
forthwith be readjusted to such Conversion Price as would have obtained had the
adjustment made upon (x) the issuance of such options, rights or securities not
exercised, converted or exchanged prior to such change, as the case may be,
been made upon the basis of such change or (y) the options or rights related to
such securities not converted or exchanged prior to such change, as the case
may be, been made upon the basis of such change; and
(4) 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 Conversion Price shall forthwith be readjusted
to such Conversion Price as would have obtained had the adjustment made upon
the issuance of such options, rights, convertible or exchangeable securities or
options or rights related to such convertible or exchangeable securities, as
the case may be, been made upon the basis of the issuance of only the number of
shares of Common Stock actually issued upon the exercise of such options or
rights, upon the conversion or exchange of such convertible or exchangeable
securities or upon the exercise of the options or rights related to such
convertible or exchangeable securities, as the case may be.
(iv) If the number of shares of Common Stock
outstanding at any time after the date hereof 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, on the date such payment is made or such change is
effective, the Conversion Price of a series of Preferred Stock shall be
appropriately decreased so that the number of shares of Common Stock issuable
on conversion of any shares of such series of Preferred Stock shall be
increased in proportion to such increase of outstanding shares of Common Stock.
(v) If the number of shares of Common Stock
outstanding at any time after the date hereof is decreased by a combination of
the outstanding shares of Common Stock, then, on the effective date of such
combination, the Conversion Price of a series of Preferred Stock shall be
appropriately increased so that the number of shares of Common Stock issuable
on conversion of any shares of a series of Preferred Stock shall be decreased
in proportion to such decrease in outstanding shares of Common Stock.
(vi) In case, at any time after the date hereof,
of any capital reorganization (other than a reorganization covered by paragraph
2(b) above), or any reclassification of the stock of the Corporation (other
than as a result of a stock dividend or subdivision, split-up or combination of
shares
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<PAGE> 31
of stock), the shares of a series of Preferred Stock shall, after such capital
reorganization or reclassification, be convertible into the kind and number of
shares of stock or other securities or property of the Corporation or otherwise
to which such holder would have been entitled if immediately prior to such
capital reorganization or reclassification he had converted his shares of such
series of Preferred Stock into Common Stock. The provisions of this clause
(vi) shall similarly apply to successive reorganizations and reclassifications
of the type described in the first sentence of this section 4(e)(vi).
(vii) All calculations under this paragraph 4 shall
be made to the nearest cent or to the nearest one hundredth (1/100) of a share
of stock, as the case may be.
(viii) For the purpose of any computation pursuant
to this paragraph 4(e), the "Current Market Price" at any date of one share of
Common Stock, shall be deemed to be the average of the highest reported bid and
the lowest reported offer prices on the preceding business day as furnished by
the National Quotation Bureau, Incorporated (or equivalent recognized source of
quotations) or the closing sale price, if reported; provided, however, that if
the Common Stock is not traded in such manner that the quotations referred to
in this clause (viii) are available for the period required hereunder, Current
Market Price shall be determined in good faith by the board of directors of the
Corporation, but if challenged by the holders of more than 50% of the
outstanding shares of Preferred Stock, then as determined by an independent
appraiser selected by the board of directors of the Corporation, the cost of
such appraisal to be borne by the challenging parties.
(f) Minimal Adjustments. No adjustment in the Conversion
Price need be made if such adjustment would result in a change in the
Conversion Price of less than $0.01. Any adjustment of less than $0.01 which
is not made shall be carried forward and shall be made at the time of and
together with any subsequent adjustment which, on a cumulative basis, amounts
to an adjustment of $0.01 or more in the Conversion Price.
(g) No Impairment. The Corporation will not through any
reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Corporation, but will at all times in
good faith assist in the carrying out of all the provisions of this paragraph 4
and in the taking of all such action as may be necessary or appropriate in
order to protect the Conversion Rights of the holders of Preferred Stock
against impairment.
(h) Certificate as to Adjustments. Upon the occurrence
of each adjustment or readjustment of the Conversion Rate pursuant to this
paragraph 4, the Corporation at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare and
furnish to each holder of Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon written
request at any time of any holder of Preferred Stock, furnish or cause to be
furnished to such holder a like certificate setting forth (i) such adjustments
and readjustments, (ii) the Conversion Rate of such series of Preferred Stock
at the time in effect, and (iii) the number of shares of Common Stock
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<PAGE> 32
and the amount, if any, of other property which at the time would be received
upon the conversion of such holder's shares of Preferred Stock.
(i) Notices of Record Date. In the event of any taking
by the Corporation of a record of the holders of any class of securities for
the purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution (including any
distribution under section 2(b) above), any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities or
property or to receive any right, the Corporation shall mail to each holder of
Preferred Stock at least ten (10) days prior to such record date, a notice
specifying the date on which any such record is to be taken for the purpose of
such dividend or distribution or right, and the amount and character of such
dividend, distribution or right.
(j) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of Preferred Stock such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of Preferred Stock, the
Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares of stock as shall be sufficient for such
purpose.
(k) Notices. Any notice required by the provisions of
this paragraph 4 to be given to the holder of shares of Preferred Stock shall
be deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at such holder's address appearing on the
books of the Corporation.
(l) Reissuance of Converted Shares. No shares of
Preferred Stock which have been converted into Common Stock after the original
issuance thereof shall ever again be reissued and all such shares of Preferred
Stock so converted shall upon such conversion cease to be a part of the
authorized shares of stock of the Corporation.
5. Protective Provisions.
(a) Preferred Stock. In addition to any other class vote
that may be required by law, so long as any of the Preferred Stock shall be
outstanding the Corporation shall not, without first obtaining the approval (by
vote or written consent, as provided by law) of the holders of at least a
majority of the then outstanding shares of Preferred Stock, voting together as
a single class:
(i) Change of Rights. Materially and adversely
alter or change the rights, preferences or privileges of the Preferred Stock;
(ii) Create a New Class. Create, or obligate
itself to create, any new class or series of shares of stock having preferences
over or being on a parity with any outstanding shares of
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<PAGE> 33
Preferred Stock as to dividends, assets, liquidation preferences, conversion
rights or voting rights or being otherwise superior to or on a parity with any
such preference or priority of any outstanding shares of Preferred Stock, or
authorize or issue shares of stock of any class or series (or any bonds,
debentures, notes or other obligations convertible into or exchangeable for, or
having option rights to purchase, any shares of stock of this Corporation)
having any such preference or priority or being otherwise superior to or being
on a parity with any such preference or priority; or
(iii) merge or consolidate with any other
Corporation or sell, lease, or convey substantially all of the assets of the
corporation or otherwise effect a recapitalization or reorganization of the
Corporation.
VI
1. Limitation of Directors' Liability. The liability of the
directors of this Corporation for monetary damages shall be eliminated to the
fullest extent permissible under the laws of the State of Delaware.
2. Indemnification of Corporate Agents. This Corporation is
authorized to indemnify the directors and officers of the Corporation to the
fullest extent permissible under the laws of the State of Delaware.
3. Repeal or Modification. Any repeal or modification of the
foregoing provisions of this Section VI shall not adversely affect any right of
indemnification or limitation of liability of an agent of this Corporation
relating to acts or omissions occurring prior to such repeal or modification.
VII
The Corporation is to have perpetual existence.
VIII
In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter, amend
or repeal the bylaws of the Corporation.
IX
The number of directors which will constitute the whole Board of
Directors of the Corporation shall be as specified in the bylaws of the
Corporation.
X
The election of directors need not be by written ballot unless the
bylaws of the Corporation shall so provide.
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<PAGE> 34
XI
Meeting of stockholders may be held within or without the State of
Delaware, as the bylaws may provide. The books of the Corporation may be kept
(subject to any provisions contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the bylaws of the Corporation.
XII
Advance notice of new business and stockholder nomination for the
election of directors shall be given in the manner and to the extent provided
in the bylaws of the Corporation.
XIII
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Restated Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
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<PAGE> 35
EXHIBIT B
EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES
<PAGE> 36
SCHEDULE OF EXCEPTIONS
This Schedule of Exceptions, dated as of October 21, 1996, is made and
given pursuant to Section 3 of the SpectRx, Inc. Series C Preferred Stock
Purchase Agreement dated October 21, 1996 (the "Agreement"). The Section
numbers in this Schedule of Exceptions correspond to the section numbers in the
Agreement; however, any information disclosed herein under any section number
shall be deemed to be disclosed and incorporated into any other section number
under this Agreement where such disclosure would be appropriate. Any terms
defined in the Agreement shall have the same meaning when used in this Schedule
of Exceptions as when used in the Agreement unless the context otherwise
requires.
3.3 Subsidiaries. The Company is currently in the process of
forming a subsidiary (the "Subsidiary") for the purpose of commercializing
certain technology of the Company. The Company intends to own approximately
65% of the Subsidiary, and the remaining stock of the Subsidiary will be owned
by the Subsidiary's management.
3.4 Capitalization. One of the warrants outstanding as of the
Closing, for the purchase of up to 824,000 shares of Common Stock, is not
currently exercisable and will only become exercisable upon the occurrence of
certain events as specified in the warrant.
3.7 Agreements; Action.
- The Company has entered into an agreement with one of its
officers, Jonathon Eppstein, Vice President of Research and
Development (the "Officer"), and two corporations controlled
by the Officer, pursuant to which the Company received a
license to certain technology owned by the Officer's
corporations. In return, the Company paid a license fee,
agreed to pay a royalty and issued a warrant to the
corporations which, upon the occurrence of certain events,
will become exercisable.
- Mark Samuels and Keith Ignotz, the Company's chief executive
officer and chioef operating officer, respectively, purchased
shares of Common Stock of the Company and paid for such shares
by delivering a promissory note to the Company. The aggregate
amount owed under the notes was approximately $48,525 as of
the Closing.
- The Company has entered into a development and licensing
agreement with Boehringer Mannheim Corporation.
- The Company has entered into a development and licensing
agreement with Healthdyne Technologies.
- The Company has entered into a development and licensing
agreement with Teijin Limited.
<PAGE> 37
- The Company has entered into a licensing agreement with Joseph
R. Lakowicz.
- The Company has entered into a licensing agreement with M.D.
Andersen Cancer Center, University of Texas.
- The Company has entered into a licensing agreement with
Georgia Institute of Technology.
3.10 Litigation, etc. The Company has received a demand notice for
payment of a $20,000 license fee due under an expired license from Martin
Marietta Energy Systems. The Company is presently in the process of
negotiating a resolution of this dispute.
3.16 Patents and Trademarks
The Company purchased all of the technology and other intellectual
property, relating to non-invasive means of diagnosing disease through the use
of fluorescence spectroscopy, of Laser Atlanta Optics, Inc.
<PAGE> 38
EXHIBIT C
PROPRIETARY INFORMATION AGREEMENT
<PAGE> 39
SPECTRX, INC.
EMPLOYEE PROPRIETARY INFORMATION AGREEMENT
As a condition of my employment with Spectrx, Inc., its subsidiaries,
affiliates, successors or assigns (together the "COMPANY"), and in
consideration of my employment with the Company and my receipt of the
compensation now and hereafter paid to me by Company, I agree to the following:
1. At-Will Employment. I understand and acknowledge that my
employment with the Company is for an unspecified duration and constitutes
"at-will" employment. I acknowledge that this employment relationship may be
terminated at any time, with or without good cause or for any or no cause, at
the option either of the Company or myself, with or without notice.
2. Confidential Information.
(a) Company Information. I agree at all times during the term
of my employment and thereafter, to hold in strictest confidence, and not to
use, except for the benefit of the Company, or to disclose to any person, firm
or corporation without written authorization of the Board of Directors of the
Company, any Confidential Information of the Company. I understand that
"CONFIDENTIAL INFORMATION" means any Company proprietary information, technical
data, trade secrets or know-how, including, but not limited to, research,
product plans, products, services, customer lists and customers (including, but
not limited to, customers of the Company on whom I called or with whom I became
acquainted during the term of my employment), markets, software, developments,
inventions, processes, formulas, technology, designs, drawings, engineering,
hardware configuration information, marketing, finances or other business
information disclosed to me by the Company either directly or indirectly, in
writing, orally, by drawings, or by observation of parts or equipment. I
further understand that Confidential Information does not include any of the
foregoing items which has become publicly known and made generally available
through no wrongful act of mine or of others who were under confidentiality
obligations as to the item or items involved.
(b) Former Employer Information. I agree that I will not,
during my employment with the Company, improperly use or disclose any
proprietary information or trade secrets of any former or concurrent employer
or other person or entity and that I will not bring onto the premises of the
Company any unpublished document or proprietary information belonging to any
such employer, person or entity unless consented to in writing by such
employer, person or entity.
(c) Third Party Information. I recognize that the Company has
received and in the future will receive from third parties their confidential
or proprietary information subject to a duty on the Company's part to maintain
the confidentiality of such information and to use it only for certain limited
purposes. I agree to hold all such confidential or proprietary information in
the strictest confidence and not to disclose it to any person, firm or
corporation or to use it except as necessary in carrying out my work for the
Company consistent with the Company's agreement with such third party.
3. Inventions.
(a) Inventions Retained and Licensed. I have attached hereto,
as Exhibit A, a list describing all inventions, original works of authorship,
developments, improvements, and trade secrets which were made by me prior to my
employment with the Company, which belong to me, which relate to the Company's
proposed business, products or research and development, and which are not
assigned to the Company hereunder (collectively referred to as "Prior
Inventions"); or, if no such list is attached, I represent that there are no
such Prior Inventions. If in the course of my employment with the Company, I
incorporate into any invention, improvement, development, product,
copyrightable material or trade secret any invention, improvement, development,
concept, discovery or other proprietary information owned by me or in which I
have an interest, the Company is hereby granted and shall have a nonexclusive,
royalty-free, irrevocable, perpetual, worldwide license to make, have made,
modify, use and sell such item as part of or in connection with such product,
process or machine.
(b) Assignment of Inventions. I agree that I will promptly make
full written disclosure to the Company, will hold in trust for the sole right
and benefit of the Company, and hereby assign to the Company, or its designee,
all my right, title, and interest in and to any and all inventions, original
works of authorship, developments, concepts, improvements or trade secrets,
<PAGE> 40
whether or not patentable or registrable under copyright or similar laws, which
I may solely or jointly conceive or develop or reduce to practice, or cause to
be conceived or developed or reduced to practice, during the period of time I
am in the employ of the Company (collectively referred to as "INVENTIONS"),
except as provided in Section 3(f) below. I further acknowledge that all
original works of authorship which are made by me (solely or jointly with
others) within the scope of and during the period of my employment with the
Company and which are protectible by copyright are "works made for hire," as
that term is defined in the United States Copyright Act.
(c) Inventions Assigned to the United States. I agree to assign
to the United States government all my right, title, and interest in and to any
and all Inventions whenever such full title is required to be in the United
States by a contract between the Company and the United States or any of its
agencies.
(d) Maintenance of Records. I agree to keep and maintain
adequate and current written records of all Inventions made by me (solely or
jointly with others) during the term of my employment with the Company. The
records will be in the form of notes, sketches, drawings, and any other format
that may be specified by the Company. The records will be available to and
remain the sole property of the Company at all times.
(e) Patent and Copyright Registrations. I agree to assist the
Company, or its designee, at the Company's expense, in every proper way to
secure the Company's rights in the Inventions and any copyrights, patents, mask
work rights or other intellectual property rights relating thereto in any and
all countries, including the disclosure to the Company of all pertinent
information and data with respect thereto, the execution of all applications,
specifications, oaths, assignments and all other instruments which the Company
shall deem necessary in order to apply for and obtain such rights and in order
to assign and convey to the Company, its successors, assigns and nominees the
sole and exclusive rights, title and interest in and to such Inventions, and
any copyrights, patents, mask work rights or other intellectual property rights
relating thereto. I further agree that my obligation to execute or cause to be
executed, when it is in my power to do so, any such instrument or papers shall
continue after the termination of this Agreement. If the Company is unable
because of my mental or physical incapacity or for any other reason to secure
my signature to apply for or to pursue any application for any United States or
foreign patents or copyright registrations covering Inventions or original
works of authorship assigned to the Company as above, then I hereby irrevocably
designate and appoint the Company and its duly authorized officers and agents
as my agent and attorney in fact, to act for and in my behalf and stead to
execute and file any such applications and to do all other lawfully permitted
acts to further the prosecution and issuance of letters patent or copyright
registrations thereon with the same legal force and effect as if executed by
me.
(f) Exception to Assignments. I understand that the provisions
of this Agreement requiring assignment of Inventions to the Company do not
apply to any invention which qualifies under the provisions of Exhibit B
attached hereto. I will advise the Company promptly in writing of any
inventions that I believe meet the criteria of Exhibit B.
4. Conflicting Employment. I agree that, during the term of my
employment with the Company, I will not engage in any other employment,
occupation, consulting or other business activity directly related to the
business in which the Company is now involved or becomes involved during the
term of my employment, nor will I engage in any other activities that conflict
with my obligations to the Company.
5. Returning Company Documents. I agree that, at the time of leaving
the employ of the Company, I will deliver to the Company (and will not keep in
my possession, recreate or deliver to anyone else) any and all devices,
records, data, notes, reports, proposals, lists, correspondence,
specifications, drawings, blueprints, sketches, materials, equipment, other
documents or property, or reproductions of any aforementioned items developed
by me pursuant to my employment with the Company or otherwise belonging to the
Company, its successors or assigns. In the event of the termination of my
employment, I agree to sign and deliver the "TERMINATION CERTIFICATION"
attached hereto as Exhibit C.
6. Notification to New Employer. In the event that I leave the employ
of the Company, I hereby grant consent to notification by the Company to my new
employer about my rights and obligations under this Agreement.
7. Solicitation of Employees. I agree that for a period of twelve
(12) months immediately following the termination of my relationship with the
Company for any reason, whether with or without cause, I shall not either
directly or indirectly solicit,
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<PAGE> 41
induce, recruit or encourage any of the Company's employees to leave their
employment, or take away such employees, or attempt to solicit, induce,
recruit, encourage or take away employees of the Company, either for myself or
for any other person or entity.
8. Representations. I agree to execute any proper oath or verify any
proper document required to carry out the terms of this Agreement. I represent
that my performance of all the terms of this Agreement will not breach any
agreement to keep in confidence proprietary information acquired by me in
confidence or in trust prior to my employment by the Company. I have not
entered into, and I agree I will not enter into, any oral or written agreement
in conflict herewith.
9. Arbitration and Equitable Relief.
(a) Arbitration. Except as provided in Section 9(b) below, I
agree that any dispute or controversy arising out of or relating to any
interpretation, construction, performance or breach of this Agreement, shall be
settled by arbitration to be held in Norcross, Georgia in accordance with the
rules then in effect of the American Arbitration Association. The arbitrator
may grant injunctions or other relief in such dispute or controversy. The
decision of the arbitrator shall be final, conclusive and binding on the
parties to the arbitration. Judgement may be entered on the arbitrator's
decision in any court having jurisdiction. The Company and I shall each pay
one-half of the costs and expenses of such arbitration, and each of us shall
separately pay our counsel fees and expenses.
(b) Equitable Remedies. I agree that it would be impossible or
inadequate to measure and calculate the Company's damages from any breach of
the covenants set forth in Sections 2, 3, and 5 herein. Accordingly, I agree
that if I breach any of such Sections, the Company will have available, in
addition to any other right or remedy available, the right to obtain an
injunction from a court of competent jurisdiction restraining such breach or
threatened breach and to specific performance of any such provision of this
Agreement. I further agree that no bond or other security shall be required in
obtaining such equitable relief and I hereby consent to the issuance of such
injunction and to the ordering of specific performance.
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<PAGE> 42
10. General Provisions
(a) Governing Law; Consent to Personal Jurisdiction. This
Agreement will be governed by the laws of the State of Georgia. I hereby
expressly consent to the personal jurisdiction of the state and federal courts
located in Georgia for any lawsuit filed there against me by the Company
arising from or relating to this Agreement.
(b) Entire Agreement. This Agreement sets forth the entire
agreement and understanding between the Company and me relating to the subject
matter herein and merges all prior discussions between us. No modification of
or amendment to this Agreement, nor any waiver of any rights under this
agreement, will be effective unless in writing signed by the party to be
charged. Any subsequent change or changes in my duties, salary or compensation
will not affect the validity or scope of this Agreement.
(c) Severability. If one or more of the provisions in this
Agreement are deemed void by law, then the remaining provisions will continue
in full force and effect.
(d) Successors and Assigns. This Agreement may not be assigned
without the prior written consent of the Company. Subject to the foregoing
sentence, this Agreement will be binding upon my heirs, executors,
administrators and other legal representatives and will be for the benefit of
the Company, its successors, and its assigns.
Date:
-------------------
-------------------------------
(Name)
- ------------------------
Witness
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<PAGE> 43
EXHIBIT A
LIST OF PRIOR INVENTIONS
AND ORIGINAL WORKS OF AUTHORSHIP
Identifying
Number of
Title Date Brief Description
----- ---- -----------------
__ No inventions or improvements
__ Additional Sheets Attached
Signature of Employee: ___________________________
(Name)
Date: _______________________
<PAGE> 44
EXHIBIT B
EXCEPTION TO ASSIGNMENTS
The assignment provisions shall not apply to an invention that the
employee developed entirely on his or her own time without using the employer's
equipment, supplies, facilities, or trade secret information except for those
inventions that either:
(1) Relate at the time of conception or reduction to practice of
the invention to the employer's business, or actual or demonstrably anticipated
research or development of the employer.
(2) Result from any work performed by the employee for the
employer.
<PAGE> 45
EXHIBIT C
SPECTRX, INC.
TERMINATION CERTIFICATION
This is to certify that I do not have in my possession, nor have I failed
to return, any devices, records, data, notes, reports, proposals, lists,
correspondence, specifications, drawings, blueprints, sketches, materials,
equipment, other documents or property, or reproductions of any aforementioned
items belonging to Spectrx, Inc., its subsidiaries, affiliates, successors or
assigns (together, the "COMPANY").
I further certify that I have complied with all the terms of the
Company's Employee Proprietary Information Agreement signed by me, including
the reporting of any inventions and original works of authorship (as defined
therein), conceived or made by me (solely or jointly with others) covered by
that agreement.
I further agree that, in compliance with the Employee Proprietary
Information Agreement, I will preserve as confidential all trade secrets,
confidential knowledge, data or other proprietary information relating to
products, processes, know-how, designs, formulas, developmental or experimental
work, computer programs, data bases, other original works of authorship,
customer lists, business plans, financial information or other subject matter
pertaining to any business of the Company or any of its employees, clients,
consultants or licensees.
I further agree that for twelve (12) months from this date, I will not
hire any employees of the Company and I will not solicit, induce, recruit or
encourage any of the Company's employees to leave their employment.
Date:
--------------------
--------------------------------
(Name)
<PAGE> 46
EXHIBIT D
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
<PAGE> 47
EXHIBIT D
SPECTRX, INC.
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
This Amended and Restated Registration Rights Agreement (the
"Agreement") amends and restates the Prior Registration Rights Agreement (as
defined in Section 1 hereof) and is effective as of October __, 1996 by and
among SpectRx, Inc., a Delaware corporation (the "Company"), the holders of
Registrable Securities (as such term is defined in the Prior Registration
Rights Agreement) and the purchaser of the Company's Series C Preferred Stock.
NOW THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement and in the agreements pursuant to which the holders of Registrable
Securities acquired their Registrable Securities in the Company, the parties
hereby agree as follows:
1. Amendment of Prior Registration Rights Agreements. This
Agreement amends and restates the Prior Registration Rights Agreement in its
entirety. Such amendment and restatement is effective upon the execution of
this Agreement by the holders of at least a majority of the Registrable
Securities (as such term is defined in the Prior Registration Rights Agreement)
outstanding as of the date of this Agreement. For purposes of this Agreement,
the term "Prior Registration Rights Agreement" shall mean that certain Amended
and Restated Registration Rights Agreement dated August 30, 1996.
2. Certain Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:
"Act" shall mean the Securities Act of 1933, as amended.
"Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Act.
"Holder" shall mean any person owning or having the right to
acquire Registrable Securities and any person holding Registrable Securities to
whom the rights under this Agreement have been transferred in accordance with
paragraph 11 hereof.
"Initiating Holders" shall mean any Holders who in the
aggregate possess more than 50% of the Registrable Securities.
"Register," "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Act, and the declaration or ordering of the effectiveness
of such registration statement.
<PAGE> 48
"Registrable Securities" shall mean (i) the Common Stock
issuable or issued upon conversion of the Series A Preferred Stock, (ii) the
Common Stock issuable or issued upon conversion of the Series A1 Preferred
Stock, (iii) the Common Stock issuable upon conversion of the Series A
Preferred Stock issuable or issued upon exercise of certain warrants issued
pursuant to the Note and Warrant Purchase Agreement dated April 6, 1994, (iv)
the Common Stock issuable upon conversion of the Series A Preferred Stock
issuable or issued upon exercise of certain warrants issued pursuant to the
Note and Warrant Purchase Agreement dated April 29, 1994, (v) the Common Stock
issuable upon conversion of the Series A Preferred Stock issuable or issued
upon exercise of certain warrants issued pursuant to the Note and Warrant
Purchase Agreement dated June 15, 1994, (vi) the Common Stock issuable or
issued upon conversion of the Series B Preferred Stock, (vii) the Common Stock
issuable or issued upon conversion of the Series B1 Preferred Stock, (viii) the
Common Stock issuable or issued upon conversion of the Series C Preferred
Stock, (ix) the Common Stock issuable or issued upon conversion of the Series
C1 Preferred Stock, and (x) any Common Stock or other securities issued or
issuable with respect to such Series A Preferred Stock, Series A1 Preferred
Stock, Series B Preferred Stock, Series B1 Preferred Stock, Series C Preferred
Stock, Series C1 Preferred Stock, or Common Stock upon any stock split, stock
dividend, recapitalization, or similar event, or any Common Stock otherwise
issued or issuable with respect to such Series A Preferred Stock, Series A1
Preferred Stock, Series B Preferred Stock, Series B1 Preferred Stock, Series C
Preferred Stock, Series C1 Preferred Stock, or Common Stock; provided, however,
that shares of Common Stock or other securities shall only be treated as
Registrable Securities if and so long as they have not been (i) sold to or
through a broker or dealer or underwriter in a public distribution or a public
securities transaction or (ii) sold by a person in a transaction in which their
rights under this Agreement are not assigned.
"Registration Expenses" shall mean all expenses, except
Selling Expenses as otherwise stated below, incurred by the Company in
complying with paragraphs 3, 4 and 5 hereof, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Company, blue sky fees and expenses,
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,
selling commissions, stock transfer taxes applicable to the securities
registered by the Holders, and any fees and expenses of special counsel of a
selling stockholder.
3. Requested Registration.
(a) Request for Registration. In case the Company shall
receive from Initiating Holders a written request that the Company effect any
registration, qualification or compliance with respect to at least 80% of the
shares of Registrable Securities held by them (or any lesser number of shares
of Registrable Securities having an expected aggregate offering price, net of
underwriting discounts and commissions, greater than $7,500,000), the Company
will:
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<PAGE> 49
(i) promptly give written notice of the proposed
registration, qualification or compliance to all other Holders; and
(ii) as soon as practicable, use its best efforts to
effect such registration, qualification or compliance (including, without
limitation, appropriate qualification under applicable blue sky or other state
securities laws and appropriate compliance with applicable regulations issued
under the Act and any other governmental requirements or regulations) as may be
so requested and as would permit or facilitate the sale and distribution of all
or such portion of such Registrable Securities as are specified in such
request, together with all or such portion of the Registrable Securities of any
Holder or Holders joining in such request as are specified in a written request
received by the Company within 20 days after receipt of such written notice
from the Company.
Provided, however, that the Company shall not be
obligated to take any action to effect any such registration, qualification or
compliance pursuant to this paragraph 3:
(1) In any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required
by the Act;
(2) Prior to the earlier of (i) September 1,
1998 or (ii) six months after the effective date of the Company's first
registered public offering of its stock;
(3) During the period starting with the date
sixty (60) days prior to the Company's estimated date of filing of, and ending
on the date three (3) months immediately following the effective date of, any
registration statement pertaining to securities of the Company (other than a
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan), provided that the Company is actively employing in good
faith all reasonable efforts to cause such registration statement to become
effective;
(4) After the Company has effected two such
registrations pursuant to this paragraph 3(a), and such registrations have been
declared or ordered effective; or
(5) If the Company shall furnish to such Holders
a certificate signed by the President of the Company that in the good faith
judgment of the Board of Directors it would be seriously detrimental to the
Company or its stockholders for a registration statement to be filed at such
time, then the Company's obligation to use its best efforts to register,
qualify or comply under this paragraph 3 shall be deferred for a period not to
exceed 90 days from the date of receipt of written request from the Initiating
Holders, provided, however, that the Company may not make such certification
more than once every calendar year.
Subject to the foregoing clauses (1) through (5), the Company
shall file a registration statement covering the Registrable Securities so
requested to be registered as soon as practicable,
-3-
<PAGE> 50
after receipt of the request or requests of the Initiating Holders and in any
event within one hundred eighty (180) days after receipt of such request.
(b) Underwriting. In the event that a registration
pursuant to this paragraph 3 is for a registered public offering involving an
underwriting, the Company shall so advise the Holders as part of the notice
given pursuant to paragraph 3(a)(i). In such event, the right of any Holder to
such registration shall be conditioned upon such Holder's participation in the
underwriting arrangements required by this paragraph 3, and the inclusion of
such Holder's Registrable Securities in the underwriting to the extent
requested shall be limited to the extent provided herein.
The Company shall (together with all Holders proposing to
distribute their securities through such underwriting) enter into an
underwriting agreement in customary form with the managing underwriter selected
for such underwriting by a majority in interest of the Initiating Holders, but
subject to the Company's reasonable approval. Notwithstanding any other
provision of this paragraph 3, if the managing underwriter advises the
Initiating Holders in writing that marketing factors require a limitation of
the number of shares to be underwritten, then the Company shall so advise all
holders of Registrable Securities and the number of shares of Registrable
Securities that may be included in the registration and underwriting shall be
allocated among all Holders thereof (except those Holders who have indicated to
the Company their decision not to distribute any of their Registrable
Securities through such underwriting) in proportion, as nearly as practicable,
to the respective amounts of Registrable Securities held by such Holders at the
time of filing the registration statement, provided, however, that the number
of shares of Registrable Securities to be included in such underwriting shall
not be reduced unless all other securities are first entirely excluded from the
underwriting. No Registrable Securities excluded from the underwriting by
reason of the underwriter's marketing limitation shall be included in such
registration. To facilitate the allocation of shares in accordance with the
above provisions, the Company or the underwriters may round the number of
shares allocated to any Holder to the nearest 100 shares.
If any Holder of Registrable Securities disapproves of the
terms of the underwriting, such person may elect to withdraw therefrom by
written notice to the Company, the managing underwriter and the Initiating
Holders. The Registrable Securities and/or other securities so withdrawn shall
also be withdrawn from registration, and such Registrable Securities shall not
be transferred in a public distribution prior to 90 days after the effective
date of such registration, or such other shorter period of time as the
underwriters may require.
4. Company Registration.
(a) Notice of Registration. If at any time or from time
to time the Company shall determine to register any of its securities, either
for its own account or the account of a security holder or holders, other than
(i) in connection with the Company's initial public offering, (ii) a
registration relating solely to employee benefit plans, or (iii) a registration
relating solely to a Commission Rule 145 transaction, the Company will:
(i) promptly give to each Holder written notice
thereof; and
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<PAGE> 51
(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 within 20 days after receipt of such written
notice from the Company, by any Holder.
(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 a part of the written
notice given pursuant to paragraph 4(a)(i). In such event the right of any
Holder to registration pursuant to this paragraph 4 shall be conditioned upon
such Holder's participation in such underwriting and the inclusion of
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 and the other holders distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the managing underwriter selected for such underwriting by
the Company.
Notwithstanding any other provision of this paragraph 4, if
the managing underwriter determines that marketing factors require a limitation
of the number of shares to be underwritten, the managing underwriter may limit
the Registrable Securities or other securities to be included in such
registration or exclude them entirely. The Company shall so advise all Holders
and other holders distributing their securities through such underwriting and
the number of shares of Registrable Securities and other securities that may be
included in the registration and underwriting shall be allocated among the
holders thereof in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities and other securities held by such holders at
the time of filing the registration statement. To facilitate the allocation of
shares in accordance with the above provisions, the Company may round the
number of shares allocated to any Holder or holder to the nearest 100 shares.
If any Holder or holder disapproves of the terms of any such
underwriting, he may elect to withdraw therefrom by written notice to the
Company and the managing underwriter. Any securities excluded or withdrawn
from such underwriting shall be withdrawn from such registration, and shall not
be transferred in a public distribution prior to 90 days after the effective
date of the registration statement relating thereto, or such other shorter
period of time as the underwriters may require.
(c) Right to Terminate Registration. The Company shall
have the right to terminate or withdraw any registration initiated by it under
this paragraph 4 prior to the effectiveness of such registration whether or not
any Holder has elected to include securities in such registration.
5. Registration on Form S-3.
(a) If any Holder or Holders request that the Company
file a registration statement on Form S-3 (or any successor form to Form S-3)
for a public offering of shares of the Registrable Securities the reasonably
anticipated aggregate price to the public of which, net of underwriting
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<PAGE> 52
discounts and commissions, would exceed $500,000, and the Company is a
registrant entitled to use Form S-3 to register the Registrable Securities for
such an offering, the Company shall use its best efforts to cause such
Registrable Securities to be registered for the offering on such form and to
cause such Registrable Securities to be qualified in such jurisdictions as the
Holder or Holders may reasonably request; provided, however, that the Company
shall not be required to effect more than one registration pursuant to this
paragraph 5 in any calendar year. The substantive provisions of paragraph 4(b)
shall be applicable to each registration under this paragraph 5.
(b) Notwithstanding the foregoing, the Company shall not
be obligated to take any action pursuant to this paragraph 5: (i) in any
particular jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such registration,
qualification or compliance unless the Company is already subject to service in
such jurisdiction and except as may be required by the Act; (ii) if the
Company, within ten (10) days of the receipt of the request of the initiating
Holders, gives notice of its bona fide intention to effect the filing of a
registration statement with the Commission within ninety (90) days of receipt
of such request (other than with respect to a registration statement relating
to a Rule 145 transaction, an offering solely to employees or any other
registration which is not appropriate for the registration of Registrable
Securities); (iii) during the period starting with the date sixty (60) days
prior to the Company's estimated date of filing of, and ending on the date six
(6) months immediately following, the effective date of any registration
statement pertaining to securities of the Company (other than a registration of
securities in a Rule 145 transaction or with respect to an employee benefit
plan), provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective; or
(iv) if the Company shall furnish to such Holder a certificate signed by the
President of the Company stating that in the good faith judgment of the Board
of Directors it would be seriously detrimental to the Company or its
stockholders for registration statements to be filed at such time, then the
Company's obligation to use its best efforts to file a registration statement
shall be deferred for a period not to exceed 90 days from the receipt of the
request to file such registration by such Holder provided that the Company may
not make such certification more than once every calendar year.
6. Expenses of Registration. All Registration Expenses
(exclusive of underwriting discounts and commissions or fees of special counsel
for a selling Holder) incurred in connection with (i) two registrations
pursuant to paragraph 3 and (ii) all registrations pursuant to paragraphs 4 and
5 shall be borne by the Company.
7. Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Agreement,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will:
(a) Prepare and file with the Commission a registration
statement with respect to such securities and use its best efforts to cause
such registration statement to become and remain effective for at least one
hundred and twenty (120) days or until the distribution described in the
Registration Statement has been completed;
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<PAGE> 53
(b) Prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the Act with respect to the disposition of all securities
covered by such registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by them.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities
or Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in
usual and customary form, with the managing underwriter of such offering. Each
Holder participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered
by such registration statement at any time when a prospectus relating thereto
is required to be delivered under the Act of the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(g) Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Agreement, on the date
that such Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Agreement, (i) an opinion,
dated such date, of the counsel representing the Company for the purposes of
such registration, in form and substance as is customarily given to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities
and (ii) a letter dated such date, from the independent accountants of the
Company, in form and substance as is customarily given by independent
accountants to underwriters in an underwritten public offering, addressed to
the underwriters, if any, and to the Holders requesting registration of
Registrable Securities.
8. Indemnification.
(a) The Company will indemnify each Holder, each of its
officers and directors and partners, and each person controlling such Holder
within the meaning of Section 15 of the Act, with respect to which
registration, qualification or compliance has been effected pursuant to this
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<PAGE> 54
Agreement, and each underwriter, if any, and each person who controls any
underwriter within the meaning of Section 15 of the Act, against all expenses,
claims, losses, damages or liabilities (or actions in respect thereof),
including any of the foregoing incurred in settlement of any litigation,
commenced or threatened, arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any registration
statement, prospectus, offering circular or other document, or any amendment or
supplement thereto, 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, in light of the circumstances in which they were made, not misleading,
or any violation by the Company of any federal, state or common law rule or
regulation applicable to the Company in connection with any such registration,
qualification or compliance, and the Company will reimburse each such Holder,
each of its officers and directors, and each person controlling such Holder,
each such underwriter and each person who controls any such underwriter, for
any legal and any other expenses reasonably incurred in connection with
investigating, preparing or defending any such claim, loss, damage, liability
or action, provided that the Company will not be liable in any such case to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on any untrue statement or omission or alleged untrue statement or
omission, made in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by such Holder,
controlling person or underwriter and stated to be specifically for use
therein.
(b) Each Holder will, if Registrable Securities held by
such Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company or such underwriter within the meaning of Section 15 of the Act,
and each other such Holder, each of its officers and directors and each person
controlling such Holder within the meaning of Section 15 of the Act, 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,
such Holders, such directors, officers, persons, 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 in reliance upon and in conformity with written information furnished
to the Company by an instrument duly executed by such Holder and stated to be
specifically for use therein. Notwithstanding the foregoing, the liability of
each Holder under this subsection (b) shall be limited in an amount equal to
the public offering price of the shares sold by such Holder, unless such
liability arises out of or is based on willful conduct by such Holder.
(c) Each party entitled to indemnification under this
paragraph 8 (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
-8-
<PAGE> 55
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 litigation,
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, provided, however, that the Indemnifying Party
shall bear the expense of independent counsel for the Indemnified Party if the
Indemnified Party reasonably determines that representation of both parties by
the same counsel would be inappropriate due to actual or potential conflicts of
interest, 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 Agreement unless the failure to give such notice is
materially prejudicial to an Indemnifying Party's ability to defend such action
and provided further, that the Indemnifying Party shall not assume the defense
for matters as to which there is a conflict of interest or separate and
different defenses. 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.
9. Information by Holder. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the Registrable Securities held
by them and the distribution proposed by such Holder or Holders as the Company
may request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Agreement.
10. Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Registrable Securities to the public without
registration, after such time as a public market exists for the Common Stock of
the Company, the Company agrees to use its best efforts to:
(a) Make and keep public information available, as those
terms are understood and defined in Rule 144 under the Act, at all times after
the effective date that the Company becomes subject to the reporting
requirements of the Act or the Securities Exchange Act of 1934, as amended.
(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 Act and the Securities Exchange Act of 1934, as amended (at any time after
it has become subject to such reporting requirements);
(c) So long as a Holder owns any Registrable Securities
to furnish to the Holder forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144
(at any time after 90 days after the effective date of the first registration
statement filed by the Company for an offering of its securities to the general
public), and of the Act and the Securities Exchange Act of 1934 (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 of the Company and other information in the possession of or
reasonably obtainable by the Company as a Holder may reasonably request in
availing itself of any
-9-
<PAGE> 56
rule or regulation of the Commission allowing a Holder to sell any such
securities without registration.
11. Transfer of Registration Rights. The rights to cause the
Company to register securities granted Holders under paragraphs 3, 4 and 5 may
be assigned to a transferee or assignee in connection with any transfer or
assignment of Registrable Securities by a Holder provided that: (i) such
transfer may otherwise be effected in accordance with applicable securities
laws, and (ii) such assignee or transferee acquires at least 400,000 shares of
Registrable Securities. Notwithstanding the foregoing, the rights to cause the
Company to register securities may be assigned, in connection with a
distribution by such Holder, to any parent or subsidiary company or to any
partner, former partner, or the estate of any such partner without compliance
with item (ii) above, provided written notice thereof is promptly given to the
Company.
12. Standoff Agreement. Each Holder agrees, in connection with
the Company's initial public offering of the Company's securities that, upon
request of the Company or the underwriters managing any underwritten offering
of the Company's securities, not to sell, make any short sale of, loan, grant
any option for the purchase of, or otherwise dispose of any Common Stock of the
Company (other than those included in the registration) without the prior
written consent of the Company or such underwriters, as the case may be, for
such period of time (not to exceed one hundred eighty (180) days) from the
effective date of such registration as may be requested by the underwriters,
provided that the officers and directors of the Company enter into similar
agreements.
13. Termination of Registration Rights. All rights of the
Holders under this Agreement shall terminate four (4) years from the date of
the Company's initial public offering.
14. Amendment of Registration Rights. Any provision of the
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Registrable Securities then outstanding. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any Registrable Securities then outstanding, each future holder of
all such Registrable Securities, and the Company.
15. Limitations on Subsequent Registration Rights. From and
after the date of this Agreement, the Company shall not, without the prior
written consent of the Holders of a majority of the then outstanding
Registrable Securities, enter into any agreement with any holder or prospective
holder of any securities of the Company which would allow such holder or
prospective holder (a) to include such securities in any registration filed
under paragraph 3 hereof, unless under the terms of such agreement, such holder
or prospective holder may include such securities in any such registration only
to the extent that the inclusion of his securities will not reduce the amount
of the Registrable Securities of the Holders which is included or (b) to make a
demand registration which could result in such registration statement being
declared effective prior to the earlier of either of the dates set forth in
subparagraph 3(a)(ii)(2) or within one hundred twenty (120) days of the
effective date of any registration effected pursuant to paragraph 3.
-10-
<PAGE> 57
16. Entire Agreement. This Agreement constitutes the full and
entire understanding and agreement among the parties with regard to the subject
matter hereof. Nothing in this Agreement, express or implied, is intended to
confer upon any person or entity, other than the parties hereto and their
respective successors and assigns, any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
herein.
17. Governing Law. This Agreement shall be governed in all
respects by the laws of the State of Delaware as such laws are applied to
agreements between Delaware residents entered into and to be performed entirely
within Delaware.
18. Successors and Assigns. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto.
19. Notices, etc. All notices and other communications required
or permitted hereunder shall be effective upon receipt and shall be in writing
and may be delivered in person, by telecopy, electronic mail, overnight
delivery service or U.S. mail, in which event it may be mailed by first-class,
certified or registered, postage prepaid, addressed (a) if to a Holder, at such
Holder's address set forth at the end of this Agreement, or at such other
address as such Holder shall have furnished the Company in writing, or, until
any such holder so furnishes an address to the Company, then to and at the
address of the last holder of such shares who has so furnished an address to
the Company, or (b) if to the Company, at its address set forth at the end of
this Agreement, or at such other address as the Company shall have furnished to
the Holders and each such other holder in writing.
20. Severability. Any invalidity, illegality or limitation on
the enforceability of the Agreement or any part thereof, by any Holder whether
arising by reason of the law of the respective Holder's domicile or otherwise,
shall in no way affect or impair the validity, legality or enforceability of
this Agreement with respect to other Holders. If any provision of this
Agreement shall be judicially determined to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
21. Titles and Subtitles. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
22. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
23. Delays or Omissions. It is agreed that no delay or omission
to exercise any right, power or remedy accruing to the Holders, upon any breach
or default of the Company under this Agreement, shall impair any such right,
power or remedy, nor shall it be construed to be a waiver of any such breach or
default, or any acquiescence therein, or of any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. It is further agreed that any waiver, permit, consent or approval
of any kind or character by a Holder of any breach or default under this
-11-
<PAGE> 58
Agreement, or any waiver by a Holder of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in writing and that all remedies, either under this
Agreement, or by law or otherwise afforded to a Holder, shall be cumulative and
not alternative.
24. Attorneys' Fees. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first written above.
COMPANY: SPECTRX, INC.
By:
---------------------------------------
Title:
------------------------------------
INVESTORS: HILLMAN MEDICAL VENTURES 1993 L.P.,
a Delaware limited partnership
By: Hillman/Dover Limited
Partnership, general partner
By: Wilmington Securities, Inc., its
sole general partner
By:
---------------------------------------
Title:
------------------------------------
NORO-MOSELEY PARTNERS II, L.P., a
Georgia limited partnership
By: Moseley & Company, II,
general partner
By:
---------------------------------------
Jack R. Kelly Jr.
Title: General Partner
-12-
<PAGE> 59
HILLMAN MEDICAL VENTURES 1994 L.P.,
a Delaware limited partnership
By: Hillman/Dover Limited
Partnership, general partner
By: Wilmington Securities, Inc., its
sole general partner
By:
------------------------------------
Title:
---------------------------------
HILLMAN MEDICAL VENTURES 1995 L.P.,
a Delaware limited partnership
By: Hillman/Dover Limited
Partnership, general partner
By: Wilmington Securities, Inc., its
sole general partner
By:
------------------------------------
Title:
---------------------------------
HILLMAN MEDICAL VENTURES 1996 L.P.,
a Delaware limited partnership
By: Hillman/Dover Limited
Partnership, general partner
By: Wilmington Securities, Inc., its
sole general partner
By:
------------------------------------
Title:
---------------------------------
-13-
<PAGE> 60
BBOTT LABORATORIES,
an Illinois corporation
By:
------------------------------------
Title:
---------------------------------
---------------------------------------
Dean Maloof
---------------------------------------
Frank Maloof
---------------------------------------
Stephen G. Maloof
PMM, INC.
By:
-------------------------------------
Peter M. Mondalek
---------------------------------------
Karen Etheridge
---------------------------------------
William Chambers
---------------------------------------
Rogers Badgett
---------------------------------------
Michael P. Moore
---------------------------------------
William Zachary, Jr.
---------------------------------------
John Imhoff, M.D.
-14-
<PAGE> 61
---------------------------------------
Keith D. Ignotz
---------------------------------------
Richard Bowe, M.D.
---------------------------------------
Joseph Calabro
---------------------------------------
I. William Collins, O.D.
---------------------------------------
Steven Davis
---------------------------------------
Emory J. Ethridge
---------------------------------------
Jimmy Funderburke
---------------------------------------
R. Andrew Garrett
---------------------------------------
Nelson Gold
The Gavin Herbert, Inc. Successor Trust
By:
------------------------------------
Title: Trustee
-15-
<PAGE> 62
---------------------------------------
Randolf Lindblad, M.D.
---------------------------------------
David Marco
---------------------------------------
Mark Miehle
---------------------------------------
Doug Myers and Heather Myers JROS
---------------------------------------
Charles M. Phillips
---------------------------------------
Dr. Lawrence Phillips
POWERVISION, INC.
By:
------------------------------------
Title:
---------------------------------
---------------------------------------
Dr. Dale Rorabaugh
---------------------------------------
Mark A. Samuels
-16-
<PAGE> 63
EXHIBIT E
LEGAL OPINION
<PAGE> 64
October 21, 1996
To Abbott Laboratories
Ladies and Gentlemen:
Reference is made to the Series C Preferred Stock Purchase Agreement,
dated as of October __, 1996 (the "Agreement"), complete with all listed
exhibits thereto, by and among SpectRx, Inc., a Delaware corporation (the
"Company"), and Abbott Laboratories, an Illinois corporation (the "Purchaser"),
which provides for the issuance by the Company to the Purchaser of shares of
Series C Preferred Stock of the Company (the "Series C Shares"). This opinion
is rendered to you pursuant to Section 5.3 of the Agreement, and all terms used
herein have the meanings defined for them in the Agreement unless otherwise
defined herein.
We have acted as counsel for the Company in connection with the
negotiation of the Agreement and the issuance of the Series C Shares. As such
counsel, we have made such legal and factual examinations and inquiries as we
have deemed advisable or necessary for the purpose of rendering this opinion.
In addition, we have examined originals or copies of such corporate records of
the Company, certificates of public officials and such other documents which we
consider necessary or advisable for the purpose of rendering this opinion. In
such examination we have assumed the genuineness of all signatures on original
documents, the authenticity and completeness of all documents submitted to us
as originals, the conformity to original documents of all copies submitted to
us and the due execution and delivery of all documents (except as to due
execution and delivery by the Company) where due execution and delivery are a
prerequisite to the effectiveness thereof.
As used in this opinion, the expression "to our knowledge," "known to
us" or similar language with reference to matters of fact means that, after an
examination of documents made available to us by the Company, and after
inquiries of officers of the Company, but without any further independent
factual investigation, we find no reason to believe that the opinions expressed
herein are factually incorrect. Further, the expression "to our knowledge",
"known to us" or similar language with reference to matters of fact refers to
the current actual knowledge of the attorneys of this firm who have worked on
matters for the Company solely in connection with the Agreement and the
transactions contemplated thereby. Except to the extent expressly set forth
herein or as we otherwise believe to be necessary to our opinion, we have not
undertaken any independent investigation to determine the existence or absence
of any fact, and no inference as to our knowledge of the existence or absence
of any fact should be drawn from our representation of the Company or the
rendering of the opinion set forth below.
For purposes of this opinion, we are assuming that you have all
requisite power and authority, and have taken any and all necessary corporate
or partnership action, to execute and deliver the Agreement, and we are
assuming that the representations and warranties made by the Purchaser in the
<PAGE> 65
Agreement and pursuant thereto are true and correct. We are also assuming that
the Purchaser has purchased the Series C Shares for value, in good faith and
without notice of any adverse claims within the meaning of the California
Uniform Commercial Code.
The opinions hereinafter expressed are subject to the following qualifications:
(a) We express no opinion as to the effect of applicable
bankruptcy, insolvency, reorganization, moratorium or other similar federal or
state laws affecting the rights of creditors;
(b) We express no opinion as to the effect of rules of
law governing specific performance, injunctive relief or other equitable
remedies (regardless of whether any such remedy is considered in a proceeding
at law or in equity);
(c) We express no opinion as to compliance with the
anti-fraud provisions of applicable securities laws;
(d) We express no opinion as to the enforceability of the
indemnification provisions of Section 7 of the Registration Rights Agreement to
the extent the provisions thereof may be subject to limitations of public
policy and the effect of applicable statutes and judicial decisions;
(e) We are members of the Bar of the State of California
and, except as set forth in paragraph 7 below with respect to the securities
laws of other states, we express no opinion as to any matter relating to the
laws of any jurisdiction other than the federal laws of the United States of
America and the laws of the State of California. To the extent this opinion
addresses applicable securities laws of states other than the State of
California, we have not retained nor relied on the opinion of counsel admitted
to the bar of such states, but rather have relied on compilations of the
securities laws of such states contained in reporting services presently
available to us.
Based upon and subject to the foregoing, and except as set forth in
the Schedule of Exceptions to the Agreement, we are of the opinion that:
1. The Company is a corporation duly organized and validly
existing under, and by virtue of, the laws of the State of Delaware and is in
good standing under such laws. The Company has requisite corporate power to
own and operate its properties and assets, and to carry on its business as
presently conducted. The Company is qualified to do business as a foreign
corporation in the State of Georgia.
2. The Company has all requisite legal and corporate power to
execute and deliver the Agreement, to sell and issue the Series C Shares
thereunder, to issue the Common Stock issuable upon conversion of the Series C
Shares and to carry out and perform its obligations under the terms of the
Agreement.
3. The authorized capital stock of the Company consists of
15,000,000 shares of Common, 2,083,500 shares of which are issued and
outstanding, 3,560,000 shares of Series A Preferred of which
-2-
<PAGE> 66
3,103,784 shares are issued and outstanding, 3,560,000 shares of Series A1
Preferred none of which are issued and outstanding, 1,375,000 shares of Series
B Preferred of which 1,172,071 shares of Series B Preferred issued and
outstanding, and 1,375,000 shares of Series B1 Preferred none of which are
issued and outstanding, 500,000 shares of Series C Preferred of which 500,000
shares of Series C Preferred are to be issued and outstanding, and 500,000
shares of Series C1 Preferred none of which are issued and outstanding . There
are also options outstanding to purchase an aggregate of 458,351 shares of
Common Stock and warrants to purchase an aggregate of 1,268,643 shares of
Common Stock and 360,000 shares of Series A Preferred Stock. All such issued
and outstanding shares of Preferred Stock and Common Stock have been duly
authorized and validly issued and are fully paid and nonassessable and free of
any preemptive or similar rights contained in the Certificate of Incorporation
or Bylaws of the Company or, to our knowledge, in any agreement to which the
Company is a party. The Common Stock issuable upon conversion of the Series C
Shares has been duly and validly reserved, and when issued in accordance with
the Company's Certificate of Incorporation will be validly issued, fully paid
and nonassessable. The Series C Shares issued under the Agreement will be
validly issued, fully paid and nonassessable and free of any liens,
encumbrances and preemptive or similar rights contained in the Certificate of
Incorporation or Bylaws of the Company, or, to our knowledge, in any agreement
by which the Company is a party, except as specifically provided in the
Agreement and in that certain Series A Preferred Stock Purchase Agreement dated
as of February 5, 1993; provided, however, that the Series C Shares (and the
Common Stock issuable upon conversion thereof) may be subject to restrictions
on transfer under state and/or federal securities laws as set forth in the
Agreement. To our knowledge, except for rights described in the Agreement and
the Certificate of Incorporation, there are no other options, warrants,
conversion privileges or other rights presently outstanding to purchase or
otherwise acquire any authorized but unissued shares of capital stock or other
securities of the Company, or any other agreements to issue any such securities
or rights.
4. All corporate action on the part of the Company, its directors
and stockholders necessary for the authorization, execution and delivery of the
Agreement by the Company, the authorization, sale, issuance and delivery of the
Series C Shares (and the Common Stock issuable upon conversion thereof) and the
performance of the Company's obligations under the Agreement has been taken.
The Agreement has been duly and validly executed and delivered by the Company
and constitutes a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms.
5. The execution, delivery and performance of and compliance with
the terms of the Agreement, and the issuance of the Series C Shares (and the
Common Stock issuable upon conversion thereof), do not violate any provision of
the Certificate of Incorporation or Bylaws, or, to our knowledge, any provision
of any applicable federal or state law, rule or regulation. To our knowledge,
the execution, delivery and performance of and compliance with the Agreement,
and the issuance of the Series C Shares (and the Common Stock issuable upon
conversion thereof) do not violate, or constitute a default under, any material
contract, agreement, instrument, judgment or decree binding upon the Company.
6. Except as identified in the Agreement, to our knowledge, there
are no actions, suits, proceedings or investigations pending against the
Company or its properties before any court or governmental agency (nor, to our
knowledge, has the Company received any written threat thereof), which, either
in any case or in the aggregate, are likely to result in any material adverse
change in the
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<PAGE> 67
business or financial condition of the Company or any of its properties, or in
any material impairment of the right or ability of the Company to carry on its
business as now conducted, or which questions the validity of the Agreement or
any action taken or to be taken by the Company in connection therewith.
7. No consent, approval or authorization of or designation,
declaration or filing with any governmental authority on the part of the
Company is required in connection with the valid execution and delivery of the
Agreement, or the offer, sale or issuance of the Series C Shares (and the
Common Stock issuable upon conversion thereof) or the consummation of any other
transaction contemplated by the Agreement, except (a) filing of the Amended and
Restated Certificate of Incorporation in the Office of the Secretary of State
of the State of Delaware, and (b) qualification (or taking such action as may
be necessary to secure an exemption from qualification, if available) under the
Delaware General Corporation Law and other applicable blue sky laws (but
excluding jurisdictions outside of the United States) of the offer and sale of
the Series C Shares (and the Common Stock issuable upon conversion thereof) and
the modification of rights of shareholders contemplated by the Agreement. The
filing referred to in clause (a) above has been accomplished and is effective.
Our opinion herein is otherwise subject to the timely and proper completion of
all filings and other actions contemplated herein where such filings and
actions are to be undertaken on or after the date hereof.
8. Subject to the accuracy of the Purchasers' Representations and
Warranties in Section 4 of the Agreement and their responses (if any) to the
Company's inquiries, we are of the opinion that the offer, sale and issuance of
the Series C Shares in conformity with the terms of the Agreement constitute
transactions exempt from the registration requirements of Section 5 of the
Securities Act of 1933, as amended.
This opinion is furnished to the Purchasers solely for their benefit
in connection with the purchase of the Series C Shares, and may not be relied
upon by any other person or for any other purpose without our prior written
consent.
Very truly yours,
WILSON, SONSINI, GOODRICH & ROSATI
Professional Corporation
-4-
<PAGE> 68
EXHIBIT F
LICENSE AGREEMENT
OMITTED
(PLEASE SEE EXHIBIT 10.23 BELOW)
<PAGE> 1
EXHIBIT 10.7
SPECTRX, INC.
STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made this 30th day of June, 1994 at Norcross,
Georgia, between SpectRx, Inc., a Delaware corporation (the "Company"), and
Mark Samuels (the "Purchaser").
WHEREAS the Purchaser is an employee or consultant of the Company and
the Purchaser's continued participation is considered by the Company to be
important for the Company's continued growth; and
WHEREAS in order to give the Purchaser an opportunity to acquire an
equity interest in the Company as an incentive for the Purchaser to participate
in the affairs of the Company, the Company is willing to sell to the Purchaser
and the Purchaser desires to purchase shares of Common Stock according to the
terms and conditions contained in the 1993 Incentive Stock Plan (the "Plan")
and herein.
THEREFORE, the parties agree as follows:
1. Sale of Stock. The Company hereby agrees to sell to the
Purchaser and the Purchaser hereby agrees to purchase an aggregate of 184,395
shares of the Company's Common Stock (the "Shares"), at the price of $0.15 per
share for an aggregate purchase price of $27,659.25.
2. Payment of Purchase Price.
(a) The purchase price for the Shares may be paid by delivery
to the Company at the time of execution of this Agreement of a check or a duly
executed full recourse promissory note (the "Note") in the form attached hereto
as Exhibit A.
(b) With respect to the Note, the parties agree to the
following:
(1) The Note shall become payable in full upon
termination or cessation of the Purchaser's employment with or services to the
Company for any reason.
(2) The Purchaser shall deliver to an escrow
holder designated by the Company (the "Escrow Holder") all certificates
representing the Shares and an executed blank stock assignment for use in
transferring all or a portion of said Shares to the Company
<PAGE> 2
if, as and when required under this Section 2(b) or under any other provision
of this Agreement including Section 3.
(3) As security for the payment of the Note and
any renewal, extension or modification thereof, the Purchaser hereby grants to
the Company a security interest in and pledges with and delivers to the Company
the certificate or certificates representing the Shares.
(4) In the event of any foreclosure of the
security interest, the Company may sell the Shares at a private sale or may
itself repurchase any or all of the Shares. The parties acknowledge that,
prior to the establishment of a public market for the Shares of the Company,
the securities laws applicable to the sale of the Shares make a public sale of
the Shares commercially unreasonable. The parties agree that the repurchasing
of said Shares by the Company, or by any person to whom the Company may have
assigned its rights hereunder, is commercially reasonable if made at a price
determined by the Board of Directors in its discretion, fairly exercised,
representing what would be the fair market value of the Shares diminished by
any limitation on transferability, whether due to the size of the block of
Shares or the restrictions of applicable securities laws.
(5) In the event of default in payment when due
of any indebtedness under the Note, the Company may elect then, or at any time
thereafter, to exercise all rights available to a secured party under the
Delaware Commercial Code, including the right to sell the Shares at a private
or public sale or repurchase the Shares as provided above. The proceeds of any
sale shall be applied in the following order:
(i) To pay all reasonable expenses of
the Company in enforcing this
Agreement, including without
limitation reasonable attorneys'
fees and legal expenses incurred
by the Company.
(ii) In satisfaction of the remaining
indebtedness under the Note.
(iii) To the Purchaser, any remaining
proceeds.
(6) Upon full payment by the Purchaser of all
amounts due on Purchaser's Note, the Escrow Holder shall deliver to the
Purchaser the certificate or certificates representing the Shares in the Escrow
Holder's possession belonging to the Purchaser, the blank stock assignment, and
the executed original of the Note marked "cancelled" by the Company, and the
Escrow Holder
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shall be discharged of all further obligations hereunder; provided, however,
that the Escrow Holder shall nevertheless retain said certificate or
certificates and stock assignment as escrow agent if so required pursuant to
other restrictions imposed pursuant to this Agreement.
3. Repurchase Option.
(a) In the event of any voluntary or involuntary termination
of the Purchaser's employment by or services to the Company for any or no
reason (including death or disability) before all of the Shares are released
from the Company's repurchase option (see Section 4), the Company shall, upon
the date of such termination (as reasonably fixed and determined by the
Company) have an irrevocable, exclusive option for a period of ninety (90) days
from such date to repurchase all (but not less than all) of the Unreleased
Shares (as defined in Section 4) at such time at the original purchase price
per share (the "Repurchase Price"). Said option shall be exercised by the
Company by written notice to the Purchaser or the Purchaser's executor (with a
copy to the Escrow Holder) and, at the Company's option, (i) by delivery to the
Purchaser or the Purchaser's executor with such notice of a check in the amount
of the purchase price for the Shares being repurchased, or (ii) by cancellation
by the Company of an amount of the Purchaser's indebtedness to the Company
equal to the purchase price for the Shares being repurchased, or (iii) by a
combination of (i) and (ii) so that the combined payment and cancellation of
indebtedness equals such repurchase price. Upon delivery of such notice and the
payment of the purchase price in any of the ways described above, the Company
shall become the legal and beneficial owner of the Shares being repurchased and
all rights and interests therein or relating thereto, and the Company shall
have the right to retain and transfer to its own name the number of Shares
being repurchased by the Company.
(b) Whenever the Company shall have the right to repurchase
Shares hereunder, the Company may designate and assign one or more employees,
officers, directors or shareholders of the Company or other persons or
organizations to exercise all or a part of the Company's purchase rights under
this Agreement and purchase all or a part of such Shares; provided that if the
fair market value of the Shares to be repurchased on the date of such
designation or assignment (the "Repurchase FMV") exceeds the Repurchase Price
of the Shares to be repurchased, then each such designee or assignee shall pay
the Company cash equal to the difference between the Repurchase FMV and the
Repurchase Price of the Shares which such designee or assignee shall have the
right to repurchase.
4. Release of Shares From Repurchase Option.
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(a) Twenty-five percent (25%) of the Shares shall be released
from the Company's repurchase option on January 1, 1994 and one forty-eigth
(1/48th) of the Shares shall be released from the Company's repurchase option
on the first day of each calendar month thereafter, provided in each case that
the Purchaser's employment or services have not been terminated prior to the
date of any such release. In no event shall the Shares be released from the
Company's repurchase option at a rate less than 20% per year over five years
from the date of this Agreement.
(b) Any of the Shares which have not yet been released from
the Company's repurchase option are referred to herein as "Unreleased Shares."
(c) The Shares which have been released from the Company's
repurchase option shall be delivered to the Purchaser at the Purchaser's
request (i) if the portion of the Note with respect to such Shares has been
paid (see Section 6) or (ii) so long as the Note continues to be secured by
twice the number of shares purchased pursuant to this Agreement.
5. Restriction on Transfer. Except for the pledge and escrow
described in Sections 2 and 6 or transfer of the Shares to the Company or its
assignees contemplated by this Agreement, none of the Shares or any beneficial
interest therein shall be transferred, encumbered or otherwise disposed of in
any way until the release of such Shares from the Company's repurchase option
in accordance with the provisions of this Agreement, other than by will or the
laws of descent and distribution.
6. Escrow of Shares.
(a) The Shares issued under this Agreement shall be held by
the Escrow Holder, along with a stock assignment executed by the Purchaser in
blank, until the expiration of the Company's option to repurchase such Shares
as set forth above. An additional 217,000 shares of the Company's Common Stock
which are presently outstanding in the name of the Purchaser shall also be held
in escrow as additional security for the Note.
(b) The Escrow Holder is hereby directed to permit transfer
of the Shares only in accordance with this Agreement or instructions signed by
both parties. In the event further instructions are desired by the Escrow
Holder, the Escrow Holder shall be entitled to rely upon directions executed by
a majority of the authorized number of the Company's Board of Directors. The
Escrow Holder shall have no liability for any act or omission hereunder while
acting in good faith in the exercise of the Escrow Holder's own judgment.
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<PAGE> 5
(c) If the Company or any assignee exercises its repurchase
option hereunder, the Escrow Holder, upon receipt of written notice of such
option exercise from the proposed transferee, shall take all steps necessary to
accomplish such transfer.
(d) When the repurchase option has been exercised or expires
unexercised or a portion of the Shares has been released from such repurchase
option and provided (i) the Note has been paid in full with respect to such
Shares or (ii) so long as the Note continues to be secured by twice the number
of shares purchased pursuant to this Agreement, upon Purchaser's request the
Escrow Holder shall promptly cause a new certificate to be issued for such
released Shares and shall deliver such certificate to the Purchaser.
(e) Subject to the terms hereof, the Purchaser shall have all
the rights of a shareholder with respect to such Shares while they are held in
escrow, including without limitation, the right to vote the Shares and receive
any cash dividends declared thereon. If, from time to time during the term of
the Company's repurchase option, there is (i) any stock dividend, stock split
or other change in the Shares, or (ii) any merger or sale of all or
substantially all of the assets or other acquisition of the Company, any and
all new, substituted or additional securities to which the Purchaser is
entitled by reason of the Purchaser's ownership of the Shares shall be
immediately subject to this escrow, deposited with the Escrow Holder and
included thereafter as "Shares" for purposes of this Agreement and the
Company's repurchase option.
7. Investment Representations; Restrictions on Transfer.
(a) In connection with the purchase of the Shares, the
Purchaser represents to the Company the following:
(i) The Purchaser is aware of the Company's business
affairs and financial condition and has acquired sufficient information about
the Company to reach an informed and knowledgeable decision to acquire the
Shares. The Purchaser is purchasing these Shares for investment for the
Purchaser's own account only and not with a view to, or for resale in
connection with, any "distribution" thereof within the meaning of the
Securities Act of 1933, as amended (the "Securities Act").
(ii) The Purchaser acknowledges and understands that
the Shares constitute "restricted securities" under the Securities Act and must
be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available. The
Purchaser further acknowledges and
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<PAGE> 6
understands that the Company is under no obligation to register the Shares. The
Purchaser understands that the certificate evidencing the Shares will be
imprinted with a legend which prohibits the transfer of the Shares unless they
are registered or such registration is not required in the opinion of counsel
satisfactory to the Company.
(iii) The Purchaser is familiar with the provisions
of Rule 701 and Rule 144, each promulgated under the Securities Act, which, in
substance, permit limited public resale of "restricted securities" acquired,
directly or indirectly, from the issuer thereof, in a non-public offering
subject to the satisfaction of certain conditions. Rule 701 provides that if
the issuer qualifies under Rule 701 at the time of issuance of the securities
to the Purchaser, such issuance will be exempt from registration under the
Securities Act. In the event the Company later becomes subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
ninety (90) days thereafter the securities exempt under Rule 701 may be resold,
subject to the satisfaction of certain of the conditions specified by Rule 144,
including among other things: (1) the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934); and,
in the case of an affiliate, (2) the availability of certain public information
about the Company, and the amount of securities being sold during any three
month period not exceeding the limitations specified in Rule 144(e), if
applicable. Notwithstanding this paragraph 7(a)(iii), the Purchaser
acknowledges and agrees to the restrictions set forth in paragraph 7(b).
In the event that the Company does not qualify under Rule 701
at the time of issuance of the securities to the Purchaser, then the securities
may be resold in certain limited circumstances subject to the provisions of
Rule 144, which requires among other things: (1) the availability of certain
public information about the Company: (2) the resale occurring not less than
two years after the party has purchased, and made full payment for, within the
meaning of Rule 144, the securities to be sold; and (3) in the case of an
affiliate, or of a non-affiliate who has held the securities less than three
years, the sale being made through a broker in an unsolicited "broker's
transaction" or in transactions directly with a market maker (as said term is
defined under the Securities Exchange Act of 1934) and the amount of securities
being sold during any three month period not exceeding the specified
limitations stated therein, if applicable.
(b) The Purchaser agrees, in connection with the Company's
initial underwritten public offering of the Company's
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<PAGE> 7
securities, (1) not to sell, make short sale of, loan, grant any options for
the purchase of, or otherwise dispose of any shares of Common Stock of the
Company held by the Purchaser (other than those shares included in the
registration) without the prior written consent of the Company or the
underwriters managing such initial underwritten public offering of the
Company's securities for one hundred eighty (180) days from the effective date
of such registration, and (2) further agrees to execute any agreement
reflecting (1) above as may be requested by the underwriters at the time of the
public offering.
8. Legends. The share certificate evidencing the Shares issued
hereunder shall be endorsed with the following legends (in addition to any
legends required under applicable state securities laws):
(a) IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF
THIS SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY
CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF THE
DELAWARE COMMISSIONER OF CORPORATIONS EXCEPT AS PERMITTED IN THE
COMMISSIONER'S RULES.
(b) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH,
THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE
EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO
OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
(c) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN
THE COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY.
9. Adjustment for Stock Split. All references to the number of
Shares and the purchase price of the Shares in this Agreement shall be
appropriately adjusted to reflect any stock split, stock dividend or other
change in the Shares which may be made by the Company after the date of this
Agreement.
10. Tax Consequences. The Purchaser has reviewed with the
Purchaser's own tax advisors the federal, state, local and foreign tax
consequences of this investment and the transactions contemplated by this
Agreement. The Purchaser is relying solely on such advisors and not on any
statements or representations of the Company or any of its agents. The
Purchaser understands that the Purchaser (and not the Company) shall be
responsible for the Purchaser's own tax liability that may arise as a result of
this
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<PAGE> 8
investment or the transactions contemplated by this Agreement. The
Purchaser understands that Section 83 of the Internal Revenue Code of 1986 (the
"Code"), taxes as ordinary income both (i) the difference between the fair
market value of the Shares when the Company granted the Purchaser the right to
purchase the Shares and the fair market value of the Shares on the date of this
Agreement and (ii) the difference between the amount paid for the Shares and
the fair market value of the Shares as of the date any restrictions on the
Shares lapse. In this context, "restriction" includes the right of the Company
to buy back the Shares pursuant to its repurchase option. In the event the
Company has registered under the Exchange Act, "restriction" with respect to
officers, directors and 10% shareholders also means the period after the
purchase of the Shares during which such officers, directors and 10%
shareholders could be subject to suit under Section 16(b) of the Exchange Act.
The Purchaser understands that the Purchaser may elect to be taxed at the time
the Shares are purchased rather than when and as the Company's repurchase
option or 16(b) period expires by filing an election under Section 83(b) of the
Code with the I.R.S. within 30 days from the date of purchase.
THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE
RESPONSIBILITY AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION
83(b), EVEN IF THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO
MAKE THIS FILING ON THE PURCHASER'S BEHALF.
11. General Provisions.
(a) This Agreement shall be governed by the laws of the State
of Delaware. This Agreement represents the entire agreement between the parties
with respect to the purchase of Common Stock by the Purchaser and may only be
modified or amended in writing signed by both parties.
(b) Any notice, demand or request required or permitted to be
given by either the Company or the Purchaser pursuant to the terms of this
Agreement shall be in writing and shall be deemed given when delivered
personally or deposited in the U.S. mail, First Class with postage prepaid, and
addressed to the parties at the addresses of the parties set forth at the end
of this Agreement or such other address as a party may request by notifying the
other in writing.
Any notice to the Escrow Holder shall be sent to the Company's
address with a copy to the other party not sending the notice.
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<PAGE> 9
(c) The rights and benefits of the Company under this
Agreement shall be transferable to any one or more persons or entities, and all
covenants and agreements hereunder shall inure to the benefit of, and be
enforceable by the Company's successors and assigns. The rights and obligations
of the Purchaser under this Agreement may only be assigned with the prior
written consent of the Company.
(d) Either party's failure to enforce any provision or
provisions of this Agreement shall not in any way be construed as a waiver of
any such provision or provisions, nor prevent that party thereafter from
enforcing each and every other provision of this Agreement. The rights granted
both parties herein are cumulative and shall not constitute a waiver of either
party's right to assert all other legal remedies available to it under the
circumstances.
(e) The Purchaser agrees upon request to execute any further
documents or instruments necessary or desirable to carry out the purposes or
intent of this Agreement.
(f) PURCHASER ACKNOWLEDGES AND AGREES THAT THE VESTING OF
SHARES PURSUANT TO SECTION 4 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN
EMPLOYEE OR CONSULTANT AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING
HIRED OR PURCHASING SHARES HEREUNDER). PURCHASER FURTHER ACKNOWLEDGES AND
AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE
VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED
PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE OR CONSULTANT FOR THE VESTING
PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH PURCHASER'S
RIGHT OR THE COMPANY'S RIGHT TO TERMINATE PURCHASER'S EMPLOYMENT OR CONSULTING
RELATIONSHIP AT ANY TIME, WITH OR WITHOUT CAUSE.
(g) Purchaser acknowledges receipt of a copy of the Plan, a
copy of which is annexed hereto, represents that Purchaser is familiar with the
terms and provisions thereof, and hereby accepts this Agreement subject to all
of the terms and provisions thereof. Purchase has reviewed the Plan and this
Agreement in their entirety, has had an opportunity to obtain the advice of
counsel prior to executing this Agreement and fully understands all provisions
of the Agreement. Purchase hereby agrees to accept as binding, conclusive and
final all decisions or interpretations of the Board or of the Committee upon
any questions arising under the Plan. Purchaser further agrees to notify the
Company upon any change in the residence address indicated below.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the day and year first set forth above.
SPECTRX, INC. PURCHASER:
a Delaware corporation
By:
-------------------------- -----------------------------------
Title:
----------------------- -----------------------------------
(Address)
- ----------------------------- -----------------------------------
(Address)
- -----------------------------
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<PAGE> 11
CONSENT OF SPOUSE
I, ____________________, spouse of Mark Samuels, have read and approve
the foregoing Agreement. In consideration of granting of the right to my
spouse to purchase shares of SpectRx, Inc., as set forth in the Agreement, I
hereby appoint my spouse as my attorney-in-fact in respect to the exercise of
any rights under the Agreement and agree to be bound by the provisions of the
Agreement insofar as I may have any rights in said Agreement or any shares
issued pursuant thereto under the community property laws of the State of
Delaware or similar laws relating to marital property in effect in the state of
our residence as of the date of the signing of the foregoing Agreement.
Dated: _______________, 1994
--------------------------------
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<PAGE> 12
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, Mark Samuels, hereby sell, assign and transfer unto
______________________________________
___________________________________________ (__________) shares of the Common
Stock of SpectRx, Inc. (the "Company") standing in my name of the books of said
corporation represented by Certificate No. _____ herewith and do hereby
irrevocably constitute and appoint Wilson, Sonsini, Goodrich & Rosati,
attorney, to transfer the said stock on the books of the within named
corporation with full power of substitution in the premises.
This Stock Assignment may be used only in accordance with the Stock
Purchase Agreement between the Company and the undersigned dated
______________, 19__.
Dated: _______________, 19__
Signature:______________________________
Mark Samuels
INSTRUCTION: PLEASE DO NOT FILL IN ANY BLANKS OTHER THAN THE SIGNATURE LINE.
THE PURPOSE OF THIS ASSIGNMENT IS TO ENABLE THE COMPANY TO EXERCISE ITS
"REPURCHASE OPTION" SET FORTH IN THE AGREEMENT WITHOUT REQUIRING ADDITIONAL
SIGNATURES ON THE PART OF THE PURCHASER.
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ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to the above-referenced
Federal Tax Code, to include in taxpayer's gross income for the current taxable
year, the amount of any compensation taxable to taxpayer in connection with
receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of
the undersigned are as follows:
NAME: : TAXPAYER: SPOUSE:
ADDRESS: :
IDENTIFICATION NO.: : TAXPAYER: SPOUSE:
TAXABLE YEAR: 1994
2. The property with respect to which the election is made is described
as follows: 184,395 shares (the "Shares") of the Common Stock of
SpectRx, Inc. (the "Company").
3. The date on which the property was transferred is: June 30, 1994.
4. The property is subject to the following restrictions:
The Shares may be repurchased by the Company, or its assignee, on
certain events. This right lapses with regard to a portion of the
Shares over time.
5. The fair market value at the time of transfer, determined without
regard to any restriction other than a restriction which by its terms
will never lapse, of such property is: $27,659.25
6. The amount (if any) paid for such property is: $27,659.25
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
except with the consent of the Commissioner.
Dated: _________________________ Taxpayer: ________________________
The undersigned spouse of taxpayer joins in this election.
Dated: __________________________ Taxpayer: ________________________
Spouse of Taxpayer
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EXHIBIT A
PROMISSORY NOTE
$27,659.25 June 30, 1994
For value received, the undersigned promises to pay to
SpectRx, Inc., a Delaware corporation (the "Company"), or order, at its
principal office the principal sum of $27,659.25 with interest thereon at the
rate of six percent (6%) per annum on the unpaid balance of the principal sum.
Said principal and interest shall be due on June 30, 1999.
Upon any termination of the employment between the undersigned and the
Company, this Note shall be immediately due and payable.
Principal payable in lawful money of the United States of America.
THE PRIVILEGE IS RESERVED TO PREPAY ANY PORTION OF THE NOTE AT ANY TIME.
Should suit be commenced to collect this Note or any portion thereof,
such sum as the Court may deem reasonable shall be added hereto as attorneys'
fees. The maker waives presentment for payment, protest, notice of protest,
and notice of non-payment of this Note.
This Note is secured by a pledge of certain shares of Common Stock of
the Company, pursuant to the provisions of the Stock Purchase Agreement between
the Company and the undersigned executed contemporaneously with this Note.
The holder of this Note shall have full recourse against the maker,
and shall not be required to proceed against the Shares or other collateral
securing this Note in the event of default.
The undersigned understands that the two-year holding period under
Rule 144 of the Securities Act of 1933 generally will not begin to run until
this Note has been paid in full.
-------------------------------
Mark Samuels
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<PAGE> 1
EXHIBIT 10.8
SPECTRX, INC.
STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made this 30th day of June, 1994 at Norcross,
Georgia, between SpectRx, Inc., a Delaware corporation (the "Company"), and
Keith Ignotz (the "Purchaser").
WHEREAS the Purchaser is an employee or consultant of the Company and
the Purchaser's continued participation is considered by the Company to be
important for the Company's continued growth; and
WHEREAS in order to give the Purchaser an opportunity to acquire an
equity interest in the Company as an incentive for the Purchaser to participate
in the affairs of the Company, the Company is willing to sell to the Purchaser
and the Purchaser desires to purchase shares of Common Stock according to the
terms and conditions contained in the 1993 Incentive Stock Plan (the "Plan")
and herein.
THEREFORE, the parties agree as follows:
1. Sale of Stock. The Company hereby agrees to sell to the
Purchaser and the Purchaser hereby agrees to purchase an aggregate of 139,105
shares of the Company's Common Stock (the "Shares"), at the price of $0.15 per
share for an aggregate purchase price of $20,865.75.
2. Payment of Purchase Price.
(a) The purchase price for the Shares may be paid by delivery
to the Company at the time of execution of this Agreement of a check or a duly
executed full recourse promissory note (the "Note") in the form attached hereto
as Exhibit A.
(b) With respect to the Note, the parties agree to the
following:
(1) The Note shall become payable in full upon
termination or cessation of the Purchaser's employment with or services to the
Company for any reason.
(2) The Purchaser shall deliver to an escrow
holder designated by the Company (the "Escrow Holder") all certificates
representing the Shares and an executed blank stock assignment for use in
transferring all or a portion of said Shares to the Company if, as and when
required under this Section 2(b) or under any other provision of this Agreement
including Section 3.
<PAGE> 2
(3) As security for the payment of the Note and
any renewal, extension or modification thereof, the Purchaser hereby grants to
the Company a security interest in and pledges with and delivers to the Company
the certificate or certificates representing the Shares.
(4) In the event of any foreclosure of the
security interest, the Company may sell the Shares at a private sale or may
itself repurchase any or all of the Shares. The parties acknowledge that,
prior to the establishment of a public market for the Shares of the Company,
the securities laws applicable to the sale of the Shares make a public sale of
the Shares commercially unreasonable. The parties agree that the repurchasing
of said Shares by the Company, or by any person to whom the Company may have
assigned its rights hereunder, is commercially reasonable if made at a price
determined by the Board of Directors in its discretion, fairly exercised,
representing what would be the fair market value of the Shares diminished by
any limitation on transferability, whether due to the size of the block of
Shares or the restrictions of applicable securities laws.
(5) In the event of default in payment when due
of any indebtedness under the Note, the Company may elect then, or at any time
thereafter, to exercise all rights available to a secured party under the
Delaware Commercial Code, including the right to sell the Shares at a private
or public sale or repurchase the Shares as provided above. The proceeds of any
sale shall be applied in the following order:
(i) To pay all reasonable expenses of
the Company in enforcing this
Agreement, including without
limitation reasonable attorneys'
fees and legal expenses incurred
by the Company.
(ii) In satisfaction of the remaining
indebtedness under the Note.
(iii) To the Purchaser, any remaining
proceeds.
(6) Upon full payment by the Purchaser of all
amounts due on Purchaser's Note, the Escrow Holder shall deliver to the
Purchaser the certificate or certificates representing the Shares in the Escrow
Holder's possession belonging to the Purchaser, the blank stock assignment, and
the executed original of the Note marked "cancelled" by the Company, and the
Escrow Holder shall be discharged of all further obligations hereunder;
provided, however, that the Escrow Holder shall nevertheless retain said
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<PAGE> 3
certificate or certificates and stock assignment as escrow agent if so required
pursuant to other restrictions imposed pursuant to this Agreement.
3. Repurchase Option.
(a) In the event of any voluntary or involuntary termination
of the Purchaser's employment by or services to the Company for any or no
reason (including death or disability) before all of the Shares are released
from the Company's repurchase option (see Section 4), the Company shall, upon
the date of such termination (as reasonably fixed and determined by the
Company) have an irrevocable, exclusive option for a period of ninety (90) days
from such date to repurchase all (but not less than all) of the Unreleased
Shares (as defined in Section 4) at such time at the original purchase price
per share (the "Repurchase Price"). Said option shall be exercised by the
Company by written notice to the Purchaser or the Purchaser's executor (with a
copy to the Escrow Holder) and, at the Company's option, (i) by delivery to the
Purchaser or the Purchaser's executor with such notice of a check in the amount
of the purchase price for the Shares being repurchased, or (ii) by cancellation
by the Company of an amount of the Purchaser's indebtedness to the Company
equal to the purchase price for the Shares being repurchased, or (iii) by a
combination of (i) and (ii) so that the combined payment and cancellation of
indebtedness equals such repurchase price. Upon delivery of such notice and the
payment of the purchase price in any of the ways described above, the Company
shall become the legal and beneficial owner of the Shares being repurchased and
all rights and interests therein or relating thereto, and the Company shall
have the right to retain and transfer to its own name the number of Shares
being repurchased by the Company.
(b) Whenever the Company shall have the right to repurchase
Shares hereunder, the Company may designate and assign one or more employees,
officers, directors or shareholders of the Company or other persons or
organizations to exercise all or a part of the Company's purchase rights under
this Agreement and purchase all or a part of such Shares; provided that if the
fair market value of the Shares to be repurchased on the date of such
designation or assignment (the "Repurchase FMV") exceeds the Repurchase Price
of the Shares to be repurchased, then each such designee or assignee shall pay
the Company cash equal to the difference between the Repurchase FMV and the
Repurchase Price of the Shares which such designee or assignee shall have the
right to repurchase.
4. Release of Shares From Repurchase Option.
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<PAGE> 4
(a) Twenty-five percent (25%) of the Shares shall be released
from the Company's repurchase option on January 1, 1994 and one forty-eighth
(1/48th) of the Shares shall be released from the Company's repurchase option
on the first day of each calendar month thereafter, provided in each case that
the Purchaser's employment or services have not been terminated prior to the
date of any such release. In no event shall the Shares be released from the
Company's repurchase option at a rate less than 20% per year over five years
from the date of this Agreement.
(b) Any of the Shares which have not yet been released from
the Company's repurchase option are referred to herein as "Unreleased Shares."
(c) The Shares which have been released from the Company's
repurchase option shall be delivered to the Purchaser at the Purchaser's
request (i) if the portion of the Note with respect to such Shares has been
paid (see Section 6) or (ii) so long as the Note continues to be secured by
twice the number of shares purchased pursuant to this Agreement.
5. Restriction on Transfer. Except for the pledge and escrow
described in Sections 2 and 6 or transfer of the Shares to the Company or its
assignees contemplated by this Agreement, none of the Shares or any beneficial
interest therein shall be transferred, encumbered or otherwise disposed of in
any way until the release of such Shares from the Company's repurchase option
in accordance with the provisions of this Agreement, other than by will or the
laws of descent and distribution.
6. Escrow of Shares.
(a) The Shares issued under this Agreement shall be held by
the Escrow Holder, along with a stock assignment executed by the Purchaser in
blank, until the expiration of the Company's option to repurchase such Shares
as set forth above. An additional 140,000 shares of the Company's Common Stock
which are presently outstanding in the name of the Purchaser shall also be held
in escrow as additional security for the Note.
(b) The Escrow Holder is hereby directed to permit transfer of
the Shares only in accordance with this Agreement or instructions signed by
both parties. In the event further instructions are desired by the Escrow
Holder, the Escrow Holder shall be entitled to rely upon directions executed by
a majority of the authorized number of the Company's Board of Directors. The
Escrow Holder shall have no liability for any act or omission hereunder
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<PAGE> 5
while acting in good faith in the exercise of the Escrow Holder's own judgment.
(c) If the Company or any assignee exercises its repurchase
option hereunder, the Escrow Holder, upon receipt of written notice of such
option exercise from the proposed transferee, shall take all steps necessary to
accomplish such transfer.
(d) When the repurchase option has been exercised or expires
unexercised or a portion of the Shares has been released from such repurchase
option and provided (i) the Note has been paid in full with respect to such
Shares or (ii) so long as the Note continues to be secured by twice the number
of shares purchased pursuant to this Agreement, upon Purchaser's request the
Escrow Holder shall promptly cause a new certificate to be issued for such
released Shares and shall deliver such certificate to the Purchaser.
(e) Subject to the terms hereof, the Purchaser shall have all
the rights of a shareholder with respect to such Shares while they are held in
escrow, including without limitation, the right to vote the Shares and receive
any cash dividends declared thereon. If, from time to time during the term of
the Company's repurchase option, there is (i) any stock dividend, stock split
or other change in the Shares, or (ii) any merger or sale of all or
substantially all of the assets or other acquisition of the Company, any and
all new, substituted or additional securities to which the Purchaser is
entitled by reason of the Purchaser's ownership of the Shares shall be
immediately subject to this escrow, deposited with the Escrow Holder and
included thereafter as "Shares" for purposes of this Agreement and the
Company's repurchase option.
7. Investment Representations; Restrictions on Transfer.
(a) In connection with the purchase of the Shares, the
Purchaser represents to the Company the following:
(i) The Purchaser is aware of the Company's
business affairs and financial condition and has acquired sufficient
information about the Company to reach an informed and knowledgeable decision
to acquire the Shares. The Purchaser is purchasing these Shares for investment
for the Purchaser's own account only and not with a view to, or for resale in
connection with, any "distribution" thereof within the meaning of the
Securities Act of 1933, as amended (the "Securities Act").
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<PAGE> 6
(ii) The Purchaser acknowledges and understands
that the Shares constitute "restricted securities" under the Securities Act and
must be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available. The
Purchaser further acknowledges and understands that the Company is under no
obligation to register the Shares. The Purchaser understands that the
certificate evidencing the Shares will be imprinted with a legend which
prohibits the transfer of the Shares unless they are registered or such
registration is not required in the opinion of counsel satisfactory to the
Company.
(iii) The Purchaser is familiar with the provisions
of Rule 701 and Rule 144, each promulgated under the Securities Act, which, in
substance, permit limited public resale of "restricted securities" acquired,
directly or indirectly, from the issuer thereof, in a non-public offering
subject to the satisfaction of certain conditions. Rule 701 provides that if
the issuer qualifies under Rule 701 at the time of issuance of the securities
to the Purchaser, such issuance will be exempt from registration under the
Securities Act. In the event the Company later becomes subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
ninety (90) days thereafter the securities exempt under Rule 701 may be resold,
subject to the satisfaction of certain of the conditions specified by Rule 144,
including among other things: (1) the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934); and,
in the case of an affiliate, (2) the availability of certain public information
about the Company, and the amount of securities being sold during any three
month period not exceeding the limitations specified in Rule 144(e), if
applicable. Notwithstanding this paragraph 7(a)(iii), the Purchaser
acknowledges and agrees to the restrictions set forth in paragraph 7(b).
In the event that the Company does not qualify under Rule 701
at the time of issuance of the securities to the Purchaser, then the securities
may be resold in certain limited circumstances subject to the provisions of
Rule 144, which requires among other things: (1) the availability of certain
public information about the Company: (2) the resale occurring not less than
two years after the party has purchased, and made full payment for, within the
meaning of Rule 144, the securities to be sold; and (3) in the case of an
affiliate, or of a non-affiliate who has held the securities less than three
years, the sale being made through a broker in an unsolicited "broker's
transaction" or in transactions directly with a market maker (as said term is
defined under the
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<PAGE> 7
Securities Exchange Act of 1934) and the amount of securities being sold during
any three month period not exceeding the specified limitations stated therein,
if applicable.
(b) The Purchaser agrees, in connection with the Company's
initial underwritten public offering of the Company's securities, (1) not to
sell, make short sale of, loan, grant any options for the purchase of, or
otherwise dispose of any shares of Common Stock of the Company held by the
Purchaser (other than those shares included in the registration) without the
prior written consent of the Company or the underwriters managing such initial
underwritten public offering of the Company's securities for one hundred eighty
(180) days from the effective date of such registration, and (2) further agrees
to execute any agreement reflecting (1) above as may be requested by the
underwriters at the time of the public offering.
8. Legends. The share certificate evidencing the Shares issued
hereunder shall be endorsed with the following legends (in addition to any
legends required under applicable state securities laws):
(a) IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF
THIS SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY
CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF THE
DELAWARE COMMISSIONER OF CORPORATIONS EXCEPT AS PERMITTED IN THE
COMMISSIONER'S RULES.
(b) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH,
THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE
EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO
OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
(c) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN
THE COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY.
9. Adjustment for Stock Split. All references to the number of
Shares and the purchase price of the Shares in this Agreement shall be
appropriately adjusted to reflect any stock split, stock dividend or other
change in the Shares which may be made by the Company after the date of this
Agreement.
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<PAGE> 8
10. Tax Consequences. The Purchaser has reviewed with the
Purchaser's own tax advisors the federal, state, local and foreign tax
consequences of this investment and the transactions contemplated by this
Agreement. The Purchaser is relying solely on such advisors and not on any
statements or representations of the Company or any of its agents. The
Purchaser understands that the Purchaser (and not the Company) shall be
responsible for the Purchaser's own tax liability that may arise as a result of
this investment or the transactions contemplated by this Agreement. The
Purchaser understands that Section 83 of the Internal Revenue Code of 1986 (the
"Code"), taxes as ordinary income both (i) the difference between the fair
market value of the Shares when the Company granted the Purchaser the right to
purchase the Shares and the fair market value of the Shares on the date of this
Agreement and (ii) the difference between the amount paid for the Shares and
the fair market value of the Shares as of the date any restrictions on the
Shares lapse. In this context, "restriction" includes the right of the Company
to buy back the Shares pursuant to its repurchase option. In the event the
Company has registered under the Exchange Act, "restriction" with respect to
officers, directors and 10% shareholders also means the period after the
purchase of the Shares during which such officers, directors and 10%
shareholders could be subject to suit under Section 16(b) of the Exchange Act.
The Purchaser understands that the Purchaser may elect to be taxed at the time
the Shares are purchased rather than when and as the Company's repurchase
option or 16(b) period expires by filing an election under Section 83(b) of the
Code with the I.R.S. within 30 days from the date of purchase.
THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE
RESPONSIBILITY AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION
83(b), EVEN IF THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO
MAKE THIS FILING ON THE PURCHASER'S BEHALF.
11. General Provisions.
(a) This Agreement shall be governed by the laws of the State
of Delaware. This Agreement represents the entire agreement between the parties
with respect to the purchase of Common Stock by the Purchaser and may only be
modified or amended in writing signed by both parties.
(b) Any notice, demand or request required or permitted to be
given by either the Company or the Purchaser pursuant to the terms of this
Agreement shall be in writing and shall be deemed given when delivered
personally or deposited in the U.S. mail, First Class with postage prepaid, and
addressed to the parties at
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<PAGE> 9
the addresses of the parties set forth at the end of this Agreement or such
other address as a party may request by notifying the other in writing.
Any notice to the Escrow Holder shall be sent to the Company's
address with a copy to the other party not sending the notice.
(c) The rights and benefits of the Company under this
Agreement shall be transferable to any one or more persons or entities, and all
covenants and agreements hereunder shall inure to the benefit of, and be
enforceable by the Company's successors and assigns. The rights and obligations
of the Purchaser under this Agreement may only be assigned with the prior
written consent of the Company.
(d) Either party's failure to enforce any provision or
provisions of this Agreement shall not in any way be construed as a waiver of
any such provision or provisions, nor prevent that party thereafter from
enforcing each and every other provision of this Agreement. The rights granted
both parties herein are cumulative and shall not constitute a waiver of either
party's right to assert all other legal remedies available to it under the
circumstances.
(e) The Purchaser agrees upon request to execute any further
documents or instruments necessary or desirable to carry out the purposes or
intent of this Agreement.
(f) PURCHASER ACKNOWLEDGES AND AGREES THAT THE VESTING OF
SHARES PURSUANT TO SECTION 4 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN
EMPLOYEE OR CONSULTANT AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING
HIRED OR PURCHASING SHARES HEREUNDER). PURCHASER FURTHER ACKNOWLEDGES AND
AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE
VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED
PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE OR CONSULTANT FOR THE VESTING
PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH PURCHASER'S
RIGHT OR THE COMPANY'S RIGHT TO TERMINATE PURCHASER'S EMPLOYMENT OR CONSULTING
RELATIONSHIP AT ANY TIME, WITH OR WITHOUT CAUSE.
(g) Purchaser acknowledges receipt of a copy of the Plan, a
copy of which is annexed hereto, represents that Purchaser is familiar with the
terms and provisions thereof, and hereby accepts this Agreement subject to all
of the terms and provisions thereof. Purchase has reviewed the Plan and this
Agreement in their entirety, has had an opportunity to obtain the advice of
counsel prior to executing this Agreement and fully understands all
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<PAGE> 10
provisions of the Agreement. Purchase hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Board or of the
Committee upon any questions arising under the Plan. Purchaser further agrees
to notify the Company upon any change in the residence address indicated below.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the day and year first set forth above.
SPECTRX, INC. PURCHASER:
a Delaware corporation
By:
---------------------------- -------------------------------------
Title:
------------------------- -------------------------------------
(Address)
- ------------------------------- -------------------------------------
(Address)
- -------------------------------
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<PAGE> 11
EXHIBIT A
PROMISSORY NOTE
$20,865.75 June 30, 1994
For value received, the undersigned promises to pay to
SpectRx, Inc., a Delaware corporation (the "Company"), or order, at its
principal office the principal sum of $20,865.75 with interest thereon at the
rate of six percent (6%) per annum on the unpaid balance of the principal sum.
Said principal and interest shall be due on June 30, 1999.
Upon any termination of the employment between the undersigned and the
Company, this Note shall be immediately due and payable.
Principal payable in lawful money of the United States of America.
THE PRIVILEGE IS RESERVED TO PREPAY ANY PORTION OF THE NOTE AT ANY TIME.
Should suit be commenced to collect this Note or any portion thereof,
such sum as the Court may deem reasonable shall be added hereto as attorneys'
fees. The maker waives presentment for payment, protest, notice of protest,
and notice of non-payment of this Note.
This Note is secured by a pledge of certain shares of Common Stock of
the Company, pursuant to the provisions of the Stock Purchase Agreement between
the Company and the undersigned executed contemporaneously with this Note.
The holder of this Note shall have full recourse against the maker,
and shall not be required to proceed against the Shares or other collateral
securing this Note in the event of default.
The undersigned understands that the two-year holding period under
Rule 144 of the Securities Act of 1933 generally will not begin to run until
this Note has been paid in full.
------------------------------
Keith Ignotz
<PAGE> 12
CONSENT OF SPOUSE
I, ____________________, spouse of Keith Ignotz, have read and approve
the foregoing Agreement. In consideration of granting of the right to my
spouse to purchase shares of SpectRx, Inc., as set forth in the Agreement, I
hereby appoint my spouse as my attorney-in-fact in respect to the exercise of
any rights under the Agreement and agree to be bound by the provisions of the
Agreement insofar as I may have any rights in said Agreement or any shares
issued pursuant thereto under the community property laws of the State of
Delaware or similar laws relating to marital property in effect in the state of
our residence as of the date of the signing of the foregoing Agreement.
Dated: _______________, 1994
------------------------------
<PAGE> 13
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, Keith Ignotz, hereby sell, assign and transfer unto
______________________________________
___________________________________________ (__________) shares of the Common
Stock of SpectRx, Inc. (the "Company") standing in my name of the books of said
corporation represented by Certificate No. _____ herewith and do hereby
irrevocably constitute and appoint Wilson, Sonsini, Goodrich & Rosati,
attorney, to transfer the said stock on the books of the within named
corporation with full power of substitution in the premises.
This Stock Assignment may be used only in accordance with the Stock
Purchase Agreement between the Company and the undersigned dated
______________, 19__.
Dated: _______________, 19__
Signature:
----------------------------
Keith Ignotz
INSTRUCTION: PLEASE DO NOT FILL IN ANY BLANKS OTHER THAN THE SIGNATURE LINE.
THE PURPOSE OF THIS ASSIGNMENT IS TO ENABLE THE COMPANY TO EXERCISE ITS
"REPURCHASE OPTION" SET FORTH IN THE AGREEMENT WITHOUT REQUIRING ADDITIONAL
SIGNATURES ON THE PART OF THE PURCHASER.
<PAGE> 14
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to the above-referenced
Federal Tax Code, to include in taxpayer's gross income for the current taxable
year, the amount of any compensation taxable to taxpayer in connection with
receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of
the undersigned are as follows:
NAME : TAXPAYER: SPOUSE:
ADDRESS: :
IDENTIFICATION NO.: TAXPAYER: SPOUSE:
TAXABLE YEAR: 1994
2. The property with respect to which the election is made is described
as follows: 139,105 shares (the "Shares") of the Common Stock of
SpectRx, Inc. (the "Company").
3. The date on which the property was transferred is: June 30, 1994.
4. The property is subject to the following restrictions:
The Shares may be repurchased by the Company, or its assignee, on
certain events. This right lapses with regard to a portion of the
Shares over time.
5. The fair market value at the time of transfer, determined without
regard to any restriction other than a restriction which by its terms
will never lapse, of such property is: $20,865.75
6. The amount (if any) paid for such property is:
$20,865.75
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
except with the consent of the Commissioner.
Dated: _________________________ Taxpayer: ________________________
The undersigned spouse of taxpayer joins in this election.
Dated: __________________________ Taxpayer: ________________________
Spouse of Taxpayer
<PAGE> 1
EXHIBIT 10.9
ASSIGNMENT AND BILL OF SALE
THIS ASSIGNMENT AND BILL OF SALE (the "Assignment"), is made and
entered into as of this 29th day of February, 1996, by and between LASER ATLANTA
OPTICS, INC., a Georgia Corporation ("Seller"), and SPECTRX, INC., a Delaware
Corporation ("Purchaser").
WHEREAS, from time to time the Seller and the Purchaser have disagreed
as to the validity of the Sellers claim to any of the Rights as described below,
with the Purchaser asserting that the Seller has no such claims to the Rights
and the Seller asserting that it may have such claims to the Rights, the Seller
and the Purchaser agree as follows:
In consideration of the settlement of and disagreement as to the Rights
and as a condition to the payment of $10.00 and other good and valuable
consideration by Purchaser to Seller, the mutual promises herein contained, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. Seller does hereby convey, grant, sell, transfer, assign and
deliver unto Purchaser, its successors and assigns forever, all of Seller's
right, title, interest in and to any technology, patents, products, uses and
applications related to Transdermal Monitoring and Delivery ("the Rights"), to
the extent the Seller has any such claims to the Rights, as a result of the
previous employment of Jonathan Eppstein by the Seller.
2. SELLER DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES
REGARDING THE ASSETS, THE LICENSE AGREEMENT, AND THE UNDERLYING TECHNOLOGY
RELATING TO MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND PURCHASER
ACKNOWLEDGES THAT, EXCEPT AS EXPRESSLY PROVIDED IN THE AGREEMENT, IT IS
ACQUIRING THE RIGHTS, THE LICENSE AGREEMENT, AND THE UNDERLYING TECHNOLOGY ON AN
"AS IS", "WHERE IS", AND "WITH ALL FAULTS" BASIS. NEITHER SELLER NOR PURCHASER
SHALL NOT BE LIABLE FOR ANY INDIRECT OR CONSEQUENTIAL DAMAGES.
3. Purchaser and Seller each agree that it will execute such
additional instruments and take such actions as may be reasonably requested by
the other party to confirm, or perfect, or otherwise carry out the intent and
purpose of this Assignment.
4. This Assignment shall be binding and shall inure to the
benefit of Seller and Purchaser and their respective successors and assigns.
<PAGE> 2
IN WITNESS WHEREOF, Purchase and Seller have caused this Assignment to
be executed by their duly executed officers as of the date first written.
"SELLER"
Laser Atlanta Optics, Inc.
By: /s/ Richard L. Fowler
-------------------------------
Richard L. Fowler, President
"PURCHASER"
SpectRx, Inc.
By: /s/ Mark A. Samuels
-----------------------------
Mark A. Samuels, President
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<PAGE> 1
EXHIBIT 10.10
SECURITY AGREEMENT
This Security Agreement is made as of October 31, 1996 between
SpectRx, Inc., a Delaware corporation ("Pledgee"), and Mark A. Samuels
("Pledgor").
Recitals
Pursuant to Pledgor's Note dated and given to Pledgee on the date
hereof (the "Note"), Pledgor has borrowed $200,000.00 from Pledgee and wishes
to secure repayment of the Note with shares of Pledgee's Common Stock and Laser
Atlanta Optics, Inc.'s ("LAO") Common Stock (the "Shares").
NOW, THEREFORE, it is agreed as follows:
1. Creation and Description of Security Interest. In
consideration of the loan of $200,000.00 to Pledgor under the Note, Pledgor,
pursuant to the Georgia Commercial Code, hereby pledges 33,334 Shares of
Pledgee's Common Stock and 6,000,000 Shares of LAO's Common Stock (herein
sometimes referred to as the "Collateral") represented by Pledgee's certificate
number 37 and LAO's certificate numbers 64 and 65, duly endorsed in blank or
with executed stock powers, and herewith delivers said certificates to Wilson
Sonsini Goodrich & Rosati, Professional Corporation, ("Pledgeholder"), who
shall hold said certificates subject to the terms and conditions of this
Security Agreement.
The pledged stock (together with an executed blank stock assignment
for use in transferring all or a portion of the Shares to Pledgee if, as and
when required pursuant to this Security Agreement) shall be held by the
Pledgeholder as security for the repayment of the Note, and any extensions or
renewals thereof, executed by Pledgor, and the Pledgeholder shall not encumber
or dispose of such Shares except in accordance with the provisions of this
Security Agreement.
2. Pledgor's Representations and Covenants. To induce Pledgee to
enter into this Security Agreement, Pledgor represents and covenants to
Pledgee, its successors and assigns, as follows:
a. Payment of Indebtedness. Pledgor will pay the
principal sum of the Note secured hereby, together with interest thereon, at
the time and in the manner provided in the Note.
b. Encumbrances. The Shares are free of all other
encumbrances, defenses and liens, and Pledgor will not further encumber the
Shares without the prior written consent of Pledgee.
<PAGE> 2
c. Margin Regulations. In the event that Pledgee's
Common Stock is now or later becomes margin- listed by the Federal Reserve
Board and Pledgee is classified as a "lender" within the meaning of the
regulations under Part 207 of Title 12 of the Code of Federal Regulations
("Regulation G"), Pledgor agrees to cooperate with Pledgee in making any
amendments to the Note or providing any additional collateral as may be
necessary to comply with such regulations.
3. Voting Rights. During the term of this pledge and so long as
all payments of principal and interest are made as they become due under the
terms of the Note, Pledgor shall have the right to vote all of the Shares
pledged hereunder.
4. Stock Adjustments. In the event that during the term of the
pledge any stock dividend, reclassification, readjustment or other changes are
declared or made in the capital structure of Pledgee or LAO, all new,
substituted and additional shares or other securities issued by reason of any
such change shall be delivered to and held by the Pledgee under the terms of
this Security Agreement in the same manner as the Shares originally pledged
hereunder. In the event of substitution of such securities, Pledgor, Pledgee
and Pledgeholder shall cooperate and execute such documents as are reasonable
so as to provide for the substitution of such Collateral and, upon such
substitution, references to "Shares" in this Security Agreement shall include
the substituted shares of capital stock of Pledgor as a result thereof.
5. Options and Rights. In the event that, during the term of
this pledge, subscription options or other rights or options shall be issued in
connection with the pledged Shares, such subscription options, other rights and
options shall be the property of Pledgor and, if exercised by Pledgor, all new
stock or other securities so acquired by Pledgor as it relates to the pledged
Shares then held by Pledgeholder shall be immediately delivered to
Pledgeholder, to be held under the terms of this Security Agreement in the same
manner as the Shares pledged.
6. Default. Pledgor shall be deemed to be in default of the Note
and of this Security Agreement in the event:
a. Payment of principal or interest on the Note shall be
delinquent for a period of 10 days or more; or
b. Pledgor fails to perform any of the covenants
contained in this Security Agreement for a period of 10 days after written
notice thereof from Pledgee.
In the case of an event of Default, as set forth above, Pledgee shall
have the right to accelerate payment of the Note upon notice to Pledgor, and
Pledgee shall thereafter be entitled to pursue its remedies under the Georgia
Commercial Code.
7. Release of Collateral. Subject to any applicable contrary
rules under Regulation G, there shall be released from this pledge a portion of
the pledged Shares held by Pledgeholder hereunder upon payments of the
principal of the Note. The number of the pledged Shares which shall be
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<PAGE> 3
released shall be that number of full Shares which bears the same proportion to
the initial number of Shares pledged hereunder as the payment of principal
bears to the initial full principal amount of the Note.
8. Withdrawal or Substitution of Collateral. Pledgor shall not
sell, withdraw, pledge, substitute or otherwise dispose of all or any part of
the Collateral without the prior written consent of Pledgee.
9. Term. The within pledge of Shares shall continue until the
payment of all indebtedness secured hereby, at which time the remaining pledged
stock shall be promptly delivered to Pledgor, subject to the provisions for
prior release of a portion of the Collateral as provided in paragraph 7 above.
10. Insolvency. Pledgor agrees that if a bankruptcy or insolvency
proceeding is instituted by or against it, or if a receiver is appointed for
the property of Pledgor, or if Pledgor makes an assignment for the benefit of
creditors, the entire amount unpaid on the Note shall become immediately due
and payable, and Pledgee may proceed as provided in the case of default.
11. Pledgeholder Liability. In the absence of willful or gross
negligence, Pledgeholder shall not be liable to any party for any of his acts,
or omissions to act, as Pledgeholder.
12. Invalidity of Particular Provisions. Pledgor and Pledgee
agree that the enforceability or invalidity of any provision or provisions of
this Security Agreement shall not render any other provision or provisions
herein contained unenforceable or invalid.
13. Successors or Assigns. Pledgor and Pledgee agree that all of
the terms of this Security Agreement shall be binding on their respective
successors and assigns, and that the term "Pledgor" and the term "Pledgee" as
used herein shall be deemed to include, for all purposes, the respective
designees, successors, assigns, heirs, executors and administrators.
14. Governing Law. This Security Agreement shall be interpreted
and governed under the laws of the State of Georgia.
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<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
"PLEDGOR"
_________________________________
Mark A. Samuels
Address: _________________________________
_________________________________
"PLEDGEE" SPECTRX, INC.,
a Delaware corporation
By: _________________________________
Title: _________________________________
"PLEDGEHOLDER" WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
By: _________________________________
Title: _________________________________
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<PAGE> 5
NOTE
$200,000.00 Norcross, GA
October 31, 1996
FOR VALUE RECEIVED, Mark A. Samuels promises to pay to SpectRx, Inc.,
a Delaware corporation (the "Company"), or order, the principal sum of Two
Hundred Thousand and 00/100 Dollars ($200,000.00) together with simple
interest at the rate of 6.72% per annum.
Principal and accrued interest shall be due and payable on the earlier
of (a) October 31, 2001, and (b) the date which is 120 days after the date when
the undersigned shall cease to be an employee or consultant of the Company.
Should the undersigned fail to make full payment of principal and accrued
interest for a period of 10 days or more after the due date thereof, the whole
unpaid balance on this Note of principal and accrued interest shall become
immediately due at the option of the holder of this Note. Payments of
principal and accrued interest shall be made in lawful money of the United
States of America.
The undersigned may at any time prepay all or any portion of the
principal owing hereunder.
This Note is secured in part by a pledge of the Company's Common Stock
and the Common Stock of Laser Atlanta Optics, Inc. under the terms of a
Security Agreement of even date herewith and is subject to all the provisions
thereof.
The holder of this Note shall not have full recourse against the
undersigned, and shall be required to proceed against the collateral securing
this Note in the event of default.
In the event the undersigned shall cease to be an employee or
consultant of the Company for any reason, this Note shall, at the option of the
Company, be accelerated, and the whole unpaid balance on this Note of principal
and accrued interest shall be due and payable on the date which is 120 days
after the date on which the undersigned ceases to be an employee or consultant
of the Company.
Should any action be instituted for the collection of this Note, the
reasonable costs and attorneys' fees therein of the holder shall be paid by the
undersigned.
____________________________________
Mark A. Samuels
<PAGE> 6
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, Mark A. Samuels, hereby sell, assign and
transfer unto ______________________________(__________) shares of the Common
Stock of SpectRx, Inc. standing in my name of the books of said
corporation represented by Certificate No. 37 herewith and do hereby
irrevocably constitute and appoint Wilson Sonsini Goodrich & Rosati,
Professional Corporation, to transfer the said stock on the books of the within
named corporation with full power of substitution in the premises.
This Stock Assignment may be used only in accordance with the Security
Agreement (the "Agreement") between SpectRx, Inc. and the undersigned dated
October 31, 1996.
Dated: _______________, 19__
Signature:
______________________________
Mark A. Samuels
INSTRUCTIONS: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to foreclose on the
pledged shares, as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.
<PAGE> 7
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, Mark A. Samuels, hereby sell, assign and
transfer unto ______________________________(__________) shares of the Common
Stock of Laser Atlanta Optics, Inc. standing in my name of the books of
said corporation represented by Certificate Nos. 64 and 65 herewith and do
hereby irrevocably constitute and appoint Wilson Sonsini Goodrich & Rosati,
Professional Corporation, to transfer the said stock on the books of the within
named corporation with full power of substitution in the premises.
This Stock Assignment may be used only in accordance with the Security
Agreement (the "Agreement") between SpectRx, Inc. and the undersigned dated
October 31, 1996.
Dated: _______________, 19__
Signature:
______________________________
Mark A. Samuels
INSTRUCTIONS: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to foreclose on the
pledged shares, as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.
<PAGE> 8
CONSENT OF SPOUSE
I, ____________________, spouse of Mark A. Samuels, have read and
approve the foregoing Security Agreement (the "Agreement"). In consideration
of the Company's non-recourse loan of $200,000.00 to my spouse, secured by the
pledge of 33,334 shares of the Common Stock of SpectRx, Inc. and 6,000,000
shares of the Common Stock of Laser Atlanta Optics, Inc. as set forth in the
Agreement, I hereby appoint my spouse as my attorney-in-fact in respect to the
exercise of any rights under the Agreement and agree to be bound by the
provisions of the Agreement insofar as I may have any rights in said Agreement
or any shares pledged pursuant thereto under the community property laws or
similar laws relating to marital property in effect in the state of our
residence as of the date of the signing of the foregoing Agreement.
Dated: _______________, 1996
______________________________________
Signature of Spouse
<PAGE> 1
EXHIBIT 10.11
SECURITY AGREEMENT
This Security Agreement is made as of October 31, 1996 between
SpectRx, Inc., a Delaware corporation ("Pledgee"), and Keith D. Ignotz
("Pledgor").
Recitals
Pursuant to Pledgor's Note dated and given to Pledgee on the date
hereof (the "Note"), Pledgor has borrowed $200,000.00 from Pledgee and wishes
to secure repayment of the Note with shares of Pledgee's Series B Preferred
Stock and Laser Atlanta Optics, Inc.'s ("LAO") Common Stock (the "Shares").
NOW, THEREFORE, it is agreed as follows:
1. Creation and Description of Security Interest. In
consideration of the loan of $200,000.00 to Pledgor under the Note, Pledgor,
pursuant to the Georgia Commercial Code, hereby pledges 16,667 Shares of
Pledgee's Series B Preferred Stock and 4,000,000 Shares of LAO's Common Stock
(herein sometimes referred to as the "Collateral") represented by Pledgee's
certificate number B7 and LAO's certificate number 57, duly endorsed in blank
or with executed stock powers, and herewith delivers said certificates to
Wilson Sonsini Goodrich & Rosati, Professional Corporation, ("Pledgeholder"),
who shall hold said certificates subject to the terms and conditions of this
Security Agreement.
The pledged stock (together with an executed blank stock assignment
for use in transferring all or a portion of the Shares to Pledgee if, as and
when required pursuant to this Security Agreement) shall be held by the
Pledgeholder as security for the repayment of the Note, and any extensions or
renewals thereof, executed by Pledgor, and the Pledgeholder shall not encumber
or dispose of such Shares except in accordance with the provisions of this
Security Agreement.
2. Pledgor's Representations and Covenants. To induce Pledgee to
enter into this Security Agreement, Pledgor represents and covenants to
Pledgee, its successors and assigns, as follows:
a. Payment of Indebtedness. Pledgor will pay the
principal sum of the Note secured hereby, together with interest thereon, at
the time and in the manner provided in the Note.
b. Encumbrances. The Shares are free of all other
encumbrances, defenses and liens, and Pledgor will not further encumber the
Shares without the prior written consent of Pledgee.
<PAGE> 2
c. Margin Regulations. In the event that Pledgee's
Common Stock is now or later becomes margin- listed by the Federal Reserve
Board and Pledgee is classified as a "lender" within the meaning of the
regulations under Part 207 of Title 12 of the Code of Federal Regulations
("Regulation G"), Pledgor agrees to cooperate with Pledgee in making any
amendments to the Note or providing any additional collateral as may be
necessary to comply with such regulations.
3. Voting Rights. During the term of this pledge and so long as
all payments of principal and interest are made as they become due under the
terms of the Note, Pledgor shall have the right to vote all of the Shares
pledged hereunder.
4. Stock Adjustments. In the event that during the term of the
pledge any stock dividend, reclassification, readjustment or other changes are
declared or made in the capital structure of Pledgee or LAO, all new,
substituted and additional shares or other securities issued by reason of any
such change shall be delivered to and held by the Pledgee under the terms of
this Security Agreement in the same manner as the Shares originally pledged
hereunder. In the event of substitution of such securities, Pledgor, Pledgee
and Pledgeholder shall cooperate and execute such documents as are reasonable
so as to provide for the substitution of such Collateral and, upon such
substitution, references to "Shares" in this Security Agreement shall include
the substituted shares of capital stock of Pledgor as a result thereof.
5. Options and Rights. In the event that, during the term of
this pledge, subscription options or other rights or options shall be issued in
connection with the pledged Shares, such subscription options, other rights and
options shall be the property of Pledgor and, if exercised by Pledgor, all new
stock or other securities so acquired by Pledgor as it relates to the pledged
Shares then held by Pledgeholder shall be immediately delivered to
Pledgeholder, to be held under the terms of this Security Agreement in the same
manner as the Shares pledged.
6. Default. Pledgor shall be deemed to be in default of the Note
and of this Security Agreement in the event:
a. Payment of principal or interest on the Note shall be
delinquent for a period of 10 days or more; or
b. Pledgor fails to perform any of the covenants
contained in this Security Agreement for a period of 10 days after written
notice thereof from Pledgee.
In the case of an event of Default, as set forth above, Pledgee shall
have the right to accelerate payment of the Note upon notice to Pledgor, and
Pledgee shall thereafter be entitled to pursue its remedies under the Georgia
Commercial Code.
7. Release of Collateral. Subject to any applicable contrary
rules under Regulation G, there shall be released from this pledge a portion of
the pledged Shares held by Pledgeholder hereunder upon payments of the
principal of the Note. The number of the pledged Shares which shall be
released shall be that number of full Shares which bears the same proportion to
the initial number of
<PAGE> 3
Shares pledged hereunder as the payment of principal bears to the initial full
principal amount of the Note.
8. Withdrawal or Substitution of Collateral. Pledgor shall not
sell, withdraw, pledge, substitute or otherwise dispose of all or any part of
the Collateral without the prior written consent of Pledgee.
9. Term. The within pledge of Shares shall continue until the
payment of all indebtedness secured hereby, at which time the remaining pledged
stock shall be promptly delivered to Pledgor, subject to the provisions for
prior release of a portion of the Collateral as provided in paragraph 7 above.
10. Insolvency. Pledgor agrees that if a bankruptcy or insolvency
proceeding is instituted by or against it, or if a receiver is appointed for
the property of Pledgor, or if Pledgor makes an assignment for the benefit of
creditors, the entire amount unpaid on the Note shall become immediately due
and payable, and Pledgee may proceed as provided in the case of default.
11. Pledgeholder Liability. In the absence of willful or gross
negligence, Pledgeholder shall not be liable to any party for any of his acts,
or omissions to act, as Pledgeholder.
12. Invalidity of Particular Provisions. Pledgor and Pledgee
agree that the enforceability or invalidity of any provision or provisions of
this Security Agreement shall not render any other provision or provisions
herein contained unenforceable or invalid.
13. Successors or Assigns. Pledgor and Pledgee agree that all of
the terms of this Security Agreement shall be binding on their respective
successors and assigns, and that the term "Pledgor" and the term "Pledgee" as
used herein shall be deemed to include, for all purposes, the respective
designees, successors, assigns, heirs, executors and administrators.
14. Governing Law. This Security Agreement shall be interpreted
and governed under the laws of the State of Georgia.
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
"PLEDGOR"
----------------------------------------
Keith D. Ignotz
Address:
----------------------------------------
----------------------------------------
"PLEDGEE" SPECTRX, INC.
a Delaware corporation
By:
----------------------------------------
The:
----------------------------------------
"PLEDGEHOLDER" WILSON SONSINI GOODRICK & ROSATI
Professional Corporation
By:
----------------------------------------
The:
----------------------------------------
<PAGE> 5
NOTE
$200,000.00 Norcross, GA
October 31, 1996
FOR VALUE RECEIVED, Keith D. Ignotz promises to pay to SpectRx, Inc.,
a Delaware corporation (the "Company"), or order, the principal sum of Two
Hundred Thousand and 00/100 Dollars ($200,000.00) together with simple
interest at the rate of 6.72 % per annum.
Principal and accrued interest shall be due and payable on the earlier
of (a) October 31, 2001, and (b) the date which is 120 days after the date when
the undersigned shall cease to be an employee or consultant of the Company.
Should the undersigned fail to make full payment of principal and accrued
interest for a period of 10 days or more after the due date thereof, the whole
unpaid balance on this Note of principal and accrued interest shall become
immediately due at the option of the holder of this Note. Payments of
principal and accrued interest shall be made in lawful money of the United
States of America.
The undersigned may at any time prepay all or any portion of the
principal owing hereunder.
This Note is secured in part by a pledge of the Company's Series B
Preferred Stock and Laser Atlanta Optics, Inc.'s Common Stock under the terms
of a Security Agreement of even date herewith and is subject to all the
provisions thereof.
The holder of this Note shall not have full recourse against the
undersigned, and shall be required to proceed against the collateral securing
this Note in the event of default.
In the event the undersigned shall cease to be an employee or
consultant of the Company for any reason, this Note shall, at the option of the
Company, be accelerated, and the whole unpaid balance on this Note of principal
and accrued interest shall be due and payable on the date which is 120 days
after the date on which the undersigned ceases to be an employee or consultant
of the Company.
Should any action be instituted for the collection of this Note, the
reasonable costs and attorneys' fees therein of the holder shall be paid by the
undersigned.
____________________________________
Keith D. Ignotz
<PAGE> 6
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, Keith D. Ignotz, hereby sell, assign and
transfer unto ______________________________(__________) shares of the Series
B Preferred Stock of SpectRx, Inc. standing in my name of the books of
said corporation represented by Certificate No. B7 herewith and do hereby
irrevocably constitute and appoint Wilson Sonsini Goodrich & Rosati,
Professional Corporation, to transfer the said stock on the books of the within
named corporation with full power of substitution in the premises.
This Stock Assignment may be used only in accordance with the Security
Agreement (the "Agreement") between SpectRx, Inc. and the undersigned dated
October 31, 1996.
Dated: _______________, 19__
Signature:
______________________________
Keith D. Ignotz
INSTRUCTIONS: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to foreclose on the
pledged shares, as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.
<PAGE> 7
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, Keith D. Ignotz, hereby sell, assign and
transfer unto ______________________________(__________) shares of the Common
Stock of Laser Atlanta Optics, Inc. standing in my name of the books of
said corporation represented by Certificate No. __ herewith and do hereby
irrevocably constitute and appoint Wilson Sonsini Goodrich & Rosati,
Professional Corporation, to transfer the said stock on the books of the within
named corporation with full power of substitution in the premises.
This Stock Assignment may be used only in accordance with the Security
Agreement (the "Agreement") between SpectRx, Inc. and the undersigned dated
October 31, 1996.
Dated: _______________, 19__
Signature:
______________________________
Keith D. Ignotz
INSTRUCTIONS: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to foreclose on the
pledged shares, as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.
<PAGE> 8
CONSENT OF SPOUSE
I,___________________________, spouse of Keith D. Ignotz, have read
and approve the foregoing Security Agreement(the "Agreement"). In
consideration of the Company's non-recourse loan of $200,000.00 to my spouse,
secured by the pledge of 16,667 shares of Series B Preferred Stock of SpectRx,
Inc. and 4,000,000 shares of Common Stock of Laser Atlanta Optics, Inc. as
set forth in the Agreement, I hereby appoint my spouse as my
attorney-in-fact in respect to the exercise of any rights under the Agreement
and agree to be bound by the provisions of the Agreement insofar as I may have
any rights in the said Agreement or any shares pledged pursuant thereto under
the community property laws or similar laws relating to marital property in
effect in the state of our residence as of the date of the signing of the
foregoing Agreement.
Dated:___________________, 1996
_______________________________
Signature of Spouse
<PAGE> 1
EXHIBIT 10.12(A)
LICENSE AGREEMENT
THIS AGREEMENT is made as of the 7th day of May, 1991, by and between
GEORGIA TECH RESEARCH CORPORATION, a nonprofit Georgia corporation with offices
in the Centennial Research Building, Georgia Institute of Technology, Atlanta,
Georgia, ("GTRC"); and LASER ATLANTA OPTICS, INC., a company incorporated under
the laws of the State of Georgia, and having its registered office in that state
at 6015D Unity Drive, Norcross, Georgia 30071, ("LASER").
W I T N E S S E T H:
WHEREAS, this Agreement is intended to cancel that certain License
Agreement between the parties hereto, dated April 10, 1990; and
WHEREAS, GTRC entered into an agreement with Joslin Diabetes Center
whereby GTRC obtained the exclusive right to market know--how related to a
method of using non-invasive instrumentation to quantitatively measure molecular
changes in living human lenses for the purpose of diagnosing diabetes and
precataractous conditions (the "Know-How") For the purpose of this Agreement,
Know-How includes, among other things, information not in the public domain,
including Confidential Information and Trade Secrets forwarded or transmitted to
LASER by GTRC, Dr. Nai-Teng Yu, Dr. Sven Bursell and Joslin Diabetes Center. The
system covered by the Know-How employs low power illuminations of different
optical wavelengths of the lens of the eye. The spectral content of the
resulting emitted light from specific sites in the lens is then acquired and
analyzed providing information that can be used to detect diabetes and
precataractous conditions.
WHEREAS, GTRC desires the further commercial development of the
Know-How and for such purpose has accepted the offer of LASER to collaborate
with GTRC upon the terms and conditions herein contained; and
WHEREAS, LASER desires to acquire an exclusive license, with the right
to grant sublicenses to others, to commercialize products incorporating the
Know-How (the "Products") and to operate and use such Products and to
manufacture, having manufactured, use, market, have marketed, sell and have sold
the Products; and
WHEREAS, GTRC and LASER have agreed that in connection with such
collaboration GTRC shall grant to LASER an exclusive license throughout the
world (the "Territory") to manufacture, have manufactured, use, market, have
marketed, sell and have sold Products incorporating the Know-How.
NOW THEREFORE, for and in consideration of the sum of one Hundred
($100.00) Dollars and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, GTPC and LASER do hereby warrant
and agree as follows:
<PAGE> 2
1. EXCLUSIVE LICENSE
GTRC hereby grants to LASER the exclusive, worldwide, right and license
to commercialize, use and exploit the Products; to make, assemble, and use
apparatus machinery, auxiliaries, and all devices for carrying such Products
into practice; and to manufacture, have manufactured, use, market, have
marketed, sell and have sold the Products.
(a) GTRC hereby grants to LASER the right to grant sublicenses on such
terms as are consistent with the provisions of this Agreement.
(b) The exclusive rights and licenses herein granted shall include all
inventions, improvements to, enhancements of and modifications of the Know-How
and Products thereto made or conceive during the term of this Agreement which
GTRC owns or controls or hereafter owns or controls and all patent applications
and patents based on or covering the same which the GTRC now owns or hereafter
owns or controls.
2. REPRESENTATIONS BY GTRC
(a) Much of the Know-How is secret, and to the best of GTRC's
knowledge and belief has not been revealed to anyone except
Joslin Diabetes Center and Dr. Sven Bursell, and shall not be
revealed to anyone without the prior approval of LASER.
(b) GTRC shall communicate to LASER all information and data,
which may come into its possession, relating to the Know-How,
but no information prominently marked "Confidential" so
communicated or otherwise acquired by LASER from GTRC, save
such information which is in the public domain, shall be
divulged to any third party (except to employees or
consultants of LASER and its sublicensees) without the prior
consent of GTRC.
(c) GTRC's and LASER' a obligations set out in this section shall
survive the termination of this Agreement to the extent that
such information has not entered the public domain.
(d) GTRC has an agreement with Joslin Diabetes Center (the
subcontractor) concerning the "Know-How" which provides for
the sharing of royalties.
3. PATENTS
(a) Should LASER at any time seek and obtain Letters Patent or
equivalent protection for any development arising from its use
of the Know-How not in the public domain, any products covered
by such Letters Patent or equivalent protection shall be
deemed to be Products within the terms of this Agreement and
be subject to the terms and conditions herein.
2
<PAGE> 3
(b) LASER shall advise GTRC within fourteen (14) days of lodging
an application for such Letters Patent or equivalent
protection, and shall keep GTRC advised of the prosecution and
maintenance of such Letters Patent or equivalent protection.
4. OWNERSHIP OF PATENTS
All patents regarding "the Know-How" shall be the sole exclusive
property of GTRC, subject to the exclusive license hereby granted GTRC shall,
upon demand, execute and deliver to LASER such documents as may be deemed
necessary or advisable by counsel for LASER for filing in the appropriate patent
offices to evidence the granting of the exclusive license hereby granted.
5. ROYALTIES
LASER shall pay to GTRC:
(a) Where the products are the subject of a Patent Application,
Letters Patent or equivalent protection, a [*] price ("Net
Selling Price) for each Product manufactured and sold anywhere
in the world.
Net Selling price shall mean LASER's gross selling price for the Products less
any of the following:
1) sales or excise taxes paid directly or indirectly to
LASER;
2) any shipping costs separately itemized by LASER;
3) normal and customary trade discounts, returns and
allowances.
(b) In all other cases, a [*].
(c) It shall be the obligation of LASER to pay all royalties due
hereunder to GTRC and GTRC shall not be required to look to
any other seller to recover any monies.
(d) The obligations of LASER with respect to the payment of
royalties in accordance with this Agreement shall apply with
respect to all sales in any country of the Territory,
notwithstanding that no letters Patent or equivalent
protection shall have been obtained or be in force in that
country.
6. ACCOUNTS
(a) LASER shall not later than the First day of March in each year
furnish to GTRC a statement showing the total net sales by
LASER and any approved sub-licensees during the immediately
preceding calendar year, and the royalties payable thereon
calculated in accordance with this Agreement.
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
3
<PAGE> 4
(b) LASER shall keep at its usual place of business true and
particular accounts of all matters connected with the use of
the Know-How and the manufacture and sale of all Products and
shall, if so requested by GTRC make available books of account
relating to royalties payable hereunder containing true
entries complete in every particular as may be necessary or
proper for enabling the amount of such royalties to be
conveniently ascertained.
7. ASSIGNMENT
This Agreement shall be binding upon and inure to the benefit of the
successors and assigns of the parties hereto, but shall not otherwise be
assigned by either party without the written consent of the other party; EXCEPT
THAT GTRC shall have the right to assign this Agreement to the Georgia Institute
of Technology or the Board of Regents of the University System of Georgia.
8. NO WARRANTY
GTRC does not nor will it assert or warrant that the Know-How or any
improvement thereto is not an infringement of the rights of third parties nor
that under the law of any country it will be possible to grant an exclusive
license.
9. NEW INVENTIONS
If during the term of this Agreement GTRC, individually or
collectively, makes any further improvements in such Products or Know-How or the
mode of using them or becomes the owners of any new improvements either through
patents or otherwise, then it shall communicate such improvements to LASER and
LASER shall have the right to include the same in this Agreement without
additional compensation. Provided, however, that this paragraph shall not apply
to any situation in which GTRC has a contrary contractual commitment as a third
party.
10. NOTICE
Any notice under this Agreement shall be addressed as follows:
(a) Georgia Tech Research Corporation
Centennial Research Building
Georgia Institute of Technology
Atlanta, Georgia
(b) Laser Atlanta Optics, Inc.
6015D Unity Drive
Norcross, Georgia 30071
4
<PAGE> 5
With a copy to:
Thornton W. Morris & Co., P.C.
1950 North Park Place
Suite 400
Atlanta, Georgia 30339
11. FORCE MAJEURE
Neither party shall be held in breach of this Agreement for any reason
for acts or omissions caused by any act of God or other cause beyond the control
of the parties, including, but not limited to, fire, floods, labor disputes, or
other unforeseen circumstances.
12. INDEMNITY
Notwithstanding anything herein contained, LASER shall indemnify and
save GTRC harmless with respect to any claims by any third party against GTRC
alleging loss, damage or injury as a result only of the use by LASER or by such
third party of the Products. The obligation of Indemnity shall survive
Termination.
13. TERM OF LICENSE
Subject to Clauses 14 and 15 herein, this Agreement and the license
granted hereunder shall continue in force for Fifteen (15) years from the date
hereof.
14. TERMINATION BY LASER
LASER may terminate this Agreement by giving to GTRC at least Three (3)
months notice in writing of any breach by GTRC of this Agreement which causes
damage to LASER, specifying the particulars of the breach and requiring that it
be rectified or made good and by a further notice if at the expiration of that
period of three months, the relevant breach has not been rectified or made good
WITHOUT PREJUDICE however to the right of GTRC to sue for and recover any moneys
due to GTRC with respect to any previous breach by LASER of any of the
provisions of this Agreement.
15. TERMINATION BY GTRC
GTRC may terminate this Agreement by Thirty (30) days notice in writing
to LASER on the happening of any of the following events:
(a) If LASER shall commit or allow to be committed a breach of any
of the terms and conditions on its part here in contained; or
5
<PAGE> 6
(b) If LASER makes any assignment for the benefit of its
creditors, provided, however, that this provision shall not
apply to the assignment of any rights made as collateral for
new loans; or
(c) If a receiver, liquidator or official manager is appointed
with respect to LASER indicates its consent, approval of or
acquiescence in any proceedings for the appointment of any
such receiver, liquidator or official manager; or
(d) If LASER ceases to carry on its business;
WITHOUT PREJUDICE HOWEVER to the right of GTRC to sue for and recover
any money then due and to the rights of GTRC with respect to any
previous breach by LASER of any of the provisions contained in this
Agreement.
16. SEVERABILITY
A holding that a Clause of this Agreement is invalid or unenforceable
shall not effect any other provisions of this Agreement.
17. USE OF NAMES
LASER shall not use the names of GTRC, the Georgia Institute of
Technology or any affiliate or entity in any advertisement or sales material
without the prior written consent of the entity or entities name in such
material.
18. INTERPRETATION
(a) In the interpretation of this Agreement, unless the context
otherwise requires, words importing the singular or plural
number shall be deemed to import the plural and singular
number respectively, words denoting gender shall include all
genders, and references to persons shall include corporations
or other bodies or vice versa.
(b) The headings in this Agreement are included for convenience
only and are not to be construed as forming part of the text
or as in any way affecting the interpretation of this
Agreement.
(c) Nothing herein shall be construed as forming any sort of
partnership or joint venture between GTRC and LASER. The
relationship between the parties is that of licensor and
licensee.
(d) This Agreement shall be interpreted and governed in all
respects by the laws of the State of Georgia.
6
<PAGE> 7
19. ENTIRE AGREEMENT
This Agreement embodies the entire Agreement between GTRC and LASER
respecting the subject matter hereof and may not be modified or amended except
in a writing signed by GTRC and LASER.
7
<PAGE> 8
IN WITNESS WHEREOF the parties have hereunto signed this Agreement on
the day hereinbefore referred to.
GEORGIA TECH RESEARCH LASER ATLANTA OPTICS, INC.
CORPORATION
By: /s/ J.W. Dees By: /s/ Mark A. Samuels
---------------------------------- -----------------------------
Typed Name: J.W. Dees Typed Name:
---------------------------------- -----------------------------
Title: Assistant Secretary Title:
---------------------------------- -----------------------------
Date: May 7, 1991 Date:
---------------------------------- -----------------------------
By: /s/ R.M. Bell
----------------------------------
Typed Name: R.M. Bell
----------------------------------
Title: Vice President/General Manager
----------------------------------
Date: May 7, 1991
----------------------------------
8
<PAGE> 1
EXHIBIT 10.12B
AGREEMENT FOR PURCHASE AND SALE
OF TECHNOLOGY
THIS AGREEMENT is entered into as of the 16 day of January, 1993, by
and between LASER ATLANTA OPTICS, INC., a Georgia corporation ("Seller"); and
SPECTRX, INC., a Delaware corporation ("Purchaser").
W I T N E S S E T H:
WHEREAS, the parties have entered into a certain agreement dated
November 6, 1992 entitled "TECHNOLOGY PURCHASE AND TRANSFER AGREEMENT" (such
agreement being hereinafter referred to as the "Prior Agreement"), the terms of
which are incorporated herein by reference; and
WHEREAS, the parties desire to enter into this Agreement in order to
clarify the terms of the Prior Agreement and to add additional terms which were
agreed to at the time of the Prior Agreement but were not included in the terms
of the Prior Agreement;
NOW THEREFORE, for and in consideration of the premises and mutual
promises, representations, warranties, covenants and agreements contained
herein, the parties do hereby covenant, agree, represent, warrant and stipulate
as follows:
1. PURCHASE AND SALE OF TECHNOLOGY. Upon the terms and
<PAGE> 2
subject to the conditions contained herein, Purchaser hereby agrees to purchase
and Seller hereby agrees to sell all of Seller's right, title and interest in
and to the technology, patents, software, designs, models, drawings, know-how,
trademarks, trade names, service marks (including the goodwill associated with
the trademarks, trade names and service marks), trade secrets, copyrights and
registrations and applications therefor, relating to non-invasive means of
diagnosing disease through the use of fluorescence spectroscopy (the "Assets").
The Assets shall include, without limitation, Seller's rights in and to that
certain license agreement dated May 7, 1991, between Georgia Tech Research
Corporation and Seller, a copy of which is attached hereto as Exhibit A (the
"License Agreement"). In addition, the Assets shall include any and all books,
records, computer tapes or disks, flow diagrams, specification sheets, source
codes, and object codes relating to the Assets, and other physical
manifestations of the Assets.
2. PURCHASE PRICE. The price to be paid by Purchaser for the
Assets at Closing (as hereinafter defined) shall be $100,000.00 and shall be
payable by delivery of a promissory note in the form attached hereto as Exhibit
B and made a part hereof (the "Promissory Note"). The Promissory Note shall be
secured by a patent collateral assignment and security agreement in the form of
Exhibit C attached hereto and made a part hereof (the "Security Agreement")
conveying a security interest in the Assets to Seller.
2
<PAGE> 3
3. WARRANTIES AND REPRESENTATIONS. Seller represents and warrants
to Purchaser as follows:
3.1 Authority. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Georgia and has all requisite corporate power and authority and, except
for the consent of Georgia Tech Research Corporation, all authorizations
necessary to enter into this Agreement and to carry out the transactions
contemplated hereby.
3.2 Ownership of Assets. Seller owns and controls all of
the Assets free and clear of all liens, claims, charges and any other
defects in title of any nature whatsoever.
3.3 Infringement. To the best of Seller's knowledge,
without investigation, no aspect of the Assets infringes upon any
proprietary rights of any other person, firm, corporation or other
legal entity and there is not pending or, to the best of Seller's
knowledge, without investigation, threatened any claim or litigation
against Seller regarding the Assets, nor to the best of Seller's
knowledge, without investigation, is there any basis for such claim.
4. CLOSING. The consummation of the transactions contemplated
herein (the "Closing") shall be held at such time and place designated by
Purchaser but in no event later than January 31,
3
<PAGE> 4
1993. At the Closing, Seller shall deliver to Purchaser the Assets by virtue
of delivery of a certain assignment and bill of sale (the "Assignment") in
substantially the same form as Exhibit D attached hereto and made a part
hereof. The Assignment shall be executed by Georgia Tech Research Corporation
in order to consent to the assignment of Seller's interest in the License
Agreement. At the Closing, Purchaser shall deliver to Seller the Promissory
Note, the Security Agreement, and the Assignment.
5. CONDITION TO CLOSING. Any provision to the contrary contained herein
notwithstanding, Purchaser's obligation to purchase the Assets at Closing is
contingent upon Seller's obtaining the consent of Georgia Tech Research
Corporation to the proposed Assignment. Seller agrees to use its best efforts
in obtaining such consent prior to the Closing.
6. MISCELLANEOUS.
6.1 Further Assurances. Each party covenants that at any time, and
from time to time, after the Closing, it will execute such additional
instruments and take such actions as may be reasonably requested by the other
party to confirm, or perfect, or otherwise to carry out the intent and purpose
of this Agreement.
6.2 Waiver. Any failure on the part of any party hereto to comply
with any of its obligations, agreements, or
4
<PAGE> 5
conditions hereunder may be waived by any other party to whom such compliance
is owed. No waiver of any provision of this Agreement shall be deemed, or
shall constitute, a waiver of any other provision, whether or not similar, nor
shall any waiver constitute a continuing waiver.
6.3 Severability. In the event that any provision of this Agreement or
any word, phrase, clause, sentence, or other portion thereof, shall be
unenforceable or invalid for any reason, such provision or portion thereof
shall be modified or deleted in such a manner so as to make this Agreement, as
modified, legal and enforceable to the fullest extent permitted under
applicable laws.
6.4 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns.
No party may assign this Agreement, in whole or in part, without the prior
express written consent of the other party.
6.5. Entire Agreement. This Agreement and the Prior Agreement constitute
the entire agreement between the parties hereto and supersede and cancel any
prior agreements, representations, warranties or communications, whether oral
or wrtiten, between the parties hereto relating to the transactions contemplated
hereby, or the subject matter
5
<PAGE> 6
hereof. This Agreement may not be changed, waived, discharged or terminated
orally, but only by an agreement in writing signed by the parties hereto. In
the event of a discrepancy between the terms of this Agreement and the Prior
Agreement, the terms of this Agreement shall control.
6.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia.
6.7 Disclaimer. EXCEPT AS EXPRESSLY PROVIDED HEREIN, SELLER DISCLAIMS
ANY AND ALL EXPRESS OR IMPLIED WARRANTIES REGARDING THE ASSETS AND THE
UNDERLYING TECHNOLOGY, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND PURCHASER ACKNOWLEDGES
THAT, EXCEPT AS EXPRESSLY PROVIDED HEREIN, IT IS ACQUIRING THE ASSETS AND THE
UNDERLYING TECHNOLOGY ON AN "AS IS", "WHERE IS", AND "WITH ALL FAULTS" BASIS.
NEITHER SELLER NOR PURCHASER SHALL BE LIABLE FOR ANY INDIRECT OR CONSEQUENTIAL
DAMAGES.
(Signatures begin on next page)
6
<PAGE> 7
IN WITNESS WHEREOF, Purchaser and Seller have caused this Agreement to be
executed as of the date first above written.
"SELLER"
Laser Atlanta Optics, Inc.
By: /s/ Mark A. Samuels
--------------------------
Mark A. Samuels, President
"PURCHASER"
Spectrx, Inc.
By: /s/ Mark A. Samuels
--------------------------
Mark A. Samuels, President
7
<PAGE> 8
EXHIBIT A
LICENSE AGREEMENT
OMITTED
PLEASE SEE EXHIBIT
10.12A
BELOW
<PAGE> 9
EXHIBIT B
SECURED NOTE
$100,000.00 Atlanta, Georgia January___, 1993
FOR VALUE RECEIVED, the undersigned promises to pay to the order of
LASER ATLANTA OPTICS, INC., a Georgia corporation, the principal sum of ONE
HUNDRED THOUSAND ($100,000.00) AND NO/100 DOLLARS, in legal tender of the
United States, with interest thereon from date at the rate of zero per centum
(0.0%) per annum, on the unpaid balance until paid, as follows:
One installment of One Hundred Thousand Dollars ($100,000.00 on or
before January 31, 1993; or
One installment of One Hundred One Thousand Dollars ($101,000.00) after
January 31, 1993, but before February 28, 1993.
Principal and interest are payable at Atlanta, Georgia, or at such
other place as the holder thereof may designate in writing.
Should any installment not be paid when due, or should the maker, or
makers, hereof fail to comply with any of the terms or requirements of a patent
collateral assignment and security agreement of even date herewith, conveying a
security interest in certain properties as security for this indebtedness, the
entire unpaid principal sum evidenced by this Note (i.e., $101,000.00), with
all accrued interest, shall, at the option of the holder, and without notice to
the undersigned, become due and may be collected forthwith, time being of the
essence of this contract. It is further agreed that failure of the holder to
exercise this right of accelerating the maturity of the debt, or indulgence
granted from time to time, shall in no event be considered as a waiver of such
right of acceleration or estop the holder from exercising such right.
In case this Note is collected by law, or through an attorney at law,
all costs of collection, including fifteen per centum (15%) of the principal
and interest as attorney's fees, shall be paid by the makers hereof.
And each of us, whether maker, endorser, guarantor, or surety, hereby
severally waives and renounces, for himself and family, any and all
exemption rights either of us, or the family of either of us, may have under
or by virtue of the Constitution or laws of Georgia, or any other
State, or the United States, as against this debt or any renewal thereof; and
each further waives demand, protest and notice of demand, protest and
non-payment.
<PAGE> 10
In case of default in the payment of the amounts due hereunder by
February 28, 1993, said principal sum (i.e., $101,000.00), or so much thereof
as may remain unpaid at the time of such default, shall bear interest at the
rate of eighteen per centum (18%) per annum from the date of such default.
This contract is to be construed in all respects and enforced according
to the laws of the State of Georgia.
Prepayment Privilege:
This Note may be prepaid at any time without penalty or charge.
Witness the hand of our SPECTRX, INC.
duly authorized officer.
By:
----------------------------
Mark A. Samuels, President
<PAGE> 11
EXHIBIT C
PURCHASE MONEY
PATENT COLLATERAL ASSIGNMENT
AND SECURITY AGREEMENT
This Agreement is made on the ______ day of January, 1993, between
SPECTRX, INC., a Delaware corporation ("Assignor") and LASER ATLANTA OPTICS,
INC., a Georgia corporation ("Lender").
W I T N E S S E T H
WHEREAS, Lender has assigned, conveyed, and transferred to Assignor all
of its right to certain assets by virtue of its execution and delivery of a
certain Assignment and Bill of Sale of even date herewith (the "Assignment"),
the terms of which are incorporated herein by this reference; and
WHEREAS, Assignor has executed and delivered its purchase money
promissory note (the "Note") of even date herewith to the Lender in the
principal amount of $100,000.00; and, in order to induce the Lender to accept
the Note, Assignor has agreed to assign to Lender certain patent rights and
other property acquired through the Assignment.
NOW, THEREFORE, in consideration of the foregoing and the premises
herein contained, Assignor hereby agrees with Lender as follows:
1. To secure the complete and timely satisfaction of all obligations
of Assignor under the Note (the "Obligations"), Assignor hereby grants, assigns
and conveys to Lender all of its rights, title and interest, resulting from the
Assignment to:
a) all right, title and interest in and to the technology,
patents, software, designs, models, drawings, know-how, trademarks, trade
names, and service marks (including the goodwill associated with the
trademarks, trade names and service marks), trade secrets, copyrights,
registrations and applications therefor, relating to non-invasive means of
diagnosing disease through the use of flourescence spectroscopy, including,
without limitation, any and all books, records, computer tapes or disks, flow
diagrams, specifications sheets, source codes, and object codes relating to the
foregoing and other physical manifestations of the foregoing; and
b) all right, title, interest, powers, privileges and options in
and to, and in accordance with, that certain license agreement dated May 7,
1991, by and between GEORGIA TECH RESEARCH CORPORATION and Seller,
including without limitation, all proceeds thereof (such as, by way of example,
license royalties and proceeds of infringement suits), the right to sue for
past, present and future infringements, and
<PAGE> 12
all rights corresponding thereto (collectively called the "Assets").
2. Assignor agrees that, until all of the Obligations shall have been
satisfied in full, it will not enter into any agreement (for example, a license
agreement) which is inconsistent with Assignor's obligations under this
Agreement, without Lender's prior written consent.
3. Unless and until there shall have occurred and be continuing a breach
of the Obligations, Lender hereby grants to Assignor the exclusive,
non-transferable right, license, and use of and to the Assets, provided,
however, Assignor agrees not to sell, assign, or otherwise encumber its
interest in, or grant any sublicense under the Assets, or any part thereof,
without the prior written consent of Lender.
4. If any breach of the Obligations shall have occurred and be
continuing, Assignor's rights, license, and use of and to the Assets set forth
in Section 3, shall terminate forthwith, and the Lender shall have, in addition
to all other rights and remedies given it by this Agreement, those allowed by
law and the rights and remedies of a secured party under the Uniform Commercial
Code as enacted in any jurisdiction in which the Assets may be located and,
without limiting the generality of the foregoing, the Lender may immediately,
without demand or performance and without other notice (except as set forth
next below) or demand whatsoever to Assignor, all of which are hereby expressly
waived, and without advertisement, sell at public or private sale or otherwise
realize upon, in Atlanta, Georgia, or elsewhere, the whole or from time to time
any part of the Assets, or any interest which the Assignor may have therein,
and after deducting from the proceeds of sale or other disposition of the
Assets all expenses (including all reasonable expenses for brokers' fees and
legal services), shall apply the residue of such proceeds toward the
satisfaction of the obligations. Any remainder of the proceeds after
satisfaction in full of the Obligations shall be paid over to the Assignor.
Notice of any sale or other disposition of the Assets shall be given to
Assignor at least five (5) days before the time of nay intended public or
private sale or other disposition of the Patents is to be made, which Assignor
hereby agrees shall be reasonable notice of such sale or other disposition.
At any such sale or other disposition, any holder of the Note or Lender may, to
the extent permissable under applicable law, purchase the whole or any part of
the Assets sold, free from any right of redemption on the part of Assignor,
which right is hereby waived and released.
5. If any breach of the Obligations shall have occurred and be
continuing, Assignor hereby authorizes and empowers Lender to make, constitute
and appoint any officer or agent of Lender, as Lender may select in its
exclusive discretion, as Assignor's true and lawful attorney-in-fact, with the
power to endorse Assignor's
2
<PAGE> 13
name on all applications, documents, papers and instruments necessary for
Lender to use the Assets, or any part thereof, or to grant or issue any
exclusive or non-exclusive license under the Assets, or any part thereof, to
any third person, or necessary for Lender to assign, pledge, convey or
otherwise transfer title in or dispose of the Assets, or any part thereof, to
any third person. Assignor hereby ratifies all that such attorney shall
lawfully do or cause to be done by virtue hereof. This power of attorney is
coupled with an interest and shall be irrevocable for the life of this
Agreement.
6. At such time as Assignor shall completely satisfy all of the
Obligations, this Agreement shall terminate and Lender shall execute and
deliver to Assignor all deeds, assignments and other instruments as may be
necessary or proper to re-vest in Assignor full title to the Assets, subject to
any disposition thereof which may have been made by Lender pursuant hereto.
7. No course of dealing between Assignor and Lender, nor any failure to
exercise, nor any delay in exercising, on the part of Lender, any right, power
or privilege hereunder or under the Note shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, power or privilege hereunder
or thereunder preclude any other or further exercise thereof or the exercise of
any other right, power or privilege.
8. All of Lender's rights and remedies with respect to the Assets,
whether established hereby or by the Note, or by any other agreements or by law
shall be cumulative and may be exercised singularly or concurrently.
9. The provisions of this Agreement are severable, and if any clause or
provision shall be held invalid and unenforceable in whole or in part in any
jurisdiction, then such invalidity or unenforceability shall affect only such
clause or provision, or part thereof, in such jurisdiction, and shall not in
any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Agreement in any jurisdiction.
10. This Agreement is subject to modification only by a writing signed by
the parties.
11. The benefits and burdens of this Agreement shall inure to the benefit
of and be binding upon the respective successors and permitted assigns of the
parties.
12. The validity and interpretation of this Agreement and the rights and
obligations of the parties shall be governed by the laws of the State of
Georgia.
3
<PAGE> 14
WITNESS the execution hereof under seal as of the day and year first
above written.
ASSIGNOR:
Spectrx, Inc.
By:
----------------------------
Mark A. Samuels, President
LENDER
Laser Atlanta Optics, Inc.
By:
----------------------------
Mark A. Samuels, President
4
<PAGE> 15
EXHIBIT D
ASSIGNMENT AND BILL OF SALE
THIS ASSIGNMENT AND BILL OF SALE (the "Assignment"), is made and
entered into as of the ______ day of January, 1993, by and between LASER
ATLANTA OPTICS, INC., a Georgia corporation ("Seller"), and SPECTRX, INC., a
Delaware corporation ("Purchaser").
In consideration of and as a condition to the payment of One Hundred
Thousand and No/100 ($100,000.00) Dollars by Purchaser to Seller, the mutual
promises herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Seller does hereby convey, grant, sell, transfer, assign and
deliver unto Purchaser, its successors and assigns forever, all of Seller's
right, title and interest in and to the technology, patents, software, designs,
models, drawings, know-how, trademarks, trade names, service marks (including
the goodwill associated with the trademarks, trade names and service marks),
trade secrets, copyrights, registrations and applications therefor, relating to
non-invasive means of diagnosing disease through the use of fluorescence
spectroscopy, including, without limitation, any and all books, records,
computer tapes or disks, flow diagrams, specification sheets, source codes, and
object codes relating to the foregoing and other physical manifestations of the
foregoing (the "Assets").
<PAGE> 16
2. Seller hereby grants, assigns and conveys to Purchaser all of
Seller's right, title, interest, powers, privileges and options in and to, and
in accordance with, that certain license agreement dated May 7, 1991, by and
between GEORGIA TECH RESEARCH CORPORATION and Seller, a copy of which is
attached hereto as Exhibit A (the "License Agreement"). Purchaser does hereby
assume and agree to perform all of the duties and obligations of the Seller
under the License Agreement, effective from and after the date hereof.
3. SELLER DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES
REGARDING THE ASSETS, THE LICENSE AGREEMENT, AND THE UNDERLYING TECHNOLOGY
RELATING TO MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND PURCHASER
ACKNOWLEDGES THAT, EXCEPT AS EXPRESSLY PROVIDED IN THE AGREEMENT, IT IS
ACQUIRING THE ASSETS, THE LICENSE AGREEMENT, AND THE UNDERLYING TECHNOLOGY ON
AN "AS IS", "WHERE IS", AND "WITH ALL FAULTS" BASIS. NEITHER SELLER NOR
PURCHASER SHALL NOT BE LIABLE FOR ANY INDIRECT OR CONSEQUENTIAL DAMAGES.
4. Purchaser and Seller each agree that it will execute such
additional instruments and take such actions as may be reasonably requested by
the other party to confirm, or perfect, or otherwise carry out the intent and
purpose of this Assignment.
5. This Assignment shall be binding and shall inure to the benefit of
Seller and Purchaser and their respective successors and
2
<PAGE> 17
assigns.
IN WITNESS WHEREOF, Purchaser and Seller have caused this Assignment to
be executed by their duly executed officers as of the date first above written.
"SELLER"
Laser Atlanta Optics, Inc.
By:
---------------------------
Mark A. Samuels, President
"PURCHASER"
Spectrx, Inc.
By:
---------------------------
Mark A. Samuels, President
In order to consent to the assignment of the License Agreement pursuant
to Section 2 above, and for no other purposes, the undersigned has hereunto
executed this Assignment this day of January, 1993.
GEORGIA TECH RESEARCH CORPORATION
By:
---------------------------
Name:
-------------------------
Title:
------------------------
By:
---------------------------
Name:
-------------------------
Title:
------------------------
3
<PAGE> 1
EXHIBIT 10.12C
FIRST AMENDMENT TO LICENSE AGREEMENT
THIS FIRST AMENDMENT TO LICENSE AGREEMENT (hereinafter referred to as
"First Amendment") is made and entered into this 19th day of October, 1993 by
and between GEORGIA TECH RESEARCH CORPORATION, a non-profit corporation
organized and existing under the laws of the State of Georgia and with offices
at the Georgia Institute of Technology, Centennial Research Building, Atlanta,
Georgia 30332-0415 (hereinafter referred to as "GTRC") and SPECTRX, INC., a
Delaware corporation and with offices at 6025 Unity Drive, Norcross, Georgia
(hereinafter referred to as "Spectrx").
W I T N E S S E T H:
WHEREAS, GTRC and Laser Atlanta Optics, Inc. (hereinafter referred to
as "Laser Atlanta") entered into a License Agreement, dated the 7th day of May,
1991, for an invention entitled "Laser Scanner for Early Cataract" (hereinafter
referred to as "Technology") which is the subject of GTRC Identification Number
1041 (hereinafter referred to as "License Agreement"). Spectrx, Inc. and Laser
Atlanta later entered into an Assignment and Bill of Sale, dated the 16th day
of January 1993, in which all of Laser Atlanta's right, title and interest in
and to the License Agreement was assigned to Spectrx.
WHEREAS, Spectrx and GTRC wish to amend the License Agreement to
extend the termination date.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and the sum of $1.00 paid by Spectrx to GTRC, the
receipt and sufficiency of which is hereby acknowledged, and intending to be
legally bound, Spectrx and GTRC do mutually agree to amend the License
Agreement as follows:
1. Paragraph 14 of the License Agreement is hereby deleted and
the following paragraph 14 is inserted in place thereof:
"14. TERM OF LICENSE
Subject to Paragraphs 14 and 15 herein, this Agreement and the
license granted hereunder shall continue in full force and
effect until the expiration date of the last expiring Patent
covering any of the Technology licensed hereunder, provided a
Patent is issued. In the event that no Patent is issued, the
disclosure in any Patent Application shall remain a Trade
Secret and this Agreement shall continue as a license of said
Trade Secret for a period of fifteen years from the date of
execution of this Agreement. Notwithstanding the foregoing,
the obligations of the parties herein relating to
confidentiality of Trade Secrets and Confidential Information
shall survive any termination of this Agreement."
<PAGE> 2
2. Except as amended by this First Amendment, the License
Agreement shall remain in full force and effect pursuant to
the terms and provisions thereof.
IN WITNESS WHEREOF, Spectrx and GTRC have caused this First Amendment
to be executed by their duly authorized officers on the day and year first
above written.
SPECTRX, INC. GEORGIA TECH
RESEARCH CORPORATION
By: /s/ Mark A. Samuels By: /s/ R.G. Shackelford
------------------------------- -------------------------------
Typed Name: Mark A. Samuels Typed Name: R.G. Shackelford
------------------------ -------------------------
Title: President Title: Assistant Secretary
--------------------------- -----------------------------
Date: 10/19/93 Date: 10/19/93
----------------------------- ------------------------------
By: /s/ Michael T. Lee
--------------------------------
Typed Name: Michael T. Lee
-------------------------
Title: Manager, Intellectual
Property Mark
-----------------------------
Date: October 19, 1993
------------------------------
-2-
<PAGE> 1
EXHIBIT 10.13
CLINICAL RESEARCH STUDY AGREEMENT
This Agreement is entered into as of the 22 day of July, 1993, by and between
Emory University, located at 1462 Clifton Road, NE, Room 302, Atlanta, GA 30322
(hereinafter referred to as "UNIVERSITY"), and SpectRx, Inc., a Delaware
corporation, located at 6040C Unity Drive, Norcross, GA 30071 (hereinafter
referred to as "COMPANY").
BACKGROUND
The COMPANY has ongoing research in the area of using the fluorescence of lens
proteins and other tissues for the non-invasive diagnosis of disease. This
research has led to the issuance of U.S. Patent No. 5,203,328. The COMPANY has
one other patent application on file with two others in preparation for filing.
The COMPANY wishes to obtain from the UNIVERSITY an option to obtain certain
rights to inventions or discoveries that are developed solely by the UNIVERSITY
during the course of research funded by the COMPANY hereunder.
The COMPANY wishes to verify its hypothesis that certain fluorescence signals
are related to the glycosolation of lens proteins, advanced glycosolation end
products, screening for diabetes and measurement of Glycosolated Hemogolobins.
The COMPANY believes the UNIVERSITY to be capable of contributing to the
verification this hypotheses by the application of these techniques to human
patients according to the clinical study protocol provided by the COMPANY.
WITNESSETH THAT:
The UNIVERSITY agrees to conduct a clinical research study entitled "Clinical
Evaluation of a Non-Invasive Lens Measurement System for Detecting and
Monitoring Diabetes Mellitus" according to the protocol attached as Exhibit A.
In this undertaking, the UNIVERSITY agrees to devote its best efforts in order
to perform efficiently the work required under this Agreement. The UNIVERSITY
agrees that it will comply with all applicable laws, rules and regulations
relating to the conduct of such study, particularly such laws, rules and
regulations concerning or promulgated by the Food and Drug Administration. The
COMPANY will provide a prototype Lens Measurement System for the use in the
study. The SpectRx Lens Measurement System is not yet approved by the U.S. Food
and Drug Administration. To the extent any portions of Exhibit A are
inconsistent with this Agreement, the terms of this Agreement shall govern.
1. Principal Investigator
The study performed under this Agreement will be under the direction of
Dr. Dan Gallina (hereinafter "INVESTIGATOR").
<PAGE> 2
2. Human Subjects
This protocol has been approved by the UNIVERSITY's Institutional
Review Board (Exhibit B) and the COMPANY. The UNIVERSITY shall obtain
from each of the patients participating in this study, advanced
informed consent in compliance with 21 CFR 50.20 through 50.27 and any
modifications thereof as may be adopted. COMPANY will reimburse
UNIVERSITY and/or the patient for the reasonable costs and expenses
incurred in diagnosing and treating unanticipated adverse effects,
injuries, illnesses, or reactions that result from the use or
application of COMPANY's investigational drug or device in the course
of this study.
3. Indemnification
The "Indemnification Agreement for Clinical Study" is attached as
Exhibit C and is incorporated by reference.
4. UNIVERSITY and COMPANY Contacts
The UNIVERSITY's scientific contact for this Agreement will be Dr. Dan
Gallina at (404) 242-8723. The UNIVERSITY's administrative contact for
this Agreement will be Ms. Nancy Wilkerson at (404) 727-2503. The
COMPANY's scientific contact will be Mr. Jonathan Eppstein at (404)
242-8723. The COMPANY's administrative contact for the Agreement will
be Mr. Mark A. Samuels at (404) 242-8723.
5. Period of Performance
The term of this Agreement shall be from the date of this Agreement is
accepted until the study is either completed or terminated. It is
anticipated that the study will begin on July 19, 1993 and be completed
by March 1994.
6. Payment Schedule
A. Payments shall be made payable to EMORY UNIVERSITY and
forwarded to the following address:
Mr. William J. Mulcahy
Assistant Vice President for Finance
Office of Grants and Contracts Accounting
313 Administration Building
1380 South Oxford Road
Atlanta, GA 30322
(404) 727-4240
It is agreed that the COMPANY will reimburse the UNIVERSITY
for an amount not to exceed $99,960.00 in accordance with the
approved budget and payment schedule
-2-
<PAGE> 3
attached as Exhibit D. COMPANY acknowledges that the
UNIVERSITY has included its indirect costs for this clinical
study. For purposes of identification, payments will include
the title of the project and the name of the INVESTIGATOR.
B. In the event of termination, the sum for professional services
and expenses payable under this Agreement shall be limited to
the pro-rated fees based on actual work performed and actual
expenses committed pursuant to the protocol. Any unexpended
funds not due under this calculation but already paid shall be
returned to the COMPANY.
7. Independent Contractor
Each party to this Agreement shall act as an independent contractor and
shall not be construed for any purpose as the agent, employee, servant
or representative of the other party, and neither party shall enter
into any contract or agreement with a third party which purports to
obligate or bind the other party.
8. Publications
The UNIVERSITY shall have publication privileges in reference to the
subject study. In this regard, UNIVERSITY shall furnish COMPANY with a
copy of any proposed publication at least thirty (30) days in advance
of the proposed submission date. Within this thirty day period, COMPANY
shall review said proposed publication for technical content, including
patentable inventions, and for the disclosure of any proprietary
information which COMPANY may have furnished to facilitate the subject
study under this Agreement, and COMPANY shall inform UNIVERSITY in
writing of the location and content of specific proprietary information
contained in the proposed publication. Upon receiving the appropriate
written notification from COMPANY, UNIVERSITY shall edit the proposed
publication to remove COMPANY's proprietary information before
submission, and further, shall delete disclosure of potentially
patentable inventions, or delay submission for ninety (90) days until
the appropriate patent application can be filed. In the event COMPANY
does not respond to the submission within such time, approval will be
deemed to have been given.
The COMPANY shall also have publication privileges in reference to the
subject study. In this regard, COMPANY shall furnish UNIVERSITY with a
copy of any proposed publication at least thirty (30) days in advance
of the proposed submission date. Within this thirty day period,
UNIVERSITY shall review said proposed publication for technical
content, including patentable inventions, and for the disclosure of any
proprietary information which UNIVERSITY may have furnished to
facilitate the subject study under this Agreement. UNIVERSITY shall
inform COMPANY in writing of the location and content of specific
proprietary information contained in the proposed publication. Upon
receiving the appropriate written notification from UNIVERSITY, COMPANY
shall edit the proposed publication to remove UNIVERSITY's proprietary
information before submission, and further, shall delete disclosure of
potentially patentable inventions, or delay submission for ninety (90)
days until the appropriate patent
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<PAGE> 4
application can be filed. In the event UNIVERSITY does not respond to
the submission within such time, approval will be deemed to have been
given.
9. Confidentiality
Subject to the provisions of Paragraph 8, the INVESTIGATOR agrees to
hold all information disclosed to it under this Agreement that the
COMPANY has advised the UNIVERSITY in writing is confidential for a
period of five (5) years from the date of termination of this Agreement
except,
A. Information that is now in the public domain or subsequently
enters the public domain through no fault of INVESTIGATOR or
UNIVERSITY;
B. Information that is presently known or becomes known to
INVESTIGATOR or UNIVERSITY from its own independent sources;
C. Information that INVESTIGATOR or UNIVERSITY receives from any
third party not under any confidential obligation to keep such
information confidential;
D. Information that is required to be disclosed by law.
10. Inventions and Patents Rights
A. It is expressly agreed that neither the COMPANY nor the
UNIVERSITY transfers by operation of this Agreement to the
other party any rights to any Invention, Discovery, or other
proprietary rights either party owns as of the commencement
date of this Agreement, except as specifically set forth
herein.
B. Ownership of Inventions and Discoveries: Any Invention or
Discovery made by COMPANY as a result of the clinical study
activities pertaining to this Agreement herein, if discovered
or developed solely by COMPANY personnel or based on the
results of the clinical study shall, from the time of
conception, be the property of the COMPANY. Any Invention or
Discovery made by UNIVERSITY during the clinical study
activities pertaining to this Agreement herein, if solely by
UNIVERSITY personnel and not based on the results of the
Clinical Study shall, from the time of conception, be the
property of the UNIVERSITY. Any Invention or Discovery made
jointly by both COMPANY and UNIVERSITY during the clinical
study activities pertaining to this Agreement herein and not
based on the results of the Clinical Study, if jointly
discovered or developed with associates from COMPANY and
UNIVERSITY personnel shall, from the time of conception, be
the joint property of both COMPANY and UNIVERSITY.
C. Jointly Owned Inventions or Discoveries: In the case of
jointly owned Inventions or Discoveries, COMPANY and
UNIVERSITY shall negotiate a sharing agreement suitable for
the management of such Invention or Discovery. Such sharing
agreement shall
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<PAGE> 5
include, but not be limited to, revenue and expense sharing,
the party responsible for patent prosecution, the party
responsible for marketing, and the party responsible for
license negotiation.
D. Option and License Provisions: To the extent permitted by
existing UNIVERSITY policies and regulations, COMPANY shall be
given a ninety (90) day option to obtain a royalty- bearing,
world-wide, exclusive license to any patentable Invention or
Discovery made by the UNIVERSITY during the clinical study
activities pertaining to this Agreement and for which COMPANY
agrees to reimburse or pay the expenses of the patent
application. Such license agreement shall contain reasonable
terms based on industry standards in agreements relating to
similar products and technology, and any other relevant facts.
If at the expiration of such ninety (90) day period the
COMPANY has failed to exercise its option and execute a
license agreement, UNIVERSITY shall be free to offer an option
with respect to such Invention or Discovery to other third
parties.
The option for a license granted herein, and any resulting license
shall be subject to any agreement the UNIVERSITY may have or hereafter
enter with the Government, and to obligations to third parties existing
prior to the date of this Agreement. The UNIVERSITY warrants that it
has identified any such prior agreements in writing to the COMPANY
prior to entering into this agreement.
Notwithstanding any provision to the contrary in the Agreement, the
UNIVERSITY shall retain the right to practice any Invention or
Discovery developed hereunder for its own use.
11. Data Ownership
Any medical records generated under this Agreement shall be the
property of UNIVERSITY. COMPANY shall retain ownership of all completed
case medical record forms supplied by COMPANY and UNIVERSITY shall be
entitled to retain copies of the case medical record forms. UNIVERSITY
shall, within the bounds of legal requirements, make such medical
records available for review and copying by COMPANY.
UNIVERSITY shall be entitled to retain ownership of the data arising
out of this clinical study. Subject to paragraphs 8 and 10, COMPANY
shall have access to the data and may freely use such data in
connection with any of its research, development, marketing or
promotional activities and may be disclosed by the COMPANY to other
clinical investigators, consultants, the Food and Drug Administration
and other Federal, State and/or local regulatory agencies.
12. Publicity
COMPANY will not include the UNIVERSITY in any advertising, sales
promotion or other publicity matter without the prior written approval
of the UNIVERSITY. Likewise, the UNIVERSITY will not include the
COMPANY in any advertising, sales promotion or other publicity matter
without the prior written approval of the COMPANY.
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<PAGE> 6
13. Termination
The study may be terminated prior to completion by written notice from
the COMPANY to the UNIVERSITY or by the UNIVERSITY to the COMPANY for
any of the following reasons:
A. Notification to the COMPANY from Federal or State Regulatory
Authorities to terminate said study;
B. Determination by the COMPANY or the UNIVERSITY that the
UNIVERSITY, after a reasonable opportunity, is unable for any
reason to perform the study satisfactorily as required in the
protocol;
C. Inability of the INVESTIGATOR to continue the study at the
UNIVERSITY and a successor acceptable to both UNIVERSITY and
COMPANY is not available.
Written notice of its decision to exercise such termination right shall
be given to the UNIVERSITY by the COMPANY or to the COMPANY by the
UNIVERSITY by Certified Mail, delivered fifteen (15) days before said
termination of the study.
Immediately upon receipt of a notice of termination by either the
COMPANY or the UNIVERSITY, the UNIVERSITY shall stop entering patients
into the study and shall cease conducting procedures, to the extent
medically permissible, on patients already entered into the
investigational protocol. In the event of termination, expenses payable
to the UNIVERSITY shall be stated in paragraph (6B).
Termination or completion of this Agreement, however, shall not relieve
the obligations undertaken by the parties in paragraphs 3, 8, 10, 12
and 13.
14. Modifications
Any alteration in or amendment to this Agreement must be approved in
writing by the UNIVERSITY and the COMPANY prior to such alteration or
amendment becoming effective.
Any modifications to the attached protocol must be agreed upon by
INVESTIGATOR and COMPANY and approved by UNIVERSITY's Institutional
Review Board.
15. Governing Law
This Agreement shall be governed by and construed in accordance with
the laws of the State of Georgia.
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<PAGE> 7
16. Order of Precedence
The terms this Agreement shall take precedence over other documentation
in the interpretation and resolution of disputes concerning this study.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year
first above written.
/s/ Mark A. Samuels /s/ Ann R. Stevens
- ------------------------------- ---------------------------------------------
SpectRx, Inc. Emory University
By: Mark A. Samuels By: Ann R. Stevens, Ph.D.
- ------------------------------- ------------------------------------------
Title: Associate Vice President for Research
---------------------------------------
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<PAGE> 1
EXHIBIT 10.14A
DEVELOPMENT AND LICENSE AGREEMENT
This Agreement is entered into and made effective as of this 2nd day of
December, 1994, by and between Boehringer Mannheim Corporation, an Indiana
corporation having a principal place of business at 9115 Hague Road,
Indianapolis, Indiana 46250 ("BMC"); and SpectRx, Inc., a Delaware corporation
having a principal place of business at 6025 A Unity Drive, Norcross, Georgia
30071 ("SI").
RECITALS:
A. BMC is in the medical diagnostics business and has experience and
expertise in the areas of testing and marketing of medical diagnostics products.
B. Pursuant to a License Agreement dated as of May 7, 1991, between
Georgia Tech Research Corporation ("GTRC") and Laser Atlanta Optics, Inc.
("LAO"), which was assigned to SI on January 16, 1993, and amended on October
19, 1993 (the "GTRC License"), SI is the exclusive licensee of GTRC for certain
know-how relating to a method and apparatus using non-invasive instrumentation
to measure molecular changes in human lenses for the purpose of detecting
diabetes.
C. SI has developed a device to detect diabetes in humans and has built
prototype devices and is conducting clinical trials of such devices.
D. BMC has expressed an interest in participating as a member of SI's
project team during the building of prototype devices and the execution of
definitive clinical trials; as well as in acquiring worldwide, exclusive
marketing rights to such device.
THEREFORE, in consideration of the premises and mutual agreements
expressed herein, the parties agree as follows:
1. DEFINITIONS
1.1 "Affiliate" shall mean, with respect to either party, any
corporation, partnership or other business entity that now or in the future
controls, is controlled by, or is under common control with, such party.
"Control" shall mean the direct or indirect ownership of fifty percent (50%) or
more of the voting interest in, or a fifty percent (50%) or more interest in the
income of, such corporation or other business entity, or such other relationship
as, in fact, constitutes actual control.
1.2 "Device" shall mean any non-invasive instrument and improvements
thereto developed by, for or with SI using the Know-How (defined below) that
measures changes in human lenses for the qualitative detection of diabetes for
screening purposes.
1.3 "Know-How" shall mean all knowledge of SI, regardless of its
source, relating to a method of using non-invasive instrumentation to measure
molecular changes in living human lenses
<PAGE> 2
for the purpose of detecting diabetes, including, but not limited to,
information not in the public domain obtained by way of the GTRC License.
2. RIGHTS GRANTED BY SI
2.1 Effective upon payment in full to SI of the development payments
described in Section 3, SI hereby grants to BMC a license to sell and market the
Device on a world-wide and exclusive basis, subject to the terms set forth in
this Agreement (the "Marketing License"). SI may not, during the term of the
Marketing License, sell, market or distribute, or give any third party rights to
sell, market or distribute, any non-invasive instrument developed by, for or
with SI using the Know-How that measures changes in human lenses for the
qualitative detection of diabetes for screening purposes. The Marketing License
gives BMC the right to market the device for screening for diabetes. The term of
the Marketing License, unless sooner terminated pursuant to the terms and
conditions of this Agreement, shall be coincident with the term of the GTRC
License, a copy of which is attached to this Agreement as Exhibit A. The
Marketing License shall remain exclusive for so long as BMC meets the minimum
volume requirements set forth in the Supply Agreement (defined below) (or, in
the event BMC acquires the Manufacturing License (described below), for so long
as BMC pays the Annual Minimum Royalty (defined below)). Should the minimum
volumes set forth in the Supply Agreement not be met (or, in the event BMC has
acquired the Manufacturing License, the Annual Minimum Royalty not be
maintained), the Marketing License (and, in the event BMC has acquired the
Manufacturing License, the Manufacturing License) shall become nonexclusive. In
such event, BMC agrees to cooperate with SI in enabling SI to obtain any
government approvals necessary for SI to sell the Device.
2.2 While the Marketing License is in effect, and during the term of
the Supply Agreement, should BMC determine pursuant to the terms and conditions
of the Supply Agreement, to itself manufacture or otherwise provide for the
manufacture of the Device, a further license shall be deemed issued in respect
of the manufacture of the Device (the "Manufacturing License"). The
Manufacturing License shall constitute the right to manufacture or have
manufactured the Device, in accordance with SI's specifications and such other
modifications as the parties may have agreed upon, on a world-wide and exclusive
basis. The Manufacturing License will issue, and be deemed in place and
effective, upon the determination by BMC to manufacture the Device, upon and
after the termination of the Supply Agreement by notice by BMC in accordance
with its terms and the payment to SI of all sums payable thereunder. The term of
the Manufacturing License, unless sooner terminated pursuant to the terms and
conditions hereof, shall be coincident with the term of the Marketing License.
Neither the Marketing License nor the Manufacturing License, nor any rights
thereunder, may be assigned or sublicensed by BMC to any person (other than an
Affiliate of BMC) without the express prior written consent of SI, which may not
be unreasonably withheld.
2.3 No royalty will be due or payable in respect of the Marketing
License. During the term of the Manufacturing License, BMC shall pay, on a
quarterly basis, on or before the sixtieth (60th) day following the end of each
calendar quarter, royalties equal to five percent (5%) of the total
consideration paid or payable to BMC upon the sale of all Devices provided such
sale is made on an arms-length basis to a purchaser unaffiliated to BMC. In
addition, during the term of the
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<PAGE> 3
Manufacturing License BMC agrees to pay to GTRC any royalties attributable to
BMC's manufacture and sale of the Device under the GTRC License. If a Device is
sold or given to a purchaser on a non-arms-length basis, or if the Device is
provided to a purchaser as an accommodation, the royalties shall be equal to
five percent (5%) of the fair salable value of such Devices. If the parties
hereto cannot agree as to the fair salable value of any Devices so sold, the
issue shall be submitted to commercial arbitration under the rules of the
American Arbitration Association for the determination of same by an expert
appointed for such purposes. A Device shall be considered sold for purposes of
this Agreement when it is billed out to a third party, or when not billed out,
when it is delivered, otherwise conveyed or paid for, whichever occurs first. It
is intended that the foregoing royalty shall be paid in respect of and computed
on the basis of the sales price to parties who are not Affiliates of BMC, and
that inter-company transfers shall not be considered as sales. Contemporaneously
with each royalty payment, BMC shall furnish to SI complete statements certified
to be accurate by BMC, showing the number, country in which manufactured,
country in which sold to or to which shipped and description and sales price in
respect of each Device sold during the preceding calendar quarter. Such
statements shall be furnished to SI whether or not any Devices have been sold
during the calendar quarter to which such statement refers. BMC's books and
records relating to such royalty payments shall be open during business hours
for reasonable inspection by a certified public accountant appointed by SI and
reasonably acceptable to BMC to determine the accuracy of such royalty
statements and payments, but for no other purpose. If such audit reveals that
the royalties reported by BMC are understated by ten percent (10%) or greater,
BMC shall pay for the full cost of the audit; otherwise SI shall pay for the
audit. In any event, any underpayment of royalties revealed by such audit shall
be promptly corrected by BMC, and any overpayment shall be creditable against
future royalties. BMC shall keep, maintain and preserve, during the term of the
Manufacturing License and for at least two (2) years following the termination
or expiration of such license, complete and accurate records of account in
respect thereof, including, without limitation, invoices, correspondence and
other records. BMC shall require its affiliates and other sublicensees to
maintain similar records necessary for the accurate computation and payment of
the royalties payable hereunder. Notwithstanding the foregoing, within sixty
(60) days of the end of each calendar year during the term of the Manufacturing
License, BMC shall pay to SI a sum equal to the difference between $100,000 (the
"Minimum Annual Royalty") and the earned royalties paid to SI with respect to
such year. (If BMC obtains the Manufacturing License on a date other than
January 1 of any calendar year, the Minimum Annual Royalty for the year in which
BMC obtains such license shall be prorated.) If, during the term of the
Manufacturing License, BMC fails to pay the minimum Annual Royalty with respect
to any calendar year, the Marketing License and the Manufacturing License shall
become nonexclusive (and BMC shall cooperate with SI in obtaining necessary
approvals for SI to sell the Device, as set forth in Section 2.1).
3. DEVELOPMENT PAYMENTS
3.1 As consideration for the Marketing License and the option to obtain
the Manufacturing License, BMC shall assist SpectRx in funding the development
of the Device. BMC's development funding shall be as described in this Article
3.0.
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<PAGE> 4
3.2 Within fifteen (15) days of the execution of this Agreement, BMC
shall [*]. These funds shall be expended by SI to initiate Alpha Development
(defined below).
3.3 Within thirty days of successful completion of the Top Level Design
Review (defined below), anticipated to be [*], BMC and SI shall execute a supply
agreement, which shall be in the form set forth in Exhibit B (subject to
completion of schedules, amounts, and other issues left open in Exhibit B, which
the parties agree to negotiate in good faith to complete) (the "Supply
Agreement"). Upon execution of the Supply Agreement, BMC shall pay [*], which
shall be expended by SI to complete Alpha Development.
3.4 Upon successful completion of Alpha Development and delivery of an
Alpha Prototype to BMC, anticipated to be [*] Agreement, BMC shall pay SI [*],
to be expended by SI to commence Beta Development (defined below).
3.5 Upon completion of Beta Development and delivery of [*] Prototypes
(defined below), BMC shall pay SI [*].
4. DEVELOPMENT ACTIVITY, CLINICAL TRIALS AND TECHNICAL ASSISTANCE
4.1 BMC shall participate as a member of SI's project development team
during the building of prototype Devices and during the execution of clinical
trials with respect to the Device. BMC shall give technical, clinical and
marketing input to the project team during these phases. BMC will pay the cost
of obtaining clearance from the Food and Drug Administration and its foreign
counterparts necessary for BMC to sell the Device.
4.2 SpectRx shall, with BMC's assistance, file applications for patents
in all major markets of the world and shall diligently prosecute such patent
applications and maintain any patents when issued.
4.3 As used herein, "Alpha Development" means the engineering
development necessary to design and fabricate a working prototype of the Device
that meets the performance specifications in all functional aspects, but does
not necessarily meet the final size, weight or environmental specifications (the
"Alpha Prototype"). The Alpha Prototype will be hand built and not suitable for
sale or production.
4.4 As used herein, "Top Level Design Review" means a design review
meeting held between SI and BMC in which the instrument design approach is
presented for review and approval. The design will be evaluated to ensure that
it meets the market requirements. Major subassemblies will be identified and all
major design tradeoffs completed. The Top Level Design Review should allow [*].
After review BMC and SI will reach mutual agreement on a system specifications
document.
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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<PAGE> 5
4.5 As used herein "Beta Development" means the design process that
results in a prototype suitable for testing by an end user that meets the
agreed-upon system specifications document, including size, weight and
environmental requirements (the "Beta Prototype"). The Beta Prototype will not
be fabricated on production tooling, however it will be substantially identical
in form, fit and function to the final production Device.
5. CONFIDENTIALITY
5.1 It is contemplated that the parties may wish to transmit to each
other confidential information. Each party agrees to receive such confidential
information, if it is in writing or other tangible form and clearly marked as
being confidential and agrees not to disclose such confidential information to
any third party for a period of five years from the date of receipt thereof
unless the information (a) was known to the receiving party prior to the time of
disclosure, (b) is obtained from a third party having an apparent right to
disclose the information, (c) was or becomes available to the public through no
fault of the receiving party or (d) was independently developed by employees of
the receiving party who have not had access to the Confidential Information.
Each party agrees not to use the confidential information of the other for any
purpose other than those set forth in this Agreement. In the event a party
considers certain information which has been marked confidential to be excluded
from the above obligations of confidence and non-use and intends to make
disclosure of such information to a third party, thirty days written notice of
such intent and the reasons therefor shall be given to the other party. It is
also understood that confidential information may be transmitted orally between
the parties if it is promptly confirmed in writing or other tangible form by the
disclosing party and marked as being confidential.
5.2 It is understood that disclosure of any information by one party to
the other under this Agreement shall in no way be considered as a grant of any
fight or license to the receiving party to use such information except for the
purposes set forth in this Agreement.
6. JOINT OBLIGATIONS
6.1 BMC and SI each agree to cooperate with the other in the building
of prototypes and execution of clinical trials for the Device.
6.2 SI agrees to make reasonable efforts to keep BMC informed
promptly of:
(a) all improvements relevant to the Device, if any;
(b) all technical information relating to the Know-How
as such data and information are acquired or developed by SI, if any;
(c) all data or information concerning the clinical
evaluations or studies made by or for SI relating to the Device for diabetes;
and
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<PAGE> 6
(d) all publications coming to the attention of SI
relating to the Device, if any for diabetes.
7. RELATIONSHIP OF THE PARTIES
This Agreement is not intended to create nor shall it be deemed to
constitute, partnership, agency, employer-employee, or joint venture
relationship between the parties. The respective activities by the parties
hereunder shall be provided as independent contractors. Neither party shall
incur any debts or make any commitments for the other, except to the extent, if
at all, specifically provided herein.
8. GOVERNMENT REGULATIONS AND GUIDELINES
Each party shall use its best efforts to assure that all further work
conducted hereunder shall be in accordance with the laws, rules and guidelines
applicable to the parties carrying out such work, in particular, so far as
applicable, the present and future guidelines for Good Laboratory Practices and
Good Manufacturing Practices set forth, as amended from time to time, in the
Code of Federal Regulations of the United States of America and the
corresponding local law of such other country in the Territory as may be
applicable to such work.
9. TERM AND TERMINATION
9.1 This Agreement shall remain in effect until the end of the term of
the Marketing License, unless extended by the parties in writing or unless
terminated earlier in accordance with Paragraph 9.2, 9.3 or 9.4.
9.2 This Agreement may be terminated at any time by BMC upon written
notice thereof to SI provided, however, that in the event of termination
pursuant to this section, all sums paid or payable shall remain the property of
SI and shall not be refundable.
9.3 This Agreement may be terminated by BMC upon written notice to SI
in the event Top Level Design Review is not completed. In such event, [*] upon
execution of this Agreement shall be promptly [*], less actual severance
expenses incurred by SI up to a maximum [*]. In the event BMC terminates this
Agreement for the reason set forth in this Section, and SpectRx grants the right
to market the Device to any party unaffiliated with SpectRx within two years of
the date of such termination, all payments made by BMC to SpectRx shall be
immediately refunded; provided, however, that in no event will SI's refunds of
payments to BMC exceed the amounts paid to SI by such unaffiliated parties.
9.4 Either party may terminate this Agreement (and the Manufacturing
License if then in effect) (i) by written notice in the event the other party
materially breaches this Agreement and does not cure such breach within thirty
(30) days of written demand for cure, or (ii) by written notice upon the
liquidation or bankruptcy of, or an assignment for the benefit of creditors of,
or a declaration of insolvency by, the other party.
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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<PAGE> 7
9.5 Upon termination of this Agreement pursuant to this Article 9, BMC
will use its reasonable best efforts to cause to be transferred to SI any
governmental approvals obtained by BMC and necessary for SI to market the
Device.
10. MISCELLANEOUS PROVISIONS
10.1 This Agreement constitutes and contains the entire Agreement of
the parties and supersedes any and all prior negotiations, correspondence,
understandings and agreements between the parties respecting the subject matter
hereof. This Agreement may be amended or modified or one or more of the
provisions thereof waived only by written instrument signed on behalf of the
parties.
10.2 Any notice required to be given hereunder shall be sent by first
class registered or certified mail addressed to the party to whom it is to be
given as follows:
To BMC: Boehringer Mannheim Corporation
Attn.: President
9115 Hague Road
Indianapolis, Indiana 46250
To SI: SpectRx, Inc.
Attn.: President
6025 A Unity Drive
Norcross, Georgia 30071
All notices shall be deemed given when sent by registered or certified mail,
postage prepaid, to the addresses listed above. The date of postmark shall be
the date of such notice.
10.3 SI warrants and represents that, as of the date of this Agreement,
it has the right to grant to BMC the rights granted herein and that there are no
outstanding agreements, assignments or encumbrances inconsistent with this
Agreement. SI further represents and warrants to BMC that it has given BMC
access to all technical and clinical data thus far generated with respect to the
Device and that all such data is accurate and complete in all material respects.
10.4 This Agreement shall be construed according to the laws of the
State of Georgia. Venue for any litigation under this Agreement shall be state
court, Gwinnett County, Georgia.
10.5 During the term of this Agreement or any extension thereof none of
the parties hereto will make any publications relating to the details of the
business arrangement between them contemplated hereunder, including business
plans, without the approval of the other; provided, however, that such approval
shall not be unreasonably withheld.
10.6 Dispute Resolution. (a) The parties shall attempt in good faith to
resolve any dispute arising out of or relating to this agreement promptly by
negotiations between representatives who have authority to settle the
controversy. Either party may give the other party written notice of any
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<PAGE> 8
dispute not resolved in the normal course of business. Within thirty days after
delivery of such notice, representatives of both parties shall meet at a
mutually acceptable time and place, and thereafter as often as they reasonably
deem necessary, to exchange relevant information and to attempt to resolve the
dispute. If the matter has not been resolved within sixty days of the disputing
party's notice, or if the parties fail to meet within thirty days, either party
may initiate mediation of the controversy or claim as provided in clause (b) of
this section. All negotiations pursuant to this clause are confidential and
shall be treated as compromise and settlement negotiations for purposes of the
Federal Rules of Evidence and state rules of evidence. (b) If the dispute has
not been resolved by negotiation, the parties shall endeavor to settle the
dispute by mediation, non-binding arbitration, or other appropriate means for a
period of at least sixty days before resorting to litigation. The procedures
specified in this Section 10.6 must be followed before either party may seek
judicial relief, provided, however, that a party may seek a preliminary
injunction or other provisional judicial relief if in its judgment such action
is necessary to avoid irreparable damage or to preserve the status quo. Despite
such action, the parties will continue to participate in good faith in the
procedures specified in this Section 10.6. All applicable statutes of limitation
and defenses based upon the passage of time shall be tolled while the procedures
specified in this Section 10.6 are pending, and the parties shall take such
action, if any, required to effectuate such tolling.
10.7 All payments made pursuant to this Agreement shall be net of
withholding and other taxes (except for taxes that are due on the net income of
SpectRx) that may be due on such payments.
10.8 This Agreement shall not be assignable by either party without the
prior written consent of the other; provided, however, that BMC may assign this
Agreement to any entity under wholly-owned, wholly-owning, or under common
control with BMC.
10.9 Until such time as the Marketing License issues or this Agreement
is terminated, whichever occurs first, SI agrees that it will not discuss or
negotiate with any third party to grant any rights to develop or market the
Device.
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<PAGE> 9
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have duly executed this Agreement as of the date first above written.
SPECTRX, INC.
By: /s/ Mark A. Samuels
-------------------------------------
Title: CEO
----------------------------------
BOEHRINGER MANNHEIM CORPORATION
By: /s/ F. Blobel
-------------------------------------
Title: Senior Vice President of DMQ
----------------------------------
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<PAGE> 10
EXHIBIT A
GTRC LICENSE
<PAGE> 11
LICENSE AGREEMENT
THIS AGREEMENT is made as of the 7th day of May, 1991, by and between
GEORGIA TECH RESEARCH CORPORATION, a nonprofit Georgia corporation with offices
in the Centennial Research Building, Georgia Institute of Technology, Atlanta,
Georgia, ("GTRC"); and LASER ATLANTA OPTICS, INC., a company incorporated under
the laws of the State of Georgia, and having its registered office in that state
at 6015D Unity Drive, Norcross, Georgia 30071, ("LASER").
W I T N E S S E T H:
WHEREAS, this Agreement is intended to cancel that certain License
Agreement between the parties hereto, dated April 10, 1990; and
WHEREAS, GTRC entered into an agreement with Joslin Diabetes Center
whereby GTRC obtained the exclusive right to market know--how related to a
method of using non-invasive instrumentation to quantitatively measure molecular
changes in living human lenses for the purpose of diagnosing diabetes and
precataractous conditions (the "Know-How") For the purpose of this Agreement,
Know-How includes, among other things, information not in the public domain,
including Confidential Information and Trade Secrets forwarded or transmitted to
LASER by GTRC, Dr. Nai-Teng Yu, Dr. Sven Bursell and Joslin Diabetes Center. The
system covered by the Know-How employs low power illuminations of different
optical wavelengths of the lens of the eye. The spectral content of the
resulting emitted light from specific sites in the lens is then acquired and
analyzed providing information that can be used to detect diabetes and
precataractous conditions.
WHEREAS, GTRC desires the further commercial development of the
Know-How and for such purpose has accepted the offer of LASER to collaborate
with GTRC upon the terms and conditions herein contained; and
WHEREAS, LASER desires to acquire an exclusive license, with the right
to grant sublicenses to others, to commercialize products incorporating the
Know-How (the "Products") and to operate and use such Products and to
manufacture, having manufactured, use, market, have marketed, sell and have sold
the Products; and
WHEREAS, GTRC and LASER have agreed that in connection with such
collaboration GTRC shall grant to LASER an exclusive license throughout the
world (the "Territory") to manufacture, have manufactured, use, market, have
marketed, sell and have sold Products incorporating the Know-How.
NOW THEREFORE, for and in consideration of the sum of one Hundred
($100.00) Dollars and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, GTPC and LASER do hereby warrant
and agree as follows:
<PAGE> 12
1. EXCLUSIVE LICENSE
GTRC hereby grants to LASER the exclusive, worldwide, right and license
to commercialize, use and exploit the Products; to make, assemble, and use
apparatus machinery, auxiliaries, and all devices for carrying such Products
into practice; and to manufacture, have manufactured, use, market, have
marketed, sell and have sold the Products.
(a) GTRC hereby grants to LASER the right to grant sublicenses on such
terms as are consistent with the provisions of this Agreement.
(b) The exclusive rights and licenses herein granted shall include all
inventions, improvements to, enhancements of and modifications of the Know-How
and Products thereto made or conceive during the term of this Agreement which
GTRC owns or controls or hereafter owns or controls and all patent applications
and patents based on or covering the same which the GTRC now owns or hereafter
owns or controls.
2. REPRESENTATIONS BY GTRC
(a) Much of the Know-How is secret, and to the best of GTRC's
knowledge and belief has not been revealed to anyone except
Joslin Diabetes Center and Dr. Sven Bursell, and shall not be
revealed to anyone without the prior approval of LASER.
(b) GTRC shall communicate to LASER all information and data,
which may come into its possession, relating to the Know-How,
but no information prominently marked "Confidential" so
communicated or otherwise acquired by LASER from GTRC, save
such information which is in the public domain, shall be
divulged to any third party (except to employees or
consultants of LASER and its sublicensees) without the prior
consent of GTRC.
(c) GTRC's and LASER' a obligations set out in this section shall
survive the termination of this Agreement to the extent that
such information has not entered the public domain.
(d) GTRC has an agreement with Joslin Diabetes Center (the
subcontractor) concerning the "Know-How" which provides for
the sharing of royalties.
3. PATENTS
(a) Should LASER at any time seek and obtain Letters Patent or
equivalent protection for any development arising from its use
of the Know-How not in the public domain, any products covered
by such Letters Patent or equivalent protection shall be
deemed to be Products within the terms of this Agreement and
be subject to the terms and conditions herein.
-2-
<PAGE> 13
(b) LASER shall advise GTRC within fourteen (14) days of lodging
an application for such Letters Patent or equivalent
protection, and shall keep GTRC advised of the prosecution and
maintenance of such Letters Patent or equivalent protection.
4. OWNERSHIP OF PATENTS
All patents regarding "the Know-How" shall be the sole exclusive
property of GTRC, subject to the exclusive license hereby granted GTRC shall,
upon demand, execute and deliver to LASER such documents as may be deemed
necessary or advisable by counsel for LASER for filing in the appropriate patent
offices to evidence the granting of the exclusive license hereby granted.
5. ROYALTIES
LASER shall pay to GTRC:
(a) Where the products are the subject of a Patent Application,
Letters Patent or equivalent protection, a [*] price ("Net
Selling Price) for each Product manufactured and sold anywhere
in the world.
Net Selling price shall mean LASER's gross selling price for the Products less
any of the following:
1) sales or excise taxes paid directly or indirectly to
LASER;
2) any shipping costs separately itemized by LASER;
3) normal and customary trade discounts, returns and
allowances.
(b) In all other cases, a [*].
(c) It shall be the obligation of LASER to pay all royalties due
hereunder to GTRC and GTRC shall not be required to look to
any other seller to recover any monies.
(d) The obligations of LASER with respect to the payment of
royalties in accordance with this Agreement shall apply with
respect to all sales in any country of the Territory,
notwithstanding that no letters Patent or equivalent
protection shall have been obtained or be in force in that
country.
6. ACCOUNTS
(a) LASER shall not later than the First day of March in each year
furnish to GTRC a statement showing the total net sales by
LASER and any approved sub-licensees during the immediately
preceding calendar year, and the royalties payable thereon
calculated in accordance with this Agreement.
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
-3-
<PAGE> 14
(b) LASER shall keep at its usual place of business true and
particular accounts of all matters connected with the use of
the Know-How and the manufacture and sale of all Products and
shall, if so requested by GTRC make available books of account
relating to royalties payable hereunder containing true
entries complete in every particular as may be necessary or
proper for enabling the amount of such royalties to be
conveniently ascertained.
7. ASSIGNMENT
This Agreement shall be binding upon and inure to the benefit of the
successors and assigns of the parties hereto, but shall not otherwise be
assigned by either party without the written consent of the other party; EXCEPT
THAT GTRC shall have the right to assign this Agreement to the Georgia Institute
of Technology or the Board of Regents of the University System of Georgia.
8. NO WARRANTY
GTRC does not nor will it assert or warrant that the Know-How or any
improvement thereto is not an infringement of the rights of third parties nor
that under the law of any country it will be possible to grant an exclusive
license.
9. NEW INVENTIONS
If during the term of this Agreement GTRC, individually or
collectively, makes any further improvements in such Products or Know-How or the
mode of using them or becomes the owners of any new improvements either through
patents or otherwise, then it shall communicate such improvements to LASER and
LASER shall have the right to include the same in this Agreement without
additional compensation. Provided, however, that this paragraph shall not apply
to any situation in which GTRC has a contrary contractual commitment as a third
party.
10. NOTICE
Any notice under this Agreement shall be addressed as follows:
(a) Georgia Tech Research Corporation
Centennial Research Building
Georgia Institute of Technology
Atlanta, Georgia
(b) Laser Atlanta Optics, Inc.
6015D Unity Drive
Norcross, Georgia 30071
-4-
<PAGE> 15
With a copy to:
Thornton W. Morris & Co., P.C.
1950 North Park Place
Suite 400
Atlanta, Georgia 30339
11. FORCE MAJEURE
Neither party shall be held in breach of this Agreement for any reason
for acts or omissions caused by any act of God or other cause beyond the control
of the parties, including, but not limited to, fire, floods, labor disputes, or
other unforeseen circumstances.
12. INDEMNITY
Notwithstanding anything herein contained, LASER shall indemnify and
save GTRC harmless with respect to any claims by any third party against GTRC
alleging loss, damage or injury as a result only of the use by LASER or by such
third party of the Products. The obligation of Indemnity shall survive
Termination.
13. TERM OF LICENSE
Subject to Clauses 14 and 15 herein, this Agreement and the license
granted hereunder shall continue in force for Fifteen (15) years from the date
hereof.
14. TERMINATION BY LASER
LASER may terminate this Agreement by giving to GTRC at least Three (3) months
notice in writing of any breach by GTRC of this Agreement which causes damage to
LASER, specifying the particulars of the breach and requiring that it be
rectified or made good and by a further notice if at the expiration of that
period of three months, the relevant breach has not been rectified or made good
WITHOUT PREJUDICE however to the right of GTRC to sue for and recover any moneys
due to GTRC with respect to any previous breach by LASER of any of the
provisions of this Agreement.
15. TERMINATION BY GTRC
GTRC may terminate this Agreement by Thirty (30) days notice in writing
to LASER on the happening of any of the following events:
(a) If LASER shall commit or allow to be committed a breach of any
of the terms and conditions on its part here in contained; or
-5-
<PAGE> 16
(b) If LASER makes any assignment for the benefit of its
creditors, provided, however, that this provision shall not
apply to the assignment of any rights made as collateral for
new loans; or
(c) If a receiver, liquidator or official manager is appointed
with respect to LASER indicates its consent, approval of or
acquiescence in any proceedings for the appointment of any
such receiver, liquidator or official manager; or
(d) If LASER ceases to carry on its business;
WITHOUT PREJUDICE HOWEVER to the right of GTRC to sue for and recover
any money then due and to the rights of GTRC with respect to any
previous breach by LASER of any of the provisions contained in this
Agreement.
16. SEVERABILITY
A holding that a Clause of this Agreement is invalid or unenforceable
shall not effect any other provisions of this Agreement.
17. USE OF NAMES
LASER shall not use the names of GTRC, the Georgia Institute of
Technology or any affiliate or entity in any advertisement or sales material
without the prior written consent of the entity or entities name in such
material.
18. INTERPRETATION
(a) In the interpretation of this Agreement, unless the context
otherwise requires, words importing the singular or plural
number shall be deemed to import the plural and singular
number respectively, words denoting gender shall include all
genders, and references to persons shall include corporations
or other bodies or vice versa.
(b) The headings in this Agreement are included for convenience
only and are not to be construed as forming part of the text
or as in any way affecting the interpretation of this
Agreement.
(c) Nothing herein shall be construed as forming any sort of
partnership or joint venture between GTRC and LASER. The
relationship between the parties is that of licensor and
licensee.
(d) This Agreement shall be interpreted and governed in all
respects by the laws of the State of Georgia.
-6-
<PAGE> 17
19. ENTIRE AGREEMENT
This Agreement embodies the entire Agreement between GTRC and LASER
respecting the subject matter hereof and may not be modified or amended except
in a writing signed by GTRC and LASER.
-7-
<PAGE> 18
IN WITNESS WHEREOF the parties have hereunto signed this Agreement on
the day hereinbefore referred to.
GEORGIA TECH RESEARCH LASER ATLANTA OPTICS, INC.
CORPORATION
By: /s/ J.W. Dees By: /s/ Mark A. Samuels
------------------------------------- --------------------------------
Typed Name: J.W. Dees Typed Name:
----------------------------- --------------------------
Title: Assistant Secretary Title:
---------------------------------- -------------------------------
Date: May 7, 1991 Date:
----------------------------------- --------------------------------
By: /s/ R.M. Bell
-------------------------------------
Typed Name: R.M. Bell
-----------------------------
Title: Vice President/General Manager
----------------------------------
Date: May 7, 1991
-----------------------------------
-8-
<PAGE> 19
FIRST AMENDMENT TO LICENSE AGREEMENT
THIS FIRST AMENDMENT TO LICENSE AGREEMENT (hereinafter referred to as
"First Amendment") is made and entered into this 19th day of October, 1993 by
and between GEORGIA TECH RESEARCH CORPORATION, a non-profit corporation
organized and existing under the laws of the State of Georgia and with offices
at the Georgia Institute of Technology, Centennial Research Building, Atlanta,
Georgia 30332-0415 (hereinafter referred to as "GTRC") and SPECTRX, INC., a
Delaware corporation and with offices at 6025 Unity Drive, Norcross, Georgia
(hereinafter referred to as "Spectrx").
W I T N E S S E T H:
WHEREAS, GTRC and Laser Atlanta Optics, Inc. (hereinafter referred to
as "Laser Atlanta") entered into a License Agreement, dated the 7th day of May,
1991, for an invention entitled "Laser Scanner for Early Cataract" (hereinafter
referred to as "Technology") which is the subject of GTRC Identification Number
1041 (hereinafter referred to as "License Agreement"). Spectrx, Inc. and Laser
Atlanta later entered into an Assignment and Bill of Sale, dated the 16th day of
January 1993, in which all of Laser Atlanta's right, title and interest in and
to the License Agreement was assigned to Spectrx.
WHEREAS, Spectrx and GTRC wish to amend the License Agreement to extend
the termination date.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and the sum of $1.00 paid by Spectrx to GTRC, the receipt and
sufficiency of which is hereby acknowledged, and intending to be legally bound,
Spectrx and GTRC do mutually agree to amend the License Agreement as follows:
1. Paragraph 14 of the License Agreement is hereby deleted and
the following paragraph 14 is inserted in place thereof:
"14. TERM OF LICENSE
Subject to Paragraphs 14 and 15 herein, this Agreement and the
license granted hereunder shall continue in full force and
effect until the expiration date of the last expiring Patent
covering any of the Technology licensed hereunder, provided a
Patent is issued. In the event that no Patent is issued, the
disclosure in any Patent Application shall remain a Trade
Secret and this Agreement shall continue as a license of said
Trade Secret for a period of fifteen years from the date of
execution of this Agreement. Notwithstanding the foregoing,
the obligations of the parties herein relating to
confidentiality of Trade Secrets and Confidential Information
shall survive any termination of this Agreement."
<PAGE> 20
2. Except as amended by this First Amendment, the License
Agreement shall remain in full force and effect pursuant to
the terms and provisions thereof.
IN WITNESS WHEREOF, Spectrx and GTRC have caused this First Amendment
to be executed by their duly authorized officers on the day and year first above
written.
SPECTRX, INC. GEORGIA TECH RESEARCH
CORPORATION
By: /s/ Mark A. Samuels By: /s/ R.G. Shackelford
----------------------------- ----------------------------------------
Typed Name: Mark A. Samuels Typed Name: R.G. Shackelford
--------------------- --------------------------------
Title: President Title: Assistant Secretary
-------------------------- -------------------------------------
Date: 10/19/93 Date: 10/19/93
--------------------------- --------------------------------------
By: /s/ Michael T. Lee
----------------------------------------
Typed Name: Michael T. Lee
--------------------------------
Title: Manager, Intellectual Property Mark
-------------------------------------
Date: October 19, 1993
--------------------------------------
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<PAGE> 21
EXHIBIT B
SUPPLY AGREEMENT
<PAGE> 22
AGREEMENT
This Agreement dated as of _____________ (the "Effective Date"), by and
between Boehringer Mannheim Corporation, an Indiana corporation, having a
principal place of business at 9115 Hague Road, Indianapolis, Indiana 46250,
(hereinafter referred to as "BMC"), and SpectRx, Inc., 6025A Unity Drive,
Norcross Georgia, 30071, (hereinafter referred to as "SI");
WITNESSETH:
WHEREAS, BMC and its affiliates are in the business of making and
selling throughout the world diagnostics management products including blood
chemistry monitoring systems for diabetes, and
WHEREAS, SI is engaged in the business of development and manufacturing
and marketing of equipment according to specifications developed by others,
developed by itself or developed jointly with others, and
WHEREAS, BMC desires to purchase, market & sell and SI desires to
supply a non-invasive diabetes screening device that is, or will be defined in
specifications contained in Appendix A, which is attached hereto and
incorporated herein be reference.
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties agree as follows:
1.0 Definitions.
1.1 "Instrument(s)" shall mean the instrument for detecting
diabetes as described in Appendix A and known to the parties at the time of
execution of this Agreement.
1.2 "Affiliates(s)" shall mean, with respect to either party,
any corporation, partnership or other business entity that now or in the future
controls, is controlled by, or is under common control with, such party.
"Control" shall mean the direct or indirect ownership of fifty percent (50%) or
more of the voting interest in, or a fifty percent (50%) or more interest in the
income of, such corporation or other business entity, or such other relationship
as, in fact, constitutes actual control.
1.3 "Manufacturing Documentation" shall mean a package of
specifications, drawings and manufacturing instructions [including detailed
training by SI] which enable SI or a third party to manufacture the Instrument
including, as applicable, software, all software source codes in printout or
magnetic media form, software assembly, linkage and validation protocols and
Software, validation results, manufacturing specifications or the Instrument,
(service and training information and a set of quality control parameters
suitable for use in acceptance testing of the Instrument), as
<PAGE> 23
well as all preliminary or working drafts of all such materials, and
documentation developed by SI in order to produce such materials by a Preferred
Supplier [as defined in BMC's Quality Partners Manual-- which manual shall be
forwarded by BMC to SI prior to October 1,1993] who has demonstrated achievement
in certain key capabilities as defined in said manual.
1.4 "Development Services" shall mean the redesign and
development effort by SI in so far as it is relative to manufacturing equipment,
manufacturing processes, goods and services contracted by SI, and associated
Manufacturing processes and associated Manufacturing Documentation which may be
necessary in order to bring the Instrument into commercial production.
1.5 "Date of Market Introduction" shall mean the later of (a)
the receipt and acceptance by BMC of [preproduction quantity to be determined]
Instruments meeting the specifications described in Appendix A and approved by
BMC, or (b) the sale and shipment of Instruments to an end-user by BMC.
2.0 Supply Services.
2.1 SI shall manufacture and sell the Instrument exclusively
to BMC and Affiliates for worldwide marketing and selling and at prices
established by the parties pursuant to paragraph 3.1. Nothing in this Agreement
prevent BMC from manufacturing or have manufactured, market, sell or otherwise
supply other non-invasive devices on a world-wide basis.
2.2 During the term of this Agreement SI (or a mutually
approved contract manufacturer] shall be BMC's sole and exclusive source for the
Instrument, provided that (a) SI provides an adequate and timely supply of the
Instrument to BMC in accordance with Purchase Orders issued by BMC and accepted
by SI, (b) SI agrees to maintain the quality assurance level as stated in BMC's
Quality Partners Manual and or as may be otherwise agreed to by the parties, in
writing, and (c) SI employs reasonably sound cost management practices. SI
warrants that it will apply all reasonable resources to its operation in order
to become ISO 9000 registered and attain a certification rating [as defined in
BMC's Quality Partners Manual] within twenty four [24] months of the start of
producing the Instrument for sale by BMC. SI further agrees to make available to
BMC for purchase, spare parts and or replacement / repair parts for a period of
not less than seven [7] years from end of market sales by BMC.
2.3 SI represents that it has or will have, prior to the date
of Market Introduction at its Norcross, Georgia facility-- or other
manufacturing facility as may be jointly approved by the parties-- manufacturing
capacity to produce the instrument in the following minimum annual quantities:
<TABLE>
<CAPTION>
DATE UNITS PER ANNUM
- --------------------------------------- --------------------------------------
<S> <C>
Market Introduction Date BMC's Annual Forecast Volumes, + 35%
One year after Market Introduction Date BMC's Annual Forecast Volumes, + 50%
</TABLE>
-2-
<PAGE> 24
NOTE: The quantities stated herein are estimated and are the result of
a review of the current business conditions and other information available to
BMC at the time the estimate is prepared. BMC shall not be obligated to purchase
any Instruments except pursuant to purchase orders as described in Section 2.5.
2.4 In order to facilitate SI's planning of production, and to
assist SI in making certain decisions relative to inventory of long lead items,
BMC shall submit to SI a non-binding estimate of its requirements of Instruments
quarterly covering a forward period of not less than four (4) quarters. Upon
receipt of BMC's estimate, if SI determines that it has insufficient capacity to
meet the quantities stated in the estimate, it shall notify BMC within fifteen
(15) days of the date of receipt of BMC's estimate that such condition exists,
and will present recommendations regarding capacity changes to meet BMC's
estimate. BMC shall promptly review SI's notice and schedule a meeting with SI
to review the recommendations and reach agreement on a course of action.
The parties agree that a short delivery lead time and a high
degree of flexibility is very important to BMC in servicing the market in which
the Instrument will be sold. In an effort to reduce lead time, and in accordance
with production forecasts provided by BMC under this Agreement, SI agrees to
establish an inventory level at its facility [financed by BMC for only the first
twelve months of production by SI] on Instrument component parts which have long
lead times. The inventory mix and levels will be reviewed quarterly by the
parties, and the parties, by mutual agreement, may make changes to the level and
mix. The details of this activity will be negotiated by the parties and will be
contained in the blanket order for the first year's supply of Instruments. Also
included will be the details of SI's refunding plan employing price discounts on
subsequent purchases of Instruments for said financing by BMC.
2.5 During the term of this Agreement, BMC shall issue
purchase orders, containing specific instructions concerning quantity, delivery
schedule, invoicing, etc., from time to time for the supply of Instruments. The
parties agree that this Agreement will supersede all conflicting terms and
conditions contained in or attached to said purchase orders.
The parties recognize the dynamic nature of the marketplace
and customer demand. Certain changes to established purchase orders may be
required from time to time and the parties shall [recognizing that time and
flexibility are paramount to business success] negotiate said changes in good
faith. SI recognizes and will use its best efforts to meet the customer demand
changes as communicated by BMC. Notwithstanding the foregoing, BMC may request
and SI shall have the ability to respond to changes in existing forecast as
follows:
Current month +30%
30-60 days +60%
In the event a change in a purchase order causes a significant increase
or decrease in SI's costs or time for performance, the parties agree to
negotiate in good faith to reach an agreement on an equitable adjustment in the
price and time for performance and this Agreement [subsequent purchase
-3-
<PAGE> 25
order(s)] shall be supplemented in writing accordingly. BMC agrees to be
responsible for all components purchased by SI in response to said purchase
orders.
2.6 During the term of this Agreement, BMC agrees to purchase
the Instrument exclusively from SI. SI agrees to provide the necessary
manufacturing capacity to meet BMC's annual requirements. Each month, BMC will
provide a non-binding twelve month rolling forecast to assist SI in establishing
and maintaining adequate stocking levels and/or to apply effective production
control techniques. Shipments by SI will be authorized only by specific Purchase
Order against this Agreement issued by BMC and containing [among other items]
the following:
1. Purchase order number and date.
2. Quantity, Price and delivery instructions
3. FOB point and mode of shipment.
4. Name and address of the person representing
Seller and Purchaser.
Prior to releasing the Instrument for production, BMC shall have the
right to purchase (at a price negotiated by the parties) from SI up to [ ]
pre-production units in order to approve the quality thereof, which approval
shall not be unreasonably withheld.
2.7 After BMC has notified SI in writing that the
pre-production Instruments manufactured by SI are approved, the Instrument,
components, manufacturing process, documentation, sources of supply to SI, etc.
shall be frozen. SI shall obtain the written approval of BMC [which approval
shall not be unreasonably withheld] prior to making any changes, substitutions,
or modifications whatsoever to the Instrument, components, manufacturing
process, or Manufacturing Documentation and shall provide notice and perform
activities in accordance with Change Notification Protocol which is attached as
Appendix "B".
2.8 The Instruments shall be supplied and labeled in
accordance with BMC-approved packaging specifications. BMC shall prepare the
artwork necessary for printing the labels and shall deliver it to SI at mutually
agreed upon time intervals prior to the scheduled delivery from SI of the first
shipment ordered by BMC. BMC agrees to reasonably recognize SI's efforts with
respect to producing the instrument by placing verbiage such as : "Developed by
SpectRx, Inc for Boehringer Mannheim Corporation by". BMC at its sole discretion
shall set the criteria for said labeling.
3.0 Price.
3.1 The parties to this Agreement because the Instrument has
yet to be designed and approved cannot accurately calculate the price of the
Instrument. Until said design / requirements specification and the manufacturing
process have been identified and agreed to, the parties at this point in time
agree on a formula for calculating the Instrument price.
The price for the Instrument will be established in accordance
with Appendix "C", SI & BMC agree that the volume of Instruments purchased by
BMC in a given year influences the
-4-
<PAGE> 26
manufacturing cost. Instead defining minimum purchase volumes, both parties
agree, that using the formula for calculating the price [Appendix "C"], BMC
intends to generate sales of the Instrument in sufficient quantity to generate
over a [*] of sales into the market. This applies assuming regular manufacture
by SI and does not include/compensate SI relevant problems, rework, returns,
etc. If BMC fails to meet this requirement, it can either a] pay the difference
between the minimum and what was purchased, or b] permit SI to manufacture and
sell the Instrument to third parties.
3.2 SI, as long as it is the manufacturer of the device, and
then successor manufacturers, whether they be BMC or other parties arranged for
by BMC pursuant to the Manufacturing License provided for in the Development and
License Agreement, will pay, as a cost of manufacturing, to GTRC the license fee
provided for in SI's patent license with GTRC.
3.3 In addition, where an improvement is generated and
implemented which provides a cost reduction, the savings will be split as
follows:
Party generating the idea/improvement = 60% of annual
savings;
balance to other
party
Both parties generate the idea/improvement = Split evenly
between the
parties.
3.4 Terms of payment shall be Net 30 except that during the
first year of manufacture of the Instruments, BMC agree to pay on a Net Cash
basis upon receipt and approval of each shipment.
4. Inspection and Quality Control.
4.1 Each shipment of Instruments to BMC shall be accompanied
by a certificate of SI's Quality Control Department indicating that the
Instruments, identified by their serial numbers, contained in the shipment have
passed the quality control parameters developed by SI, agreed to in writing by
BMC and contained in the Manufacturing Documentation. BMC reserves the right --
at such frequency that BMC feels appropriate and upon providing SI with
reasonable notice-- to visit SI's facility [or other third party manufacturer of
the Instrument] for the purpose of confirming that SI's quality system and
process is in conformance to agreed upon parameters.
SI shall keep complete reproducible records of all data
pertaining to SI's performance under this Agreement and as it relates to
individual Instruments for the life of the Instrument. BMC agrees to implement
its current warranty card tracking system for the Instruments sold by BMC
pursuant to this Agreement.
4.2 Within one (1) month after receipt of Instruments, BMC may
conduct its own acceptance inspection thereof in which random samples of the
Instruments will be compared with the specifications and Quality Control
Procedures, which are a part of the Manufacturing Documentation
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
-5-
<PAGE> 27
and shall inform SI of the results of such inspection. In the event such
inspection by BMC reveals unacceptable variances from the Quality Control
Procedures in the Manufacturing Documentation, BMC shall promptly notify SI
(which notice shall specify the manner in which the defective Instruments fail
to meet the specifications), and SI shall have thirty (30) days in which to
verify the variances. Upon the earlier of (a) verification by SI or (b) the
expiration of thirty (30) days from the date of said notice, BMC shall have the
right to refuse acceptance of the defective or deficient lots of Instruments and
to require, at the option of SI, that said lot(s) be immediately replaced or
corrected free of charge. SI reserves the right to cure the defect at BMC or
request return of the Instrument to SI facility. SI maintains an option to - at
its own expense - make a one hundred percent (100%) inspection of the lots with
respect to the defective function. However said activity shall not delay the
shipment of replacement Instruments to BMC or place BMC in a position of not
being capable responding to the demand its customers. If SI's inspection results
in a finding that the Instruments are not defective or deficient, SI shall
immediately notify BMC of the same and shall resubmit the lots for acceptance.
The remedies of this paragraph accruing to BMC prior to acceptance of
Instruments shall be in lieu of rights accruing under Article 5 (WARRANTIES),
which shall accrue to BMC after acceptance of Instruments. Failure of BMC to
complete the acceptance inspection with respect to a lot within the one (1)
month period shall constitute acceptance by BMC of the lot.
5.0 Warranties.
5.1 SI warrants to BMC that all Instruments to be supplied
hereunder will upon shipment meet the agreed upon specifications therefor and
will be free from defects in materials and workmanship, and will be properly
packed and labeled; provided, however, in respect of defects in materials and
workmanship, and in respect of packaging and labeling, should a matter be
covered by the specifications, the specifications will control. This warranty
shall apply for a period of twenty-four (24) months after the date of shipment
by SI, or twelve [12] months from date of installation with end user, whichever
occurs first SI, shall satisfy this warranty requirement by replacing [at no
charge to BMC] each defective instrument or parts returned to it prior to the
expiration of the warranty period. The parties have the option to establish a
loaner pool of Instruments [details of which to be agreed upon] Appendix "E"
designed to provide BMC's customer with an Instrument while warranty services
are performed on Customer's Instrument SI shall not be liable for loss or
damages arising out of misuse of the Instrument by BMC, its agents or customers.
5.2 SI shall conduct a failure analysis as required by U.S.
Food and Drug Administration ("FDA") regulations, i.e. 21 CFR parts 820.115 and
820.198 (b) with respect to defective Instruments returned to it under paragraph
5.1. Such analysis shall be conducted promptly upon receipt by SI of the subject
Instruments and a results report shall be returned to BMC no later than
forty-five (45) days after SI's receipt of the defective Instrument(s).
5.3 SI shall be liable for and shall indemnify, defend and
hold BMC harmless against any and all claims, suits, proceedings, recoveries,
and damages, including but not limited to costs and expenses of total or partial
Instrument recall, whether initiated voluntarily by BMC and agreed to by SI
[said agreement shall not be unreasonably withheld], or at the direction of the
FDA, (collectively "Claims") arising out of, based on, or caused by defects in
material, workmanship, but in
-6-
<PAGE> 28
no event shall [i] SI be liable for warranty product design or be required to
indemnify BMC for or hold it harmless from any claims arising in whole or in
part from or based on, or caused by defects or deficiencies in any features of
the Instrument designed by BMC or its affiliates, any component of the
Instrument designed by BMC or the literature supplied by BMC for use with the
Instrument, or claims made by BMC or its agents, [ii] SI be liable to BMC or any
person for any loss or damage to the extent caused by any misuse of the
Instrument or reliance upon the Instrument in respect of the issuance of any
medical opinion, [iii] SI be liable to BMC or any person for any implied
warranties for merchantability of fitness for a particular purpose or any
express warranties other than those provided for in this Agreement. ["Excluded
Claims"]. BMC agrees to incorporate in its documentation to its customers that
its warranty for product liability will not exceed the repair or replacement of
the Instrument - or the return of the price thereof, SI shall promptly notify
BMC of any situation which may affect a decision to recall the Instrument,
however, BMC shall have the final authority to institute a voluntary recall,
which authority shall not be exercised unreasonably. Notwithstanding the
foregoing, in no event shall SI be liable to BMC or any other person for any
incidental or consequential damages arising from or in any way connected with
the purchase or use of product
Except for Excluded Claims [as defined herein], SI shall
indemnify, defend and hold BMC harmless from any and all claims, demands,
actions and causes of action against BMC in connection with any and all
injuries, damages or liabilities of any kind whatsoever directly or indirectly
attributed to manufacture of the Instrument or component deficiencies or
defects. This indemnification obligation shall include, without limiting the
generality of the foregoing reasonable attorney's fees, and other costs or
expenses incurred in connection with the defense or settlement of any and all
such claims, demands, actions or causes of actions.
5.4 SI will indemnify and hold BMC harmless from and against
any claims, actions or demands (including, without limitation, attorney's fees,
interest and penalties) based upon the alleged infringement of any patent or
other intellectual property rights now or hereafter existing, provided, however
SI shall have no such obligation with respect to Excluded Claims. SI shall have
the right to defend at its expense any suits other than Excluded Claims alleging
that the manufacturing process infringes any patent, copyright or other
intellectual property rights. If action is commenced or a claim is made against
BMC with respect to alleged infringement, BMC shall, if a claim in respect
thereof is to be made against SI under this paragraph 5.4, notify SI in writing
of the commencement thereof, in which case (a) SI shall be entitled to
participate therein in the name of BMC and shall be entitled to assume the
defense thereof with counsel who shall be reasonably satisfactory to BMC, and
(b) BMC shall on request of SI cooperate in the defense of such action. SI shall
notify BMC promptly in writing of its intention not to defend a claimed
infringement and BMC may at its option and expense proceed to defend said
infringement. Further, in response to notification by BMC to SI that said claim
or action is commence, SI shall promptly initiate efforts to:
1] secure permission to continue the manufacture and
supply of Instruments to BMC, or
2] provide an Instrument which is non-infringing yet
still meets the agreed upon BMC requirement as
contained in this Agreement, or
-7-
<PAGE> 29
3] provide BMC with other suitable alternatives which
permits BMC to sustain product support and supply in
the marketplace.
5.5 BMC will indemnify and hold SI harmless from any and all
claims, demands, actions or causes of action against SI, in connection with any
and all injuries, losses damages or liability of any kind whatsoever directly or
indirectly attributed to features of the Instrument designed according to BMC's
or its Affiliates' instructions or directions or any omission or misstatement in
the literature supplied by BMC for use with the Instrument. This indemnification
obligation shall include, without limiting the generality of the foregoing,
reasonable attorney's fees and other costs or expenses incurred in connection
with the defense or settlement of any such claim, demand, actions, or causes of
action. Notwithstanding the foregoing, in no event shall BMC be liable to SI or
any other person for any incidental or consequential damages arising from or in
any way connected with the purchase or use of product.
5.6 BMC & SI agree in conjunction with their obligations under
this Agreement to avoid knowingly designing and/or developing any item that
infringes any patent of a third party. If either party becomes aware of any such
infringement during the course of performing hereunder, it will notify the other
party promptly in writing.
6. Confidentiality Representation Concerning Employees.
6.1 All information identified as confidential and received by
one party from the other under this Agreement shall be subject to the
obligations of confidentiality set out in the Development and License Agreement
between SpectRx, Inc. and BMC.
It is understood that disclosure of any information
by one party to the other under this Agreement shall in no way be considered as
a grant of any right or license to the receiving party to use such information
except for assistance in developing the Device and the evaluation of the Device
undertaken by BMC during the term of this option and any extension hereof.
6.2 No news release, advertisement, public announcement,
denial or confirmation of same, of any kind regarding any part of the subject
matter of this agreement shall be made by one party without the prior written
approval of the other party.
6.3 Upon termination or expiration of this Agreement, the
parties agree to promptly return all written or descriptive matter, including
but not limited to drawings, blueprints, descriptions, or other papers,
documents, tapes, or any other media which contains such Confidential
Information which is the property of and or proprietary to the other party. In
the event of a loss of any item containing such Confidential Information, the
party claiming said loss will promptly notify the other party in writing.
-8-
<PAGE> 30
7. Employees.
7.1 Personnel assigned by SI to perform services under this
Agreement will be employees of SI and will not for any purpose be considered
employees or agents of BMC. SI assumes full responsibility for the actions of
such personnel while performing services hereunder and shall be solely
responsible for their supervision, daily direction and control, payment of
salary (including withholding of income taxes and social security), worker's
compensation, disability benefits and the like.
7.2 Personnel assigned by BMC to perform services under this
Agreement will be employees of BMC and will not for any purpose be considered
employees or agents of SI. BMC assumes full responsibility for the actions of
such personnel while performing services under this agreement as well as
promotion, distribution and any sales activities with respect to the Instrument
and BMC shall be solely responsible for their daily supervision, daily direction
and control, payment of salary (including withholding of income taxes and social
security), worker's compensation, disability benefits and the like. Both SI and
BMC agree, during the term of this Agreement and for a period of two (2) years
after the termination of the Agreement, not to engage in any activity whether
express or implied which would reasonably be interpreted as soliciting or
employment specific personnel of the other party. Nothing in this provision
prevents either party from placing an employment ad in general business
publications or local newspapers which are or may become available in the
geographic area where either party has a facility.
8. Changes.
8.1 Either party may request, in writing, changes to the work
scope or to the manufacturing or design specifications for the Instrument. The
party receiving the request for the change shall submit within a reasonable time
a report to the other party setting forth its best judgment as to the probable
effect on the supply services and their costs. Neither party shall proceed with
any changes without the prior written consent of the other.
8.2 Cost reduction activity: The parties agree to adopt and
implement TOM and continuous improvement tenets designed to reduce costs, lead
times and improve response times. The parties agree to cooperate in an ongoing
effort designed to reduce the total cost of the Instrument. Such efforts include
but are not limited to: supply route efficiencies, cycle time reduction,
economies of scale, process improvements (properly approved by the parties),
etc. Action may be initiated by either party, but cannot be implemented without
the approval of the other party. The extent to which cost reduction benefits are
to be shared by the parties shall be the result of good faith negotiations
between the parties. Further, SI shall implement a continuous improvement
process which will enable SI to eliminate waste and reduce cost.
9.0 Term, Termination and Cancellation.
9.1 Unless terminated pursuant to the terms hereof, the term
of this Agreement shall be coincident with the term of the Development and
License Agreement between BMC and SI
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<PAGE> 31
dated as of December, 1994. Upon termination of this Agreement, the status of
all purchase orders outstanding at the date of termination shall be reviewed and
the parties shall resolve any termination costs through good faith negotiations.
BMC shall purchase from SI, at SI's cost, any components purchased by SI in
response to purchase order releases issued by BMC if SI is unable to use such
components. The parties further agree that in the event of termination of this
Agreement, all confidential information, documents, materials, tools, etc. which
are the property of either party shall be promptly returned to such party.
9.2 Either party may terminate this Agreement by written
notice in the event (i) the other party materially breaches this Agreement and
does not cure such breach within thirty (30) days of written demand for cure;
"material breach" includes, but is not limited to, a breach of covenants
contained in Section 2.2 of this Agreement, or (ii) by written notice upon the
liquidation or bankruptcy of, or an assignment for the benefits of creditors of,
or a declaration of insolvency by, the other party. Termination of this
Agreement pursuant to this Section 9.2 shall not constitute a termination of the
Development and License Agreement nor of the Marketing License granted
thereunder. In the event of termination of this Agreement by BMC pursuant to
this Section, BMC shall be deemed to have acquired the Manufacturing License
described in the Development and License Agreement effective upon such
termination.
9.3 Notwithstanding the foregoing and as part of risk
management practices, SI shall place a complete and updated set of Manufacturing
Documentation and know-how in escrow in accordance with the provisions of
Appendix "F". Said escrowed documentation and know-how shall be sufficient such
as to maintain BMC as an alternative source of Instruments capable of supplying
the Instruments to meet BMC's needs.
In the event this Agreement is terminated and BMC retains the
Manufacturing License, or in the event SI cannot manufacture for ninety [90]
days because of an event of force majeure, BMC shall have full, complete and
unrestricted access to [including physical possession of] the said Manufacturing
Documentation residing in escrow; all in accordance with the terms and
conditions of the escrow documentation. SI agrees to provide all reasonable
resources to render BMC fully qualified in all respects to supply Instruments
with the same specifications, and manufacturing criteria and under the same
regulatory and quality standards as if manufactured by SI. BMC will receive from
SI a maximum of five hundred [500] hours of training and BMC will supply
reasonably competent manufacturing and technical personnel who will be trained
by SI to support production of the Instrument.
10.0 General Provisions.
10.1 The rights and obligations of Articles 5 (WARRANTIES),
and 10 (GENERAL PROVISIONS) shall survive any termination of this Agreement and
shall bind the parties and their legal representatives, successors and assigns.
Neither party may assign this Agreement (except to an Affiliate) without the
consent of the other, which consent shall not be unreasonably withheld.
-10-
<PAGE> 32
10.2 SI and BMC shall do all things necessary to comply with
all applicable Federal, State and local laws, regulations and ordinances,
including but not limited to the Regulations of the United States Department of
Commerce relating to the export of Technical Data, insofar as they relate to the
services to be performed under this Agreement. BMC will conduct clinicals and
submit applications for FDA and other national regulatory approvals which are
required to market and sell the Instruments worldwide. SI shall obtain any
required government documents and approvals in the event of SI export of
Instruments manufactured for BMC affiliates hereunder and for any technical data
disclosed to SI by BMC. SI will not be the exporter of record for exports to BMC
customers. SI agrees to maintain or contract with [as provided herein] an FDA
approved facility which is operated in compliance with Good Manufacturing
Practices, to be found in 21 CFR 820. SI will provide documentation that such
facility complies with FDA published guidelines (as defined in 21 CFR 10.90b)
and upon request by BMC demonstrate compliance.
10.3 Each of the parties hereto shall be excused from the
performance of its obligations hereunder in the event such performance is
prevented by force majeure and such excuse shall continue as long as the
condition constituting such force majeure continues, plus fifteen (15) days
after the termination of such condition. For purposes of this Agreement, force
majeure is defined as follows: Causes beyond the control of SI or BMC including,
without limitation, regulations, laws or acts of any government, delays by
exporting agency, destruction of production facilities or material by fire, or
failure of public utilities or common carriers or embargo.
10.4 This Agreement, its appendices and the Development and
License Agreement embody the entire understanding and agreement among the
parties and supersede all previous negotiations, representations, writings and
agreements, written or oral, with respect to the development and sale of the
Instrument. This Agreement shall in no way preclude SI or BMC (or any of their
affiliates) from entering into any agreements in the future which are not
specifically limited or precluded hereunder.
10.5 All notices, demands and communications provided for in
this Agreement shall be in writing and shall be deemed effective by a party upon
hand delivery or when mailed, postage prepaid, by registered or certified mail,
to the other party or its copy designee at the respective addresses listed
below, unless and until such address is changed by giving written notice thereof
in like manner.
To BMC: Boehringer Mannheim Corporation
9115 Hague Road
Indianapolis, IN 46250
Attn.: President, Diabetes Care Division
To SI: SpectRx, Inc.
6025A Unity Drive
Norcross, Georgia 30071
Attn.: Contracts Administration*
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<PAGE> 33
10.6 This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia. Dispute Resolution. (a) The
parties shall attempt in good faith to resolve any dispute arising out of or
relating to this agreement promptly by negotiations between representatives who
have authority to settle the controversy. Either party may give the other party
written notice of any dispute not resolved in the normal course of business.
Within thirty days after delivery of such notice, representatives of both
parties shall meet at a mutually acceptable time and place, and thereafter as
often as they reasonably deem necessary, to exchange relevant information and to
attempt to resolve the dispute. If the matter has not been resolved within sixty
days of the disputing party's notice, or if the parties fail to meet within
thirty days, either party may initiate mediation of the controversy or claim as
provided in clause (b) of this section. All negotiations pursuant to this clause
are confidential and shall be treated as compromise and settlement negotiations
for purposes of the Federal Rules of Evidence and state rules of evidence. If
the dispute has not been resolved by negotiation, the parties shall endeavor to
settle the dispute by mediation, non-binding arbitration, or other appropriate
means for a period of at least sixty days before resorting to litigation. The
procedures specified in this Section 10.6 must be followed before either party
may seek judicial relief; provided, however, that a party may seek a preliminary
injunction or other provisional judicial relief if in its judgment such action
is necessary to avoid irreparable damage or to preserve the status quo. Despite
such action, the parties will continue to participate in good faith in the
procedures specified in this Section 10.6. All applicable statutes of limitation
and defenses based upon the passage of time shall be tolled while the procedures
specified in this Section 10.6 are pending, and the parties shall take such
action, if any, required to effectuate such tolling.
10.7 In the case of conflict between the general terms and
conditions of a BMC issued purchase order, or of an SI acceptance of a BMC
purchase order, and this Agreement the terms and conditions of this Agreement
shall take precedence unless otherwise agreed in writing by the parties.
10.8 SI shall make its records and facilities involved in the
performance of this Agreement available to BMC personnel at reasonable and
mutually convenient times during normal business hours for audit purposes and
shall take any reasonable actions required by BMC to facilitate such audit.
10.9 No modification, amendment, extension or waiver of this
Agreement or any provision hereof shall be binding or effective unless in
writing and signed by duly authorized representative of each of the parties.
10.10 SI agrees that, during the term of the Agreement, it
will not enter into any agreement to develop or manufacture a non-invasive
diabetes screening instrument using the same or similar technology as employed
in the Instrument for measuring and collecting data on glucose in human blood
other than with BMC Affiliate(s).
Further, SI represents and warrants that it is under no
obligation, nor will it assume any obligation, which would in any way interfere
with or be inconsistent with or present a conflict or interest with the services
to be furnished by SI under this Agreement.
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<PAGE> 34
10.11 This Agreement shall be construed according to the laws
of the State of Georgia. Venue for any litigation under this Agreement shall be
state court, Gwinnett County, Georgia.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives.
BOEHRINGER MANNHEIM CORPORATION SpectRx, INC.
- ----------------------------------------- --------------------------
Robert J. Daley, C.P.M.
Head; Commercial Contracts/Negotiations
-13-
<PAGE> 35
APPENDIX "A"
1. Non Invasive Diabetes Screening Instruments.
The instrument will have the ability to detect diabetes and is
intended to be used for screening for Diabetes. The SI diabetes screening
instrument will present data useful for screening in a qualitative manner. The
presentation of data will not compromise the quantitative data presentation of
the SI instrument. The SI screening instrument will not be used, nor can the
data be presented in such a manner that it could be used to evaluate long-term
glucose control in a manner similar to the HbAlc test that the SI monitoring
instrument is designed to replace.
2. Product Specifications.
Details to follow
-14-
<PAGE> 36
APPENDIX "B"
CHANGE NOTIFICATION PROTOCOL
-15-
<PAGE> 37
APPENDIX "C"
PRICING:
In accordance with the provisions of Section 3.0 of this Agreement, the
parties agree that the unit price for the Instrument shall be fixed for twelve
[12] month periods and shall be calculated using the below indicated tabulation.
(1994 Dollars)
<TABLE>
<CAPTION>
COST OF GOODS SOLD GROSS MARGIN UNIT PRICE
------------------------ ------------------ ----------------
<S> <C> <C>
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
</TABLE>
If the Cost of Goods Sold exceeds [*], then SI & BMC will renegotiate
the Gross Margins.
Price for the Instrument shall not exceed [__________]**
** estimated until the final specifications and manufacturing
process/costs are defined.
The Cost of Goods Sold figures provided for above, and in turn the
corresponding Unit Prices, are subject to adjustment at the end of each twelve
month period (referred to above) for increases in the Producers Price Index
wherein the Cost of Goods Sold, as previously adjusted in accordance herewith,
shall be increased on the date of each such adjustment by an amount equal to the
product obtained by multiplying the figures provided for in the foregoing
tabulation for Cost of Goods Sold by the percentage increase, if any, in the
then applicable Producers Price Index from the Producers Price Index applicable
at the commencement of such twelve month period. "Producers Price Index" with
respect to a particular date means the most recently published Producers Price
Index, by the United States Department of Labor, Bureau of Labor Statistics.
Should publication of such index cease, such term shall mean such alternative
index as the parties shall reasonably determine most closely approximates said
Producers Price Index.
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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<PAGE> 38
BOEHRINGER
MANNHEIM
Diabetes Care
CONTROL PROCEDURE
DESCRIPTION
APPROVED: CN 17204 Diabetes Care Manufacturing
08/16/94 Partner Notification/Approval Procedure
SUPERSEDES: CN 16458 CONTROL PROCEDURE 348
03/05/93
MANUFACTURING PARTNER NOTIFICATION/APPROVAL PROCESS
Purpose The purpose of this procedure is to establish the methods and
requirements for communication of product, process, or
precedural changes between BM Diabetes Care and the
manufacturing partners, whether the change is initiated by
Diabetes Care or the manufacturing partner
Scope This procedure covers the following product categories:
- licensed products from BM GmbH,
- licensed products manufacturing for BM affiliates,
- finished and semi-finished products developed and
manufactured by an external organization.
Only products which are licensed or contracted from external
sources are covered in this procedure.
Change Types Changes are designated as either major or minor changes
according to the associated matrix listed in this procedure.
NOTE: Major changes to the process or product configuration
are subject to joint approval prior to implementation. Minor
changes may be implemented upon notification without joint
approval. The site originating the change has the authority to
designate a change as major or minor. This decision may be
challenged upon notification to the receiving partner.
Continued on next page
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<PAGE> 39
MANUFACTURING PARTNER NOTIFICATION/APPROVAL PROCESS, Continued
Definitions This table defines terms used throughout this procedure.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
TERM DEFINITION
----------------------------------------------------------------------------------
<S> <C>
Manufacturing Those suppliers who have either licensed a product
Partners to BM for manufacture and sale, or manufactures a
product for BM where BM has designed or owns the
design of the product. This also includes those
manufacturers who have designed and manufactured OEM
products for BM distribution.
----------------------------------------------------------------------------------
Minor change Corrections to process deviations to restore original
process specifications or enhancements to process flow
----------------------------------------------------------------------------------
Major change Changes which potentially affect form, fit, function,
or labeling of the product
----------------------------------------------------------------------------------
</TABLE>
LICENSED OR STRATEGICALLY CRITICAL PRODUCTS
PRODUCT EXAMPLE The following is an example of a licensed or
strategically critical product to be used as an aid
in understanding the major/minor designation:
- Chemstrip bG(R): Diabetes Care licenses
manufacturing rights for the product from
Boehringer Mannheim GmbH, and Corange
International performs the final processing
and packaging of the product from Diabetes
Care-sub-assemblies.
Continued on next page
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<PAGE> 40
MANUFACTURING PARTNER NOTIFICATION/APPROVAL PROCESS, Continued
LICENSED OR STRATEGICALLY CRITICAL PRODUCTS, CONTINUED
GUIDELINE MATRIX Following are examples of major/minor designations
for types of process changes:
<TABLE>
<CAPTION>
bG MANUFACTURING AGREEMENT MATRIX
--------------------------------------------------------------------------------
PROCESS-RELATED CHANGE BM TO CI TO
BM GMBH BM
--------------------------------------------------------------------------------
<S> <C> <C>
1. Compounding
--------------------------------------------------------------------------------
a. Mixing time/speed Minor Minor
--------------------------------------------------------------------------------
b. CO2 blanket Minor Minor
--------------------------------------------------------------------------------
c. Centrifugation Minor Minor
--------------------------------------------------------------------------------
d. Filtration Minor Minor
--------------------------------------------------------------------------------
e. Equipment modification/repairs Minor Minor
--------------------------------------------------------------------------------
2. Coating
--------------------------------------------------------------------------------
a. Compounding start/coating end time Minor Minor
--------------------------------------------------------------------------------
b. Coating thickness Major Major
--------------------------------------------------------------------------------
c. Blade change/refinishing Minor Minor
--------------------------------------------------------------------------------
d. Equipment modification/repairs Minor Minor
--------------------------------------------------------------------------------
3. Drying
--------------------------------------------------------------------------------
a. Web speed Major Major
--------------------------------------------------------------------------------
b. Drying temperature Major Major
--------------------------------------------------------------------------------
c. Air flow/exhaust Major Major
--------------------------------------------------------------------------------
d. Room environment Minor Minor
--------------------------------------------------------------------------------
e. Equipment modification/repairs Minor Minor
--------------------------------------------------------------------------------
4. Slitting
--------------------------------------------------------------------------------
a. Time after coating/drying Minor Minor
--------------------------------------------------------------------------------
b. Room environment Minor Minor
--------------------------------------------------------------------------------
c. Storage of rolls (packaging and time) Minor Minor
--------------------------------------------------------------------------------
d. Equipment modification/repairs Minor Minor
--------------------------------------------------------------------------------
5. Sealing
--------------------------------------------------------------------------------
a. Temperature Minor Minor
--------------------------------------------------------------------------------
b. Pressure Minor Minor
--------------------------------------------------------------------------------
c. Room environment Minor Minor
--------------------------------------------------------------------------------
d. Storage of rolls (packaging and time) Minor Minor
--------------------------------------------------------------------------------
e. Equipment modifications/repairs Minor Minor
--------------------------------------------------------------------------------
6. Cutting
--------------------------------------------------------------------------------
a. Aging time Minor Minor
--------------------------------------------------------------------------------
b. Room environment Minor Minor
--------------------------------------------------------------------------------
c. Equipment modifications/repairs Minor Minor
--------------------------------------------------------------------------------
</TABLE>
Continued on next page
-19-
<PAGE> 41
MANUFACTURING PARTNER NOTIFICATION/APPROVAL PROCESS, Continued
LICENSED OR STRATEGICALLY CRITICAL PRODUCTS, continued
<TABLE>
<CAPTION>
bG MANUFACTURING AGREEMENT MATRIX
--------------------------------------------------------------------------------
BM TO CI TO
FORMULATION-RELATED CHANGE BM GMBH BM
---------------------------------------------------------------------------------
<S> <C> <C>
1. Alternate raw material suppliers Minor Minor
(chemical/non-chemical)
--------------------------------------------------------------------------------
2. Raw materials additions/deletions Major Major
--------------------------------------------------------------------------------
3. Raw materials concentrations (out of Major Major
specification)
--------------------------------------------------------------------------------
4. Raw material specification change Major Major
--------------------------------------------------------------------------------
PRIMARY PACKAGING
--------------------------------------------------------------------------------
1. Primary Packaging Major Major
--------------------------------------------------------------------------------
SPECIFICATION-RELATED CHANGE
--------------------------------------------------------------------------------
1. Raw material Minor Minor
--------------------------------------------------------------------------------
2. In-process Minor Minor
--------------------------------------------------------------------------------
3. Final (vials, stoppers, bar code) Major Major
--------------------------------------------------------------------------------
4. Artwork (final packaging) Minor Major
--------------------------------------------------------------------------------
CLEANING OF PRODUCT CONTACT SURFACES/AREAS
--------------------------------------------------------------------------------
1. Compounding Minor Minor
--------------------------------------------------------------------------------
2. Coating Minor Minor
--------------------------------------------------------------------------------
3. Drying Minor Minor
--------------------------------------------------------------------------------
4. Slitting Minor Minor
--------------------------------------------------------------------------------
5. Sealing Minor Minor
--------------------------------------------------------------------------------
6. Cutting Minor Minor
--------------------------------------------------------------------------------
CODE ASSIGNMENT CHANGES
--------------------------------------------------------------------------------
1. Code Assignment Changes Minor Major
--------------------------------------------------------------------------------
</TABLE>
Note: Products manufactured for BM affiliates should
be handled as those above.
PRODUCTS MANUFACTURED FOR BOEHRINGER MANNHEIM
PRODUCT EXAMPLE Examples of products which are designed or owned by
Boehringer Mannheim are:
- Products designed by R&D,
- Products designed jointly by R&D and an external
supplier under contract or
- Products designed by an external contract supplier
for sale by Boehringer Mannheim.
Continued on next page
-20-
<PAGE> 42
MANUFACTURING PARTNER NOTIFICATION/APPROVAL PROCESS, Continued
PRODUCTS MANUFACTURED FOR BOEHRINGER MANNHEIM, continued
MATRIX GUIDELINE The following matrix is used to aid in determining
whether a proposed change should be designated as
major or minor.
<TABLE>
<CAPTION>
TYPE OF CHANGE CLASSIFICATION EXAMPLES
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Any change to existing Minor 1. Any change in
product where design, manufacturing
labeling, performance, procedures to enhance
function reliability, manufacturability where
appearance, formulation, or the stated criteria are not
configuration remain affected (e.g., process
unchanged or where the sequencing)
change is to implement a
previously approved revision
which has been formally
approved by BM
- Process validation may be
required
-----------------------------------------------------------------------------------------
Any change affecting form, Major 1. Component or circuit
fit, function, or labeling modifications
where the change could
possibly affect the 2. Labeling or packaging
appearance or performance changes
of the product
3. Case modifications
- BM evaluation is required
4. Change in consumable
After BM approval has been materials used during
obtained, the date of manufacturing (e.g.,
implementation and the solder paste, flux,
initial identifying criteria cleaning solvents, etc.)
(e.g., lot or serial number)
must be provided to BM for
effectiveness monitoring
-----------------------------------------------------------------------------------------
</TABLE>
Continued on next page
-21-
<PAGE> 43
MANUFACTURING PARTNER NOTIFICATION/APPROVAL PROCESS, Continued
PRODUCTS MANUFACTURED FOR BOEHRINGER MANNHEIM, continued
PROCESS The following tables define the areas responsible for
RESPONSIBILITIES specific activities concerning approval and
notification between BM Diabetes Care and the
Manufacturing Partner.
<TABLE>
<CAPTION>
MANUFACTURING PARTNER-ORIGINATED CHANGE
-------------------------------------------------------------------------------------
DEPARTMENT/ RESPONSIBILITY
INDIVIDUAL
-------------------------------------------------------------------------------------
<S> <C> <C>
Designated department 1. Originates change request and designates as
(Partner) major/minor.
2. Obtains internal approval.
3. Forwards documentation to designated BM
authority.
-------------------------------------------------------------------------------------
Designated authority 1. Forwards change request to Supplier Quality
(BM) Engineering for review and approval.
-------------------------------------------------------------------------------------
Supplier Quality 1. Receives partners' change request and reviews
Engineering (BM) major/minor designation.
2. Processes for review and approval/rejection.
-------------------------------------------------------------------------------------
Supplier Quality 1. Notifies partner of approval when formal Change
Engineering (BM) Notice is not required.
2. Initiates formal Change Notice where appropriate.
-------------------------------------------------------------------------------------
Quality Documentation 1. Obtains CN approvals.
(BM) 2. Notifies manufacturing partner as
appropriate and BM Supply Coordination Team
of approved change for implementation.
-------------------------------------------------------------------------------------
Designated authority 1. Receives/implements change.
(Partner)
-------------------------------------------------------------------------------------
</TABLE>
Continued on next page
-22-
<PAGE> 44
MANUFACTURING PARTNER NOTIFICATION/APPROVAL PROCESS, Continued
PROCESS BM-ORIGINATED CHANGE
RESPONSIBILITIES,
continued
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
DEPARTMENT/ RESPONSIBILITY
INDIVIDUAL
---------------------------------------------------------------------------------
<S> <C> <C>
Originator(BM) 1. Obtains approval signature from
manufacturing partner on cross-functional
review, DCN, or pECN copy.
2. Assigns major/minor designation.
---------------------------------------------------------------------------------
Designated authority 1. Reviews and approves/rejects change and
(Partner) returns to BM originator.
---------------------------------------------------------------------------------
Originator (BM) 1. Prepares Change Notice documentation and
forwards to Quality Documentation for
processing.
---------------------------------------------------------------------------------
Quality Documentation 1. Reviews major/minor designation.
(BM) 2. Obtains CN approvals.
3. Notifies manufacturing partner as applicable
and BM Supply Coordination Team of approved
change for implementation.
---------------------------------------------------------------------------------
</TABLE>
-23-
<PAGE> 1
EXHIBIT 10.14 B
CONFIDENTIAL TREATMENT
SUPPLY AGREEMENT
This Agreement dated as of 1/5/96 (the "Effective Date"), by and
between Boehringer Mannheim Corporation, an Indiana corporation, having a
principal place of business at 9115 Hague Road, Indianapolis, Indiana 46250,
(hereinafter referred to as "BMC"), and SpectRx, Inc., a Delaware corporation,
6025A Unity Drive, Norcross, Georgia, 30071, (hereinafter referred to as "SI");
WITNESSETH:
WHEREAS, BMC and SI have entered into a Development and License Agreement dated
as of December 2, 1994, and
WHEREAS, said Agreement provisions for the establishment of a Supply Agreement
between BMC and SI,
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties agree as follows:
1.0 DEFINITIONS
1.1 "Instrument(s)" shall mean the instrument for screening diabetes as
described in the "System Specification Document, Magnum Diabetes
Screening Instrument, Project 227" attached hereto (Appendix A) and
incorporated by reference, and known to the parties at the time of
execution of this Agreement.
1.2 "Affiliates(s)" shall mean, with respect to either party, any
corporation, partnership or other business entity that now or in the
future controls, is controlled by, or is under common control with,
such party. "Control" shall mean the direct or indirect ownership of
fifty percent (50%) or more of the voting interest in, or a fifty
percent (50%) or more interest in the income of, such corporation or
other business entity, or such other relationship as, in fact,
constitutes actual control.
1.3 "Manufacturing Documentation" shall mean a package of specifications,
drawings and manufacturing instructions [including detailed training
by SI] which enable SI or a third party to manufacture the Instrument
including, as applicable, software, all software source codes in
printout or magnetic media form, software assembly, linkage and
validation protocols and software validation results, manufacturing
specifications for the Instrument, (service and training information
and a set of quality control parameters suitable for use in acceptance
testing of the Instrument), as well as all preliminary or working
drafts of all such materials, and documentation developed by SI in
order to produce such materials.
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1.4 "Development Services" shall mean the design and development effort by
SI in so far as it is relative to manufacturing equipment,
manufacturing processes, goods and services contracted by SI, and
associated Manufacturing processes and associated Manufacturing
Documentation which may be necessary in order to bring the Instrument
into commercial production.
1.5 "Date of Market Introduction" shall mean the later of (a) the receipt
and acceptance by BMC of [preproduction quantity to be determined]
Instruments meeting the specifications described in Appendix A and
approved by BMC, or (b) the sale and shipment of Instruments to an
end-user by BMC.
2.0 SUPPLY SERVICES
2.1 SI shall manufacture and sell the Instrument exclusively to BMC and
Affiliates for worldwide marketing and selling at prices established
by the parties pursuant to paragraph 3.1. Nothing in this Agreement
shall prevent BMC from manufacturing or having manufactured,
marketing, selling, or otherwise supplying other non- invasive devices
on a world-wide basis.
2.2 During the term of this Agreement SI [or a mutually approved contract
manufacturer] shall be BMC's sole and exclusive source for the
Instrument, provided that (a) SI provides an adequate and timely
supply of the Instrument to BMC in accordance with Purchase Orders
issued by BMC and accepted by SI, (b) SI maintains the quality
assurance level as stated in BMC's Quality Partners Manual and
or as may be otherwise agreed to by the parties, in writing, (c) SI
follows the most current and pertinent Federal Food and Drug
Administration guidelines, meets the requirements of ISO9001:1994,
section 4.4 during development, and be in compliance with Good
Manufacturing Practices as found in 21 CFR 820 prior to production,
and (d) SI's employs reasonably sound cost management practices. SI
warrants that it will apply all reasonable resources to its operation
in order to attain a certification rating [as defined in BMC's Quality
Partners Manual within twenty-four [24] months from the start of
Instrument production for sale by BMC. SI further agrees to make
available to BMC for purchase, spare parts and or replacement/repair
parts for a period of not less than seven [7] years from end of market
sales by BMC.
2.3 SI represents that it has or will have, prior to the date of Market
Introduction at its Norcross, Georgia facility or other manufacturing
facility as may be jointly approved by the parties manufacturing
capacity to produce the Instrument in the following minimum annual
quantities:
<TABLE>
<CAPTION>
Date Units per Annum
---- ---------------
<S> <C>
Market Introduction Date BMC's Annual Forecast Volumes, +35%
One year after Market Introduction Date BMC's Annual Forecast Volumes, +50%
</TABLE>
NOTE: The quantities stated herein are estimated and are the
result of a review of the current business conditions and other
information available to BMC at the time the estimate is prepared.
BMC shall not be obligated to purchase any Instruments except pursuant
to purchase orders as described in Section 2.5.
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2.4 In order to facilitate SI's planning of production, and to assist SI
in making certain decisions relative to inventory of long lead items,
BMC shall submit to SI a non-binding estimate of its requirements of
Instruments monthly covering a forward period of not less than twelve
(12) months. Upon receipt of BMC's estimate, if SI determines that it
has insufficient capacity to meet the quantities stated in the
estimate, it shall notify BMC within fifteen (15) days of the date of
receipt of BMC's estimate that such condition exists, and will present
recommendations regarding capacity changes to meet BMCs estimate. BMC
shall promptly review SI's notice and schedule a meeting with SI to
review the recommendations and reach agreement on a course of action.
In an effort to reduce lead time, and in accordance with production
forecasts provided by BMC under this Agreement, SI agrees to establish
an inventory level at its facility [financed by BMC for only the first
twelve months of production by SI] of Instrument component parts which
have long lead times. The inventory mix and levels will be reviewed
quarterly by the parties, and the parties, by mutual agreement, may
make changes to the level and the mix. The details of this activity
will be negotiated by the parties and will be contained in the blanket
order for the first year's supply of Instruments. Also included will
be the details of SI's refunding plan employing price discounts on
subsequent purchases of Instruments for said financing by BMC.
2.5 During the term of this Agreement, BMC agrees to purchase the
Instrument exclusively from SI (see Section 2.2). BMC shall issue
purchase orders, containing specific instructions concerning quantity,
delivery schedule, invoicing, etc., from time to time for the supply
of Instruments. The purchase orders described in this Section 2.5
shall constitute the only authorization for SI to ship Instruments to
BMC.
BMC shall have the right to cancel or make changes to said purchase
orders from time to time. SI agrees to use its best efforts to comply
with changes. In the event a change in a purchase order causes a
significant increase or decrease in SI's costs or time for
performance, the parties agree to negotiate in good faith to reach an
agreement on an equitable adjustment in the price and time for
performance and this Agreement [ subsequent purchase order (s)] shall
be supplemented in writing accordingly. BMC agrees to be responsible
for all components purchased by SI in response to said purchase
orders.
Notwithstanding the foregoing, BMC may request and SI shall have the
ability to respond to changes in existing forecast as follows:
Current month +30%
30-60 days +60%
NOTE: The above are considered short term targets and subject to
modification by mutual agreement by the parties. Subject to the
provisions of the previous sentence, the goal is to respond to all
changes in customer demand within 30 days.
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2.6 Prior to releasing the Instrument for production, BMC shall have the
right to purchase (at a price negotiated by the parties) from SI up to
sixteen (16) pre-production units in order to approve the quality
thereof, which approval shall not be unreasonably withheld.
2.7 After BMC has notified SI in writing that the pre-production
Instruments manufactured by SI are approved, the Instrument,
components, manufacturing process, documentation, sources of supply to
SI, etc. shall be frozen. SI shall obtain the written approval of
BMC [which approval shall not be unreasonably withheld] prior to
making any changes, substitutions, or modifications whatsoever to the
Instrument, components, manufacturing process, or Manufacturing
Documentation and shall provide notice and perform activities in
accordance with Change Notification Protocol which is attached as
Appendix B.
2.8 The Instruments shall be supplied and labeled in accordance with
BMC-approved packaging specifications. BMC shall prepare the artwork
necessary for printing the labels and shall deliver it to SI at
mutually agreed upon time intervals prior to the scheduled delivery
from SI of the first shipment ordered by BMC. BMC agrees to
reasonably recognize SI's efforts with respect to producing the
instrument by placing verbiage such as : "Developed by SpectRx, Inc.
for Boehringer Mannheim Corporation". BMC at its sole discretion
shall set the criteria for said labeling.
3.0 PRICE
3.1 The parties to this Agreement - because the Instrument has yet to be
designed and approved - cannot accurately calculate the price of the
Instrument. Until said design and manufacturing process have been
identified and agreed to, the parties - at this point in time - agree
on a formula for calculating the Instrument price.
The price of the Instrument will be established in accordance with
Appendix "C". SI and BMC agree that the volume of instruments
purchased by BMC in a given year influences the manufacturing cost.
Instead of defining minimum purchase volumes, both parties agree, that
using the formula for calculating the price [Appendix "C"], BMC
intends to generate sales of the Instrument in sufficient quantity to
generate over [*]. This applies assuming regular manufacture by SI
and does not include/compensate SI relevant problems, rework, returns,
etc. If BMC fails to meet this requirement, BMC can either a] permit
SI to manufacture and sell the Instrument to third parties, or b]
purchase additional instruments sufficient to meet the sales
requirement [*].
3.2 SI, as long as it is the manufacturer of the device, and then
successor manufacturers, whether they be BMC or other parties arranged
for by BMC pursuant to the Manufacturing License provided for in the
Development and License Agreement, will pay, as a cost of
manufacturing, to GTRC the license fee provided for in SI's patent
license with GTRC.
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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3.3 In addition, where a revolutionary improvement (herein defined as a
technical improvement which dramatically and radically improves the
Instrument) is generated and implemented which provides a cost
reduction, the savings will be split as follows:
Party generating the idea/improvement = 60% of annual savings;
balance to other party
Both parties generate the idea/improvement Split evenly
between the parties.
3.4 Terms of payment shall be Net 30; except that during the first year of
manufacture of the Instruments, BMC agrees to forward payment within
ten days of receipt of said Instruments and corresponding invoice.
4.0 INSPECTION AND QUALITY CONTROL
4.1 Each shipment of Instruments to BMC shall be accompanied by a
certificate of SI's Quality Control Department indicating that the
Instruments, identified by their serial numbers, contained in the
shipment have passed the quality control parameters developed by SI,
agreed to in writing by BMC and contained in the Manufacturing
Documentation. BMC reserves the right - at such frequency that BMC
feels appropriate and upon providing SI with reasonable notice to
visit SI's facility [or other third party manufacturer of the
Instrument] for the purpose of confirming that SI's quality system and
process is in conformance to agreed upon parameters.
SI shall keep complete reproducible records of all data pertaining to
SI's performance under this Agreement and as it relates to individual
Instruments for the life of the Instrument. BMC agrees to implement
its current warranty card tracking system for the Instruments sold by
BMC pursuant to this Agreement.
4.2 Within one (1) month after receipt of Instruments, BMC may conduct its
own acceptance inspection thereof in which random samples of the
Instruments will be compared with the specifications and Quality
Control Procedures, which are a part of the Manufacturing
Documentation. In the event such inspection by BMC reveals
unacceptable variances from the Quality Control Procedures in the
Manufacturing Documentation, BMC shall promptly notify SI (which
notice shall specify the manner in which the defective Instruments
fail to meet the specifications), and SI shall have thirty (30) days
in which to verify the variances. Upon the earlier of (a)
verification by SI or (b) the expiration of thirty (30) days from the
date of said notice, BMC shall have the right to refuse acceptance of
the defective or deficient lots of Instruments and to require, at the
option of SI, that said lot(s) be immediately replaced or corrected
free of charge. SI reserves the right to cure the defect at BMC or
request return of the Instrument to SI facility. SI maintains an
option to- at its own expense- make a one hundred percent (100%)
inspection of the lots with respect to the defective function.
However said activity shall not delay the shipment of replacement
Instruments to BMC or place BMC in a position of not being capable
responding to the demand of its customers. If SI's inspection results
in a finding that the Instruments are not defective or deficient, SI
shall
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immediately notify BMC of the same and shall resubmit the lots for
acceptance. The remedies of this paragraph accruing to BMC prior to
acceptance of Instruments shall be in lieu of rights accruing under
Article 5 (WARRANTIES), which shall accrue to BMC after acceptance of
Instruments. Failure of BMC to complete the acceptance inspection
with respect to a lot within the one (1) month period shall constitute
acceptance by BMC of the lot.
5.0 WARRANTIES
5.1 SI warrants to BMC that all Instruments to be supplied hereunder will
upon shipment meet the agreed upon specifications, will be free from
defects in materials and workmanship, and will be property packed and
labeled; provided, however, in respect of defects in materials and
workmanship, and in respect of packaging and labeling, should a matter
be covered by the specifications, the specifications will control.
This warranty shall apply for a period of twenty-four (24) months
after the date of shipment by SI, or twelve [12] months from date of
installation with the end user, whichever occurs first. SI shall
satisfy this warranty requirement by repairing or replacing [at no
charge to BMC] each defective Instrument returned to it prior to the
expiration of the warranty period. All repair or replacement in
accordance with this Section 5.1 shall be in accordance the
"Instrument Loaner Program/Customer Service Procedure dated 11/01/95"
attached hereto as Appendix D and incorporated by reference. SI shall
not be liable for loss or damages arising out of misuse of the
Instrument by BMC, its agents or customers.
5.2 After the initial warranty period, SI agrees to replace failed
Instrument bulbs (if any) for a period of five (5) years from the date
of installation. SI shall bill BMC for the cost of the replacement at
SI's cost.
5.3 SI shall conduct a failure analysis as required by U.S. Food and Drug
Administration ("FDA") regulations, i.e. 21 CFR parts 820.115 and
820.198 (b) with respect to defective Instruments returned to it under
paragraph 5.1. Such analysis shall be conducted promptly upon receipt
by SI of the subject Instruments and a results report shall be
returned to BMC no later than forty-five (45) days after SI's receipt
of the defective Instrument(s).
5.4 SI shall be liable for and shall indemnify, defend and hold BMC
harmless against any and all claims, suits, proceedings, recoveries,
and damages, including but not limited to costs and expenses of total
or partial Instrument recall, whether initiated voluntarily by BMC and
agreed to by SI [said agreement shall not be unreasonably withheld],
or at the direction of the FDA, (collectively "Claims") arising out
of, based on, or caused by defects in material, workmanship, but in no
event shall [i] SI be liable for or be required to indemnify BMC for
or hold it harmless from any claims arising in whole or in part from
or based on, or caused by defects or deficiencies in any features of
the Instrument designed by BMC or its affiliates, any component of the
Instrument designed by BMC or the literature supplied by BMC for use
with the Instrument, or claims made by BMC or its agents, [ii] SI be
liable to BMC or any person for any loss or damage to the extent
caused by any misuse of the Instrument or reliance upon the Instrument
in respect of the issuance of any medical opinion, [iii] SI be liable
to
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BMC or any person for any implied warranties for merchantability of
fitness for a particular purpose or any express warranties other than
those provided for in this Agreement. ["Excluded Claims"]. BMC
agrees to incorporate in its documentation to its customers that its
warranty for product liability will not exceed the repair or
replacement of the Instrument or the return of the price thereof. SI
shall promptly notify BMC of any situation which may affect a decision
to recall the Instrument, however, BMC shall have the final authority
to institute a voluntary recall, which authority shall not be
exercised unreasonably. Notwithstanding the foregoing, in no event
shall SI be liable to BMC or any other person for any incidental or
consequential damages arising from or in any way connected with the
purchase or use of product.
Except for excluded claims [as defined herein], SI shall indemnify,
defend and hold BMC harmless from any and all claims, demands, actions
and causes of action against BMC in connection with any and all
injuries, damages or liabilities of any kind whatsoever directly or
indirectly attributed to manufacture of the Instrument or component
deficiencies or defects. This indemnification obligation shall
include, without limiting the generality of the foregoing reasonable
attorney's fees, and other costs or expenses incurred in connection
with the defense or settlement of any and all such claims, demands,
actions or causes of actions.
5.5 SI will indemnify and hold BMC harmless from and against any claims,
actions or demands (including, without limitation, attorney's fees,
interest and penalties) based upon the alleged infringement of any
patent or other intellectual property rights now or hereafter
existing, provided, however SI shall have no such obligation with
respect to Excluded Claims. SI shall have the right to defend at its
expense any suits other than Excluded Claims alleging that the
manufacturing process infringes any patent, copyright or other
intellectual property rights. If action is commenced or a claim is
made against BMC with respect to alleged infringement, BMC shall, if a
claim in respect thereof is to be made against SI under this paragraph
5.5, notify SI in writing of the commencement thereof, in which case
(a) SI shall be entitled to participate therein in the name of BMC and
shall be entitled to assume the defense thereof with counsel who shall
be reasonably satisfactory to BMC, and (b) BMC shall on request of SI
cooperate in the defense of such action. SI shall notify BMC promptly
in writing of its intention not to defend a claimed infringement and
BMC may at its option and expense proceed to defend said infringement.
Further, in response to notification by BMC to SI that said claim or
action is commenced, SI shall promptly initiate efforts to:
1] secure permission to continue the manufacture and supply of
Instruments to BMC, or
2] provide an Instrument which is non-infringing yet still meets
the agreed upon BMC requirement as contained in this
Agreement, or
3] provide BMC with other suitable alternatives which permits BMC
to sustain product support and supply in the marketplace.
5.6 BMC will indemnify and hold SI harmless from any and all claims,
demands, actions or causes of action against SI, in connection with
any and all injuries, losses damages or liability of any kind
whatsoever directly or indirectly attributed to features of the
Instrument designed
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according to BMC's or its Affiliates' instructions or directions or
any omission or misstatement in the literature supplied by BMC for use
with the Instrument. This indemnification obligation shall include,
without limiting the generally of the foregoing, reasonable attorney's
fees and other costs or expenses incurred in connection with the
defense or settlement of any such claim, demand, actions, or causes of
action. Notwithstanding the foregoing, in no event shall BMC be
liable to SI or any other person for any incidental or consequential
damages arising from or in any way connected with the purchase or use
of product.
5.7 BMC & SI agree in conjunction with their obligations under this
Agreement to avoid knowingly designing and/or developing any item that
infringes any patent of a third party. If either party becomes aware
of any such infringement during the course of performing hereunder, it
will notify the other party promptly in writing.
6.0 CONFIDENTIALITY REPRESENTATION CONCERNING EMPLOYEES
6.1 All information identified as confidential and received by one party
from the other under this Agreement shall be subject to the
obligations of confidentiality set out in the Development and License
Agreement between SpectRx, Inc. and BMC.
It is understood that disclosure of any information by one party to
the other under this Agreement shall in no way be considered as a
grant of any right or license to the receiving party to use such
information except for assistance in developing the Instrument and the
evaluation of the Instrument undertaken by BMC during the term of this
option and any extension hereof.
6.2 No news release, advertisement, public announcement, denial or
confirmation of same, of any kind regarding any part of the subject
matter of this agreement shall be made by one party without the prior
written approval of the other party.
6.3 Upon termination or expiration of this Agreement, the parties agree to
promptly return all written or descriptive matter, including but not
limited to drawings, blueprints, descriptions, or other papers,
documents, tapes, or any other media which contains such Confidential
Information which is the property of and or proprietary to the other
party. In the event of a loss of any item containing such
Confidential Information, the party claiming said loss will promptly
notify the other party in writing.
7.0 EMPLOYEES
7.1 Personnel assigned by SI to perform services under this Agreement will
be employees of SI and will not for any purpose be considered
employees or agents of BMC. SI assumes full responsibility for the
actions of such personnel while performing services hereunder and
shall be solely responsible for their supervision, daily direction and
control, payment of salary (including withholding of income taxes and
social security), workers compensation, disability benefits and the
like.
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7.2 Personnel assigned by BMC to perform services under this Agreement
will be employees of BMC and will not for any purpose be considered
employees or agents of SI. BMC assumes full responsibility for the
actions of such personnel while performing services under this
agreement as well as promotion, distribution and any sales activities
with respect to the Instrument and BMC shall be solely responsible for
their daily supervision, daily direction and control, payment of
salary (including withholding of income taxes and social security),
workers compensation, disability benefits and the like.
8.0 CHANGES
8.1 Either party may request, in writing, changes to the work scope or to
the manufacturing or design specifications for the Instrument. The
party receiving the request for the change shall submit within a
reasonable time a report to the other party setting forth its best
judgment as to the probable effect on the supply services and their
costs. Neither party shall proceed with any changes without the prior
written consent of the other.
8.2 Cost reduction activity: The parties agree to adopt and implement TQM
and continues improvement tenets designed to reduce costs, lead times
and improve response times. The parties agree to cooperate in an
ongoing effort designed to reduce the total cost of the Instrument.
Such efforts include but are not limited to: supply route
efficiencies, cycle time reduction, economies of scale, process
improvements (properly approved by the parties), etc. Action may be
initiated by either party, but cannot be implemented without the
approval of the other party. The extent to which cost reduction
benefits are to be shared by the parties shall be the result of good
faith negotiations between the parties. Further, SI shall implement a
continuous improvement process which will enable SI to eliminate waste
and reduce cost.
9.0 TERM, TERMINATION AND CANCELLATION
9.1 Unless terminated pursuant to the terms hereof, the term of this
Agreement shall be coincident with the term of the Development and
License Agreement between BMC and SI dated as of December 2, 1994.
Upon termination of this Agreement, the status of all purchase orders
outstanding at the date of termination shall be reviewed and the
parties shall resolve any termination costs through good faith
negotiations. BMC shall purchase from SI, at SI's cost, any
components purchased by SI in response to purchase order releases
issued by BMC if SI is unable to use or sell such components. The
parties further agree that in the event of termination of this
Agreement, all confidential information, documents, materials, tools,
etc. which are the property of either party shall be promptly
returned to such party.
9.2 Either party may terminate this Agreement by written notice in the
event [i] the other party materially breaches this Agreement and does
not cure such breach with thirty (30) days of written demand for cure;
"material breach" includes, but is not limited to, a breach of
covenants in Section 2.2 of this Agreement, or [ii] by written notice
upon the liquidation or bankruptcy of, or an assignment for the
benefit of creditors of, or a declaration of insolvency by, the other
party. Termination of this Agreement pursuant to this Section 9.2
shall not
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constitute a termination of the Development and License Agreement nor
the Marketing License granted thereunder. In the event of termination
of this Agreement by BMC pursuant to this Section, BMC shall be deemed
to have acquired the Manufacturing License described in the
Development and License Agreement effective upon such termination.
9.3 Notwithstanding the foregoing and as part of risk management
practices, within twenty-four (24) hours of initial production, SI
shall place a complete and updated set of Manufacturing Documentation
and know-how in escrow. Said escrowed documentation and know-how
shall be sufficient such as to maintain BMC as an alternative source
of Instruments capable of supplying the Instruments to meet BMC's
needs.
In the event this Agreement is terminated and BMC retains the
Manufacturing License, or in the event SI cannot manufacture for
ninety [90] days because of an event of force majeure, BMC shall have
full, complete and unrestricted access to [including physical
possession of] the said Manufacturing Documentation residing in
escrow. SI agrees to provide all reasonable resources [including all
tooling] to render BMC fully qualified in all respects to supply
Instruments with the same specifications, and manufacturing criteria
and under the same regulatory and quality standards as if manufactured
by SI. BMC will receive from SI a maximum of five hundred [500] hours
of training and BMC will supply reasonably competent manufacturing and
technical personnel who will be trained by SI to support production of
the Instrument.
10.0 GENERAL PROVISIONS
10.1 The rights and obligations of Articles 5 (WARRANTIES), and 10 (GENERAL
PROVISIONS) shall survive any termination of this Agreement and shall
bind the parties and their legal representatives, successors and
assigns. Neither party may assign this Agreement (except to an
Affiliate) without the consent of the other, which consent shall not
be unreasonably withheld.
10.2 SI and BMC shall do all things necessary to comply with all applicable
Federal, State and local laws, regulations and ordinances, including
but not limited to the Regulations of the United States Department of
Commerce relating to the export of Technical Data, insofar as they
relate to the services to be performed under this Agreement. SI shall
obtain any required government documents and approvals in the event of
SI export of Instruments manufactured for BMC affiliates hereunder and
for any technical data disclosed to SI by BMC. SI will not be the
exporter of record for exports to BMC customers. SI agrees to
maintain or contract with [as provided herein] an FDA approved
facility which is operated in compliance with Good Manufacturing
Practices, to be found in 21 CFR 820. SI will provide documentation
that such facility complies with FDA published guidelines (as defined
in 21 CFR 10.90b) and upon request by BMC demonstrate compliance.
10.3 Each of the parties hereto shall be excused from the performance of
its obligations hereunder in the event such performance is prevented
by force majeure and such excuse shall continue as
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long as the condition constituting such force majeure continues, plus
fifteen (15) days after the termination of such condition. For
purposes of this Agreement, force majeure is defined as follows:
Causes beyond the control of SI or BMC including, without limitation,
regulations, laws or acts of any government, delays by exporting
agency, destruction of production facilities or material by fire, or
failure of public utilities or common carriers or embargo.
10.4 This Agreement, its appendices and the Development and License
Agreement embody the entire understanding and agreement among the
parties and supersede all previous negotiations, representations,
writings and agreements, written or oral, with respect to the
development and sale of the Instrument. This Agreement shall in no
way preclude SI or BMC (or any of their affiliates) from entering into
any agreements in the future which are not specifically limited or
precluded hereunder.
10.5 All notices, demands and communications provided for in this Agreement
shall be in writing and shall be deemed effective by a party upon hand
delivery or when mailed, postage prepaid, by registered or certified
mail, to the other party or its copy designee at the respective
addresses listed below, unless and until such address is changed by
giving written notice thereof in like manner.
To BMC: Boehringer Mannheim Corporation
9115 Hague Road
Indianapolis, IN 46250
Attn: President, Patient Care Systems Division
To SI: SpectRx, Inc.
6025 A Unity Drive
Norcross, Georgia 30071
Attn: Contracts Administration
10.6 Dispute Resolution. (a) The parties shall attempt in good faith to
resolve any dispute arising out of or relating to this agreement
promptly by negotiations between representatives who have authority to
settle the controversy. Either party may give the other party written
notice of any dispute not resolved in the normal course of business.
Within thirty days after delivery of such notice, representatives of
both parties shall meet at a mutually acceptable time and place, and
thereafter as often as they reasonably deem necessary, to exchange
relevant information and to attempt to resolve the dispute. If the
matter has not been resolved within sixty days of the disputing
party's notice, or if the parties fail to meet within thirty days,
either party may initiate mediation of the controversy or claim as
provided in clause (b) of this Section. All negotiations pursuant to
this clause are confidential and shall be treated as compromise and
settlement negotiations for purposes of the Federal Rules of Evidence
and state rules of evidence. (b) If the dispute has not been resolved
by negotiation, the parties shall endeavor to settle the dispute by
mediation, non-binding arbitration, or other appropriate means for a
period of at least sixty days before resorting to litigation. The
procedures specified in this Section 10.6 must be followed before
either party may seek judicial relief;
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provided, however, that a party may seek a preliminary injunction or
other provisional judicial relief if in its judgment such action is
necessary to avoid irreparable damage or to preserve the status quo.
Despite such action, the parties will continue to participate in good
faith in the procedures specified in this Section 10.6. All
applicable statutes of limitation and defenses based upon the passage
of time shall be tolled while the procedures specified in this Section
10.6 are pending, and the parties shall take such action, if any,
required to effectuate such tolling.
10.7 In the case of conflict between the general terms and conditions of a
BMC issued purchase order, or of an SI acceptance of a BMC purchase
order, and this Agreement the terms and conditions of this Agreement
shall take precedence unless otherwise agreed in writing by the
parties.
10.8 SI shall make its records and facilities involved in the performance
of this Agreement available to BMC personnel at reasonable and
mutually convenient times during normal business hours for audit
purposes and shall take any reasonable actions required by BMC to
facilitate such audit.
10.9 SI shall not utilize the exterior design (including the mechanical
design and the industrial design) of the Instrument for any other
purpose (device, application, etc.) without the prior written consent
of BMC. BMC shall pay all costs of the mechanical design and
industrial design, and fifty (50) percent of the nonrecurring tooling
charges up to a maximum of $25,000, actually incurred by SI for the
exterior of the Instrument. BMC acknowledges that SI is under no
restriction for the use of the design of the interior of the
Instrument in any area outside of that licensed exclusively to BMC.
10.10 No modification, amendment, extension or waiver of this Agreement or
any provision hereof shall be binding or effective unless in writing
and signed by duly authorized representative of each of the parties.
10.11 SI agrees that, during the term of the Agreement, it will not enter
into any agreement to develop or manufacture a non-invasive diabetes
detection instrument using the same or similar technology as employed
in the Instrument other than with BMC Affiliate(s).
Further, SI represents and warrants that it is under no obligation,
nor will it assume any obligation, which would in any way interfere
with or be inconsistent with or present a conflict or interest with
the services to be furnished by SI under this Agreement.
10.12 This Agreement shall be construed according to the laws of the State
of Georgia. Venue for any litigation under this Agreement shall be
state court, Gwinnett County, Georgia.
-12-
<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized representatives.
BOEHRINGER MANNHEIM CORPORATION SPECTRX, INC.
/s/ Kent M. Kost /s/ Mark A. Samuels
- ------------------------------- ------------------------------
Name Kent M. Kost Name Mark A. Samuels
-------------------------- -------------------------
Title Head, Supply Services Title President & CEO
-------------------------- -------------------------
-13-
<PAGE> 14
APPENDIX A
1) System Specification Document, Magnum Diabetes Screening Instrument,
Project 227, dated October 18, 1995 (or as revised from time to time
and mutually agreed to by the parties).
<PAGE> 15
APPENDIX B
1) Manufacturing Partner Notification/Approval Process dated August 16,
1994.
<PAGE> 16
APPENDIX C
Pricing:
In accordance with the provisions of Section 3.0 of this Agreement, the parties
agree that the unit price for the Instrument shall be fixed for twelve [12]
month periods and shall be calculated using the below indicated tabulation
(linear relationship).
<TABLE>
<CAPTION>
Cost of Goods Sold Gross Margin Unit Price
<S> <C> <C>
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
</TABLE>
If the Cost of Goods Sold exceeds [*], then SI and BMC will renegotiate the
Gross Margins.
Price for the Instrument shall not exceed [*]
**estimated until the final specifications and manufacturing process/costs are
defined.
Approximately three (3) months prior to the end of the initial (or current)
twelve month period, the parties shall review the Cost of Goods Sold components
(material, labor, and overhead). Upon review the parties shall explore the
impact of the following on the components: learning curve, economies of scale,
labor optimization, material savings and/or increases, alternate sourcing,
inventory financing adjustment recoup, etc., and negotiate the Cost of Goods
Sold amount for the next twelve month period. The above tabulation, adjusted
to reflect inflation in accordance with the following paragraph, will then be
used to calculate the unit price.
The Cost of Goods Sold figures provided for in the above tabulation, and in
turn the corresponding Unit Prices, are subject to adjustment at the end of
each twelve month period (referred to above) for changes in the Producers Price
Index. The Cost of Goods Sold figures in the above tabulation shall be
increased or decreased on the date of each adjustment by an amount equal to the
product obtained by multiplying the Cost of Good Sold figures from the
tabulation by the percentage increase or decrease, if any, in the then
Producers Price Index applicable at the commencement of such twelve month
period. "Producers Price Index" with respect to a particular date means the
most recently published Producers Price Index, by the United States Department
of Labor, Bureau of Labor Statistics. Should publication of such index cease,
such term shall mean such alternate index as the parties shall reasonably
determine most closely approximates said Producers Price Index. As noted
above, if the Cost of Good Sold exceeds [*] (regardless of changes in the
Producers Price Index) then SI and BMC will renegotiate the Gross Margins.
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
<PAGE> 17
FOR EXAMPLE PURPOSES ONLY
If the Cost of Good Sold figure agreed to by the parties during Period A
(twelve month period) is [*], the parties will set the Unit Price for the next
twelve month period (Period B) as follows:
1) The parties will negotiate the Cost of Good Sold figure for the next
twelve month period (see second paragraph of this Appendix). For
purposes of this example assume the parties agree on a Cost of Good
Sold figure of [*].
2) The tabulation for Period A shall be adjusted to reflect changes in
the Producer Price Index. For purposes of this example assume the
index rose one percent. The tabulation for Period B would be as
follows:
<TABLE>
<CAPTION>
Cost of Goods Sold Gross Margin Unit Price
-----------------------------------------------------------------------
<S> <C> <C>
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
</TABLE>
3) The Cost of Good Sold figure from #1 is applied to the table to
determine the Unit Price for the next twelve months. Based on this
example [*] the Gross margin would be [*] and the Unit Price would be
[*].
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
-2-
<PAGE> 18
APPENDIX D
1) Instrument Loaner Program/Customer Service Procedure dated 11/01/95
<PAGE> 1
EXHIBIT 10.15
SPONSORED RESEARCH AGREEMENT
Agreement, made this 3rd day of May 1995, by and between THE UNIVERSITY
OF TEXAS M.D. ANDERSON CANCER CENTER (hereinafter referred to as "CANCER
CENTER"), a component institution of The University of Texas System (hereinafter
referred to as "SYSTEM"), located at 1515 Holcombe Blvd., Houston, Texas 77030,
and SpectRX (hereinafter referred to as "SPONSOR"), located at 6025 A Unity
Drive, Norcross, Georgia 30071.
WITNESSETH:
WHEREAS, CANCER CENTER has research facilities and situations which
would allow investigation and study of the non-invasive clinical study of
non-invasive bilirubin monitor invented by Dr. Steven Jacques as described in
Exhibit I hereinafter referred to as ("Research"), a copy of which is attached
hereto and incorporated herein by reference; and
WHEREAS, both SPONSOR and CANCER CENTER consider it necessary and
desirable to perform the Research;
NOW, THEREFORE, the parties agree as follows:
1. Evaluation. SPONSOR agrees to engage the services of CANCER CENTER as
an independent contractor to perform the Research. The Research will be
under the supervision of Steven L. Jacques, Ph.D. (Principal
Investigator) at CANCER CENTER, with the assistance of appropriate
associates and colleagues at CANCER CENTER as may be required.
2. Research. CANCER CENTER agrees as an independent contractor to conduct
the Research. Such Research was originally approved by CANCER CENTER in
accordance with CANCER CENTER policy and may be subsequently amended
only in accordance with CANCER CENTER policy and the written agreement
of CANCER CENTER and SPONSOR as provided for in Article 16 herein
below. The Principal Investigator shall provide SPONSOR with all
research conclusions, analyses, and raw data, which will be marked
"CONFIDENTIAL" upon conclusion of this Agreement.
3. Invention and Patents.
a. For all purposes herein, "Invention" shall mean any discovery,
concept or idea whether or not patentable or copyrightable,
which (i) arises out of work performed pursuant to the
obligations of this Agreement; (ii) is conceived and reduced
to practice during the term of the Agreement as defined in
Article 14 hereinbelow, and (iii) includes but is not limited
to processes, methods, software, formulae, techniques,
compositions of matter, devices, and improvements thereof and
know-how relating thereto. Inventions made solely by the
<PAGE> 2
Principal Investigator and/or other CANCER CENTER personnel as
identified in Article 1 hereinabove or agents of CANCER CENTER
shall be the sole property of CANCER CENTER. Inventions made
jointly by employees or agents of CANCER CENTER and SPONSOR
shall be jointly owned by CANCER CENTER and SPONSOR.
b. In the event that an Invention is made, either solely by
employees or agents of CANCER CENTER or jointly by employees
or agents of CANCER CENTER and SPONSOR, CANCER CENTER and
SPONSOR agree to give notice of such invention to each other
within thirty (30) days of the identification of such
Invention. Within thirty (30) days of notice of Invention,
CANCER CENTER and SPONSOR will thereupon exert their best
reasonable efforts in cooperation with each other to
investigate, evaluate and determine to the mutual satisfaction
of both parties, the disposition of rights to the Invention,
including whether, by whom, and where any patent applications
are to be filed.
c. If, after consultation with SPONSOR, it is agreed by the
parties that a patent application should be filed, SPONSOR
will prepare or co-prepare and file appropriate United States
and foreign patent applications on Inventions made under this
Agreement and SPONSOR will provide CANCER CENTER with the
opportunity to review and provide comments and recommendations
on all such filings. CANCER CENTER has the right to assume
patent filing responsibility if SPONSOR fails to perform.
SPONSOR will provide CANCER CENTER a copy of the application
filed for which SPONSOR has paid the cost of filing, as well
as copies of any documents received or filed during
prosecution thereof. SPONSOR will pay the cost of preparing,
filing and maintenance thereof. If SPONSOR notifies CANCER
CENTER that it does not intend to pay the costs of an
application, or if SPONSOR does not respond or make an effort
to agree with CANCER CENTER on the disposition of rights to
the Invention, then CANCER CENTER may file such application at
its own expense, and SPONSOR shall have no rights to such
Invention. CANCER CENTER will provide SPONSOR a copy of the
application filed for which SPONSOR has paid the cost of
filing, as well as copies of any documents received or filed
during prosecution thereof. SPONSOR agrees to maintain any
such application in confidence until it is published by CANCER
CENTER or by the respective patent office.
d. Upon execution of this Agreement, CANCER CENTER hereby grants
SPONSOR an option, for a period of twelve (12) months ("Option
Period"), to negotiate and acquire an exclusive, world-wide,
royalty-bearing license to the non-invasive bilirubin monitor
(U.S. Patent No. 5,353,790) invented by Dr. Steven Jacques and
any Invention (as well as patent applications, patents, and
copyrights thereon) for commercial purposes, provided that
SPONSOR shall pay all costs and expenses associated with
patent and copyright filing, prosecution, issuance, and
maintenance. The Option Period may be extended for a period of
six (6) months upon mutual agreement of SPONSOR and CANCER
CENTER.
-2-
<PAGE> 3
e. During the Option Period, the parties agree to enter into good
faith negotiations regarding the terms and conditions of said
license and further agree to negotiate license fee rates and
other payments which are fair and reasonable to both parties.
f. In the event that parties fail to reach an agreement regarding
the terms and conditions of said license, within the Option
Period pursuant to Articles 3(d) and (e) hereinabove, CANCER
CENTER shall have the right to enter into license agreements
concerning the same Inventions with third parties.
4. Confidentiality. Because CANCER CENTER and SPONSOR will be cooperating
with each other in this Research, and because each may reveal to the
other in the course of this Research certain confidential information,
CANCER CENTER and SPONSOR agree to hold any confidential information
which (a) is obtained during the course of this work and (b) is related
thereto and (c) is marked as "CONFIDENTIAL" in confidence, and each
party will not disclose same to any third party without the express
written consent of the other party to this Agreement. Information which
is orally transmitted by the disclosing party and is identified at the
time as being of a proprietary or trade-secret nature shall be
considered by the receiving party to be proprietary information,
provided that the disclosing party notifies the receiving party in
writing within thirty (30) days of the oral transmission, identifying
specifically the information transmitted. This requirement shall remain
in force for a period of three (3) years following completion of work
under this Agreement. Nothing in this paragraph shall in any way
restrict the rights of either CANCER CENTER or SPONSOR to use, disclose
or otherwise deal with any information which:
a. Can be demonstrated to have been in public domain as of the
effective date of this Agreement or comes into the public
domain through the term of this Agreement through no act of
the recipient; or
b. Can be demonstrated to have been known to the recipient prior
to the execution of this Agreement; or
c. Can be demonstrated to have been rightfully received by the
recipient after disclosure under this Agreement from a third
party who did not require the recipient to hold it in
confidence or limit its use and who did not acquire it,
directly or indirectly, under obligation of confidentiality to
the disclosing party; or
d. Shall be required for disclosure to Federal regulatory
agencies pursuant to approval for use; or
e. Is independently invented by researchers of the recipient,
which in the case of CANCER CENTER includes SYSTEM, who have
not had access to the information provided to the recipient
hereunder.
-3-
<PAGE> 4
Nothing herein is intended to give SPONSOR the right to use for any
purpose pre-existing confidential information of CANCER CENTER.
Notwithstanding the confidentiality obligations of this Agreement,
nothing herein shall prevent CANCER CENTER and any other component of
SYSTEM from using any information generated hereunder for ordinary
research and educational purposes of a university.
5. Publication Rights. Notwithstanding the provisions of Article 4 of this
Agreement, CANCER CENTER may publish scientific papers relating to the
collaborative research performed under this Agreement. In the event
that CANCER CENTER wishes to publish, CANCER CENTER shall notify
SPONSOR of its desire to publish at least thirty (30) days in advance
of publication and shall furnish to SPONSOR a written description of
the subject matter of the publication in order to permit SPONSOR to
review and comment thereon. SPONSOR shall notify CANCER CENTER in
writing within thirty (30) days of receipt of such draft whether such
draft contains information deemed to be confidential under the
provisions of Article 4, or information that if published within thirty
(30) days would have an adverse effect on a patent application in which
SPONSOR owns full or part interest, or intends to obtain an interest
from CANCER CENTER pursuant to this Agreement. In the latter case
SPONSOR has the right to request a delay and CANCER CENTER agrees to
delay said publication for a period not exceeding ninety (90) days. In
any such notification, SPONSOR shall indicate with specificity to what
manner and degree CANCER CENTER may disclose said information. CANCER
CENTER shall have the final authority to determine the scope and
content of any publication, provided that such authority shall be
exercised with reasonable regard for the commercial interests of
SPONSOR. It is the intent of the parties that no publication will
contain any of confidential information disclosed by SPONSOR without
SPONSOR's prior written permission.
6. Publicity. CANCER CENTER acknowledges SPONSOR's intention to distribute
periodically informational releases and announcements to the news media
regarding the progress of research hereunder. SPONSOR shall not release
such materials containing the name of CANCER CENTER or any of its
employees without prior written approval by an authorized
representative of CANCER CENTER, and said approval shall not be
unreasonably withheld. Should CANCER CENTER reject the news release,
CANCER CENTER and SPONSOR agree to discuss the reasons for CANCER
CENTER's rejection, and every effort shall be made to develop an
appropriate informational news release within the bounds of accepted
academic practices. SPONSOR reserves the same right in the event that
CANCER CENTER desires to distribute a news release concerning the
research program. Nothing herein shall be construed as prohibiting
CANCER or SPONSOR from reporting on this study to a governmental
agency.
7. Responsibility. The parties each agree to assume individual
responsibility for the actions and omissions of their respective
employees, agents and assigns in conjunction with this evaluation.
8. Independent Contractor. SPONSOR will not have the right to direct or
control the activities of CANCER CENTER in performing the services
provided herein, and CANCER CENTER shall perform services hereunder
only as an independent contractor, and nothing herein contained shall
be construed to be inconsistent with this relationship or status. Under
no circumstances shall
-4-
<PAGE> 5
CANCER CENTER be considered to be an employee or agent of SPONSOR. This
Agreement shall not constitute, create or in any way be interpreted as
a joint venture, partnership or formal business organization of any
kind.
9. Title to Equipment. CANCER CENTER shall retain title to all equipment
purchased and/or fabricated by it with funds provided by SPONSOR under
this Agreement.
10. Survivorship. The provisions of Article 3, 4, 5, 6, and 12 shall
survive any expiration or termination of this Agreement.
11. Assignment. This Agreement may not be assigned by either party without
the prior written consent of the other party and such consent will not
be unreasonably withheld; provided, however, that SPONSOR may assign
this Agreement to any purchaser or transferee of all or substantially
all of SPONSOR's business upon prior written notice to CANCER CENTER.
12. Indemnification. CANCER CENTER shall, to the extent authorized under
the Constitution and the laws of the State of Texas, hold SPONSOR
harmless from liability resulting from the negligent acts or omissions
of CANCER CENTER, its agents or employees pertaining to the activities
to be carried out pursuant to the obligations of this Agreement;
provided, however, that CANCER CENTER shall not hold SPONSOR harmless
from claims arising out of the negligence of SPONSOR, its officers,
agents or any person or entity not subject to CANCER CENTER's
supervision or control.
SPONSOR shall indemnify and hold harmless SYSTEM, CANCER CENTER, their
regents, officers, agents and employees from any liability or loss
resulting from judgements or claims against them arising out of the
activities to be carried out pursuant to the obligations of this
Agreement or the use by SPONSOR of the results of the Research
provided, however, that the following is excluded from SPONSOR's
obligation to indemnify and hold harmless:
a. the negligent failure of CANCER CENTER to comply with any
applicable governmental requirements; or
b. the negligence or willful malfeasance by a regent, officer,
agent or employee of CANCER CENTER or SYSTEM.
13. Award. SPONSOR agrees to pay CANCER CENTER a fee of Eight Thousand
Seven Hundred Fifty and No/100 Dollars ($8,750.00) for expenses and
other related costs incurred in conjunction with the Research. This
fee, as shown by approximate category of expense in the attached
Exhibit II which is attached hereto and is incorporated herein by
reference, for information only, shall be payable in one (1)
installment of Eight Thousand Seven Hundred Fifty and No/100 Dollars
($8,750.00) by SPONSOR to CANCER CENTER. This installment shall be due
within thirty (30) days of the date of execution of this Agreement.
-5-
<PAGE> 6
14. Basic Term. This Agreement as it relates to the performance of the
Research, shall become effective as of the date first hereinabove
written and unless earlier terminated as hereinafter provided, shall
continue in force for a period of one (1) month after the same.
15. Default and Termination. In the event that either party to this
Agreement shall be in default of any of its material obligations
hereunder and shall fail to remedy such default within thirty (30) days
after receipt of written notice thereof, the party not in default shall
have the option of terminating this Agreement by giving written notice
thereof, notwithstanding anything to the contrary contained in this
Agreement. Termination of this Agreement shall not affect the rights
and obligations of the parties which accrued prior to the effective
date of termination. SPONSOR shall pay CANCER CENTER for all reasonable
expenses incurred or committed to be expended as of the effective
termination date, subject to the maximum amount as specified in Article
13.
16. Entire Agreement. The parties acknowledge that this Agreement and the
attached Exhibits hereto represent the sole and entire Agreement
between the parties hereto pertaining to the Research and that such
supersedes all prior Agreements, understandings, negotiations and
discussions between the parties regarding same, whether oral or
written. There are no warranties, representations or other Agreements
between the parties in connection with the subject matter hereof except
as specifically set forth herein. No supplement, amendment, alteration,
modification, waiver or termination of this Agreement shall be binding
unless executed in writing by the parties hereto.
17. Reform of Agreement. If any provision of this Agreement is, becomes or
is deemed invalid, illegal or unenforceable in any United States
jurisdiction, such provision shall be deemed amended to conform to
applicable laws so as to be valid and enforceable; or if it cannot be
so amended without materially altering the intention of the parties, it
shall be stricken, and the remainder of this Agreement shall remain in
full force and effect.
18. Notices. Any notices, statements, or reports required by this Agreement
shall be considered given if sent by United States Certified Mail,
postage prepaid and addressed as follows:
If to CANCER CENTER:
Donna S. Gilberg, CPA
Manager, Sponsored Programs
The University of Texas
M.D. Anderson Cancer Center
1515 Holcombe Blvd.
Houston, Texas 77030
-6-
<PAGE> 7
If to SPONSOR:
Mr. Mark Samuels
President and CEO
SpectRX
6025 A Unity Drive
Norcross, Georgia 30071
19. Captions. The captions in this Agreement are for convenience only and
shall not be considered a part of or affect the construction or
interpretation of any provision of this Agreement.
20. Governing Law. This Agreement shall be governed and interpreted in
accordance with the substantive laws of the State of Texas and with
applicable laws of the United States of America.
-7-
<PAGE> 8
IN WITNESS WHEREOF, CANCER CENTER and SPONSOR entered into this
Agreement effective as of the date first hereinabove written and have executed
two (2) originals each of which are of equal dignity.
SPECTRX THE UNIVERSITY OF TEXAS
M.D. ANDERSON CANCER CENTER
By: /s/ Mark A. Samuels By: /s/ Donna S. Gilberg
--------------------------- --------------------------------
Mark Samuels Donna S. Gilberg, CPA
President and CEO Manager, Sponsored Programs
Date: Date: May 2, 1995
------------------------- ------------------------------
I have read this agreement and
understand my obligations hereunder:
By: /s/ Steven L. Jacques 5/1/95
--------------------------------
Steven L. Jacques, Ph.D.
Principal Investigator
By: /s/ Andrew von Eschenbach
--------------------------------
Andrew von Eschenbach, M.D.
Chairman, Dept. of Urology
By: /s/ Helmuth Goepfert
--------------------------------
Helmuth Goepfert, M.D.
Interim Head, Div. of Surgery
Mail Payment To:
The University of Texas
MD. Anderson Cancer Center
Attn: Manager, Sponsored Programs
P.O. Box 297402
Houston, TX 77297
Tax I.D.: 74 6001118 A1
-8-
<PAGE> 9
EXHIBIT I
BACKGROUND
The work consists of analyzing optical measurements on about 96 infants
in the neonatal intensive care unit at Herman Hospital, which measurements have
already been conducted under an approved human research protocol (Dr. David
Oelberg, Pediatrics, UTHSCH).
The work was conducted by a registered nurse and the cost was $7,000
paid by Steven Jacques from the accounts of the Laser Biology Research
Laboratory. At this time, the remaining work consists of analysis by Dr. Jacques
of the data base, which consists of 467 spectra on various sites and at various
times on the infants.
PROPOSED WORK
1. Collect, format and review data collected from bilirubin instrument for
presentation. Include race, age, gender and serum bilirubin levels as available
in data base along with instrument data (raw and processed).
2. Apply the analysis technique described in the patent.
3. Calculate a correlation coefficient and a standard error term for the
analysis outcome vs the measured serum bilirubin levels for the data base.
Provide graphical presentations of the measured (serum) vs predicted (cutaneous)
bilirubin levels.
4. Plot time courses of repeated measurements on any individuals which
were measured on multiple days.
5. Present the data for the most darkly pigmented infants vs the lightly
pigmented infants (similar to item 3 above).
<PAGE> 10
BUDGET
<TABLE>
<S> <C>
DIRECT COSTS
Miscellaneous Expenses $7,000
INDIRECT COSTS (25%) $1,750
TOTAL $8,750
</TABLE>
ANIMALS
None.
HUMANS
No more measurements on humans. Identities of patients are kept
confidential.
<PAGE> 11
[UNIVERSITY OF TEXAS LETTERHEAD]
August 11, 1995
Keith D. Ignotz
Chief Operating Officer
SpectRX
6025A Unity Drive Norcross, GA 30071
Dear Mr. Ignotz:
This will acknowledge receipt of your check dated 07/14/95, in the amount of
$8,750.00, which represents payment in support of the project entitled "Optical
Assessment of Hyperbilirubinemia in Neonates." This project is under the
direction of Dr. Steven L. Jacques of this Institution.
We are sincerely grateful for your financial assistance in support of this
project.
Sincerely,
/s/ Donna S. Gilberg
Donna S. Gilberg, CPA
Manager, Sponsored Programs
/jw
c: Dr. Steven L. Jacques
Dr. Andrew von Eschenbach
Dr. Helmuth Goepfert
<PAGE> 1
EXHIBIT 10.16
SOLE COMMERCIAL PATENT LICENSE AGREEMENT
THIS AGREEMENT, made effective on the 4 day of May, 1995, by and
between MARTIN MARIETTA ENERGY SYSTEMS, INC., (hereinafter "Energy Systems"), a
corporation organized and existing under the laws of the State of Delaware and
whose address for notices is Post Office Box 2009, Oak Ridge, Tennessee
37831-8242, and SpectRx, (hereinafter "Licensee"), a corporation organized and
existing under the laws of the State of Delaware and whose address for notices
is 6025A Unity Drive, Norcross, Georgia 30071.
W I T N E S S:
A. Energy Systems, pursuant to Contract No. DE-AC05-84OR21400
(hereinafter "Prime Contract") with the United States Government as represented
by the Department of Energy (hereinafter "DOE") has developed and/or obtained
rights to Proprietary Rights relating to Products subject to the DOE
non-exclusive, nontransferable, irrevocable, paid- up license for the United
States Government and certain march-in rights and any other conditions of
waivers granted by the DOE; and
B. Licensee desires to obtain rights under Energy Systems,
Proprietary Rights.
THEREFORE, in consideration of the foregoing premises,
covenants and agreements contained herein, the parties hereto agree to be bound
as follows:
1. Definitions.
1.1 "Proprietary Rights" shall mean Energy Systems' United States patents
and patent applications listed in Exhibit A attached hereto and hereby
incorporated into this Agreement by reference and all continuations,
continuations- in-part, divisions, reissues, reexaminations and temporal
extensions of any of the foregoing.
<PAGE> 2
1.2 "Products" shall mean any and all products manufactured, used, sold or
transferred by Licensee covered by one or more claims of the Proprietary Rights
licensed hereunder.
1.3 "Net Sales" shall mean the total amounts invoiced to purchasers during
the accounting period in question for Products sold by Licensee, less
allowances for returns of Products, discounts, commissions, freight, and excise
or other taxes on Products. Net Sales in the case of Products used or
transferred by Licensee shall mean the fair market value of Products as if they
were sold to an unrelated third party in similar quantities.
2. Grants.
2.1 Subject to the terms and conditions of this Agreement, Energy Systems
hereby grants to Licensee the sole commercial (non-U.S.-Government) right and
license, in the United States, to manufacture, use, sell or offer for sale
Products in the field of "Diagnostic Applications Involving the Eye."
2.2 Energy Systems hereby agrees not to grant to any other party right and
license to Proprietary Rights in accordance with the grant hereinabove as long
as Licensee abides by the terms and conditions of this Agreement, unless
required to so grant such right and license in accordance with Federal
Statutory or Regulatory enactments conditioning the waiver of rights to Energy
Systems by the DOE, particularly as set forth in 41 CFR 9-9.109-(6)i; 10 CFR
Part 781; or 37 CFR Part 404.
2.3 Licensee agrees that any Products for use or sale in the United States
shall be manufactured substantially in the United States.
2.4 Should Licensee fail to make a good faith effort to meet the
commercialization milestones described in Exhibit C, Energy Systems shall have
the option, to be exercised on thirty (30) days written notice anytime during
the next succeeding calendar year, to convert this license grant to a
non-exclusive license. Such non-exclusive license shall have the grant
restriction described in Paragraph 2.1.
-2-
<PAGE> 3
However, in the event Energy Systems exercises its conversion option under this
paragraph, Energy Systems will agree to concurrently negotiate, in good faith,
a lower royalty rate than the one described in Exhibit B.
2.5 Licensee agrees to affix appropriate markings of the applicable Energy
Systems' proprietary rights (and the fact that Energy Systems was the source of
these rights) upon or in association with Licensee's Products or licensed
services and Licensee agrees to use its best efforts to follow any guidance
from Energy Systems concerning such markings.
3. Royalties and Commercialization Plan.
3.1 In consideration of the right and license granted herein, Licensee
agrees to the provisions of Exhibit B and Exhibit C attached hereto and hereby
incorporated herein by reference.
3.2 No royalties shall be owing on any Products produced for or under any
Federal governmental agency contract pursuant to the DOE non-exclusive license
for Federal governmental purposes but only to the extent that Licensee can show
that the Federal government received a discount on Product sales which discount
is equivalent to or greater than the amount of any such royalty that would
otherwise be due. Any sales for Federal governmental purposes shall be
reported under the Records and Reports Section hereinbelow by providing: (a) a
Federal government contract number; (b) identification of the Federal
government agency; and (c) a description as to how the benefit of the royalty
free sale was passed onto the Federal government.
3.3 The royalty provisions of Exhibit B shall be offset by any advances
made by Licensee in the Infringement by Third Parties Section hereinbelow.
3.4 Upon termination of this Agreement for any reason whatsoever, any
royalties that remain unpaid shall be properly reported and paid to Energy
Systems within (30) days of any such termination.
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<PAGE> 4
4. Records and Reports.
4.1 Licensee agrees to keep adequate records in sufficient detail to
enable royalties payable hereunder to be determined and to provide such records
for inspection by authorized representatives of Energy Systems at any time
during regular business hours of Licensee. Such inspection may occur on 14
days written notice by Energy Systems to Licensee. Licensee agrees that any
additional records of Licensee, as Energy Systems may reasonably determine are
necessary to verify the above records, shall also be provided to Energy Systems
for inspection.
4.2 Within thirty (30) calendar days after the close of each calendar
half-year during the term of this Agreement (i.e. July 31) and within sixty
(60) calendar days after the close of each calendar year (i.e. February 28 or
February 29), Licensee will furnish Energy Systems a written report providing:
(a) all domestic Net Sales in U.S. Dollars during the preceding calendar
half-year period including any Federal governmental agency under Section 3.2
hereinabove and all export Net Sales, if none so indicate; (b) amount of
royalties due in U.S. Dollars for the preceding calendar half-year period
pursuant to the provisions hereof; and (c) payment of the royalties due in U.S.
Dollars payable to the order of Martin Marietta Energy Systems, Inc., pursuant
to the report to be transmitted in accordance with the Notices Section of this
Agreement hereinbelow.
4.3 Should Licensee fail to make any payment to Energy Systems within the
time period prescribed for such payment, then the unpaid amount shall bear
interest at the rate of one and one half percent (1.5%) per month from the date
when payment was due until payment in full, with interest, is made.
5. Technical Assistance.
5.1 Energy Systems agrees, upon the written request of Licensee, to assist
Licensee in obtaining necessary DOE approvals for technical assistance at
Energy
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<PAGE> 5
Systems' facilities under appropriate agreements. The cost of such technical
assistance shall be paid for by the Licensee.
5.2 Energy Systems agrees to permit its employees, within Energy Systems'
corporate policy guidelines then in effect and subject to DOE requirements then
in effect, to provide consulting services to Licensee with reference to
Licensee's use and commercial exploitation of the Proprietary Rights as
contemplated herein. Licensee shall make payment directly to the individual
consultant(s) for all such services.
6. Infringement by Third Parties.
6.1 Licensee shall give notice of any discovered third-party infringement
to Energy Systems. In the event that Energy Systems does not take appropriate
action to stop or prevent such infringement within ninety (90) days after
receiving such notice and diligently pursue such action, Licensee has the right
to take appropriate action to stop and prevent the infringement, including the
right to file suit.
6.2 In the event that Licensee files suit to stop infringement or defends
any action against the validity of the patent, Licensee shall indemnify and
hold Energy Systems harmless against all liability, expense and costs,
including attorneys' fees incurred as a result of any such suit.
6.3 Licensee may, however, apply all such Licensee costs as a reduction of
any royalties due and payable to Energy Systems under the terms of this
Agreement at such time as verified bills of costs actually incurred are
reported to Energy Systems in accordance with the Records and Reports Section
hereinabove.
6.4 In the event Licensee secures a judgment against any third party
infringer, after accounting for and paying all of Licensee's costs associated
with prosecution of such action as well as paying Energy Systems for any
reduction of royalties pursuant to this section, Licensee shall pay Energy
Systems its royalties as set forth
-5-
<PAGE> 6
hereinabove on any balance of proceeds actually received and Licensee shall
retain any such remaining balance of proceeds.
6.5 The parties hereby agree to cooperate with each other in the
prosecution of any such legal actions or settlement actions undertaken under
this section and each will provide to the other all pertinent data in its
possession which may be helpful in the prosecution of such actions; provided,
however, that the party in control of such action shall reimburse the other
party for any and all costs and expenses in providing data and other
information necessary to the conduct of the action.
6.6 The party having filed such action shall be in control of such action
and shall have the right to dispose of such action in whatever reasonable
manner it determines to be the best interest of parties hereto, except that any
settlement which affects or admits issues of patent validity shall require the
advance written approval of Energy Systems.
7. Representations and Warranties.
7.1 Energy Systems represents and warrants that Exhibit A contains a
complete and accurate listing of all the Proprietary Rights licensed and that
Energy Systems has the right to grant the rights, licenses, and privileges
granted herein.
7.2 Energy Systems represents and warrants that Energy Systems has no
knowledge of any claims of infringement filed against Energy Systems for
practicing the Exhibit A Proprietary Rights anywhere in the world.
7.3 Except as set forth hereinabove, Energy Systems makes NO
REPRESENTATIONS OR WARRANTIES, express or implied, with regard to the
infringement of proprietary rights of any third party.
7.4 Licensee acknowledges that the export of any of the Proprietary Rights
from the United States or the disclosure of any of the Proprietary Rights to a
foreign national may require some form of license from the U.S. Government.
Failure to
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<PAGE> 7
obtain any required export licenses by Licensee may result in Licensee
subjecting itself to criminal liability under U.S. laws.
8. Disclaimers.
8.1 Neither Energy Systems, the DOE, nor persons acting on their behalf
will be responsible for any injury to or death of persons or other living
things or damage to or destruction of property or for any other loss, damage,
or injury of any kind whatsoever resulting from Licensee's manufacture, use, or
sale of materials, information, or Proprietary Rights hereunder.
8.2 EXCEPT AS SET FORTH HEREINABOVE, NEITHER ENERGY SYSTEMS, THE DOE, NOR
PERSONS ACTING ON THEIR BEHALF MAKE ANY WARRANTY, EXPRESS OR IMPLIED: (1) WITH
RESPECT TO THE MERCHANTABILITY, ACCURACY, COMPLETENESS, OR USEFULNESS OF ANY
SERVICES, MATE OR INFORMATION FURNISHED HEREUNDER; (2) THAT THE USE OF ANY SUCH
SERVICES, MATERIALS, OR INFORMATION WILL NOT INFRINGE PRIVATELY OWNED RIGHTS;
(3) THAT THE SERVICES, MATERIALS, OR INFORMATION FURNISHED HEREUNDER WILL NOT
RESULT IN INJURY OR DAMAGE WHEN USED FOR ANY PURPOSE; OR (4) THAT THE SERVICES,
MATERIALS, OR INFORMATION FURNISHED HEREUNDER WILL ACCOMPLISH THE INTENDED
RESULTS OR ARE SAFE FOR ANY PURPOSE, INCLUDING THE INTENDED OR PARTICULAR
PURPOSE. FURTHERMORE, ENERGY SYSTEMS AND THE DOE HEREBY SPECIFICALLY DISCLAIM
ANY AND ALL WARRANTIES, EXPRESS OR IMPLIED, FOR ANY PRODUCTS MANUFACTURED,
USED, OR SOLD BY LICENSEE. NEITHER ENERGY SYSTEMS NOR THE DOE SHALL BE LIABLE
FOR CONSEQUENTIAL OR INCIDENTAL DAMAGES IN ANY EVENT.
8.3 Licensee agrees to indemnify Energy Systems, the DOE, and persons
acting on their behalf for all damages, costs, and expenses, including
attorney's fees,
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<PAGE> 8
arising from, but not limited to, Licensee's making, using, selling, or
exporting of any, Proprietary Rights, information, or Products, in whatever
form furnished hereunder.
9. Term of Agreement and Early Termination.
9.1 This Agreement shall remain in effect until the expiration of the
"last-to-expire" Proprietary Rights of Exhibit A, subject to early termination
as set forth hereinbelow and the terms and conditions set forth in Exhibit B
and Exhibit C attached hereto and hereby incorporated into this Agreement by
reference thereto.
9.2 Either party shall have the right to terminate this Agreement without
judicial resolution upon written notice to the other after a breach of any
provision by the other party has gone uncorrected for sixty (60) days after the
other party has been notified in writing of such breach.
9.3 This Agreement shall terminate automatically upon the extinguishment
of all of the Exhibit A Proprietary Rights, for any reason, but only after the
time for appealing said extinguishment has expired.
9.4 The Parties agree that Energy Systems, at its sole discretion, may
immediately terminate this Agreement upon any attempted transfer of Licensee's
interest, in whole or in part, in this Agreement to any other party.
9.5 Licensee shall provide notice to Energy Systems of its intention to
file a voluntary petition in bankruptcy or of another party's intention to file
an involuntary petition in bankruptcy for Licensee, said notice to be received
by Energy Systems at least thirty (30) days prior to filing such a petition.
Licensee's failure to provide such notice to Energy Systems of such intentions
shall be deemed a material, pre-petition, incurable breach of this Agreement.
9.6 Licensee agrees that this Agreement shall automatically terminate upon
any attempt by Licensee to offer Licensee's rights under this Agreement as
collateral to a third party.
-8-
<PAGE> 9
9.7 Licensee may terminate this Agreement upon sixty (60) days written
notice to Energy Systems and upon paying Energy Systems all royalties due on
actual sales of Product, or the pro rata portion of any annual minimum royalty
due up through the termination date during the anniversary years described in
Exhibit B, whichever amount is greater. The one-year periods covered by the
pro-rata requirement will commence on January 1, 1997, and every anniversary
thereafter.
9.8 Licensee may terminate this Agreement upon written notice to Energy
Systems before the second installment of time "Up-Front" fee, described in
Exhibit B, is due. Receipt of such notice by Energy Systems win remove any
further payment obligation by Licensee. If such notice of termination is
received by Energy Systems after the date when such second installment is due,
Licensee will be required to make such second installment payment before
terminating the Agreement.
9.9 Licensee may also terminate this Agreement upon sixty (60) days
written notice to Energy Systems, without further payment to Energy Systems, if
termination occurs after the second-installment of the "Up-Front" fee of
Exhibit B has been paid by Licensee, and before January 1, 1997.
10. Rights of Parties After Termination.
10.1 Neither party shall be relieved of any obligation or liability under
this Agreement arising from any act or omission committed prior to the
effective date of such termination.
10.2 From and after any termination of this Agreement, Licensee shall have
the right to sell any Products that Licensee had already manufactured prior to
termination, provided that all royalties and reports required hereinabove shall
be timely submitted to Energy Systems.
10.3 From and after any termination of this Agreement, Licensee shall not
manufacture nor have manufactured any Products pursuant to this Agreement.
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<PAGE> 10
10.4 The rights and remedies granted herein, and any other rights or
remedies which the parties may have, either at law or in equity, are cumulative
and not exclusive of others. On any termination, Licensee shall duly account
to Energy Systems and transfer to it all rights to which Energy Systems may be
entitled under this Agreement.
11. Force Majeure.
11.1 No failure or omission by Energy Systems or by Licensee in the
performance of any obligation under this Agreement shall be deemed a breach of
this Agreement or create any liability if the same shall arise from acts of
God, acts or omissions of any government or agency thereof, compliance with
requests, recommendations, rules, regulations, or orders of any governmental
authority or any office, department, agency, or instrumentality thereof, fire,
storm, flood, earthquake, accident, acts of the public enemy, war, rebellion,
insurrection, riot, sabotage, invasion, quarantine, restriction, transportation
embargoes, or failures or delays in transportation.
12. Notices
12.1 All notices and reports shall be addressed to the parties hereto as
follows:
<TABLE>
<S> <C>
If to Energy Systems:
Business Manager, Technology Transfer Facsimile No.
Martin Marietta Energy Systems, Inc. (615) 576-9465
701 Scarboro Road Verify No.
Oak Ridge, Tennessee 37831-8242 (615) 574-4193
If to Licensee:
Mr. Mark A. Samuels Facsimile No.
President (404) 242-8639
SpectRx Verify No.
6025A Unity Drive (404) 242-8723
Norcross, Georgia 30071
</TABLE>
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<PAGE> 11
12.2 All fees, minimum royalties and royalty payments due Energy Systems
shall be sent to:
Martin Marietta Energy Systems. Inc.
Department 888058
Knoxville, Tennessee 37995-5058
12.3 Any notice, report or any other communication required or permitted to
be given by one party to the other party by this Agreement shall be in writing
and either (a) served personally on the other party, (b) sent by express,
registered or certified first-class mail, postage prepaid, addressed to the
other party at its address as indicated above, or to such other address as the
addressee shall have previously furnished to the other party by proper notice,
(c) delivered by commercial courier to the other party, or (d) sent by
facsimile to the other party at its facsimile number indicated above or to such
other facsimile number as the party shall have previously furnished to the
other party by proper notice, with machine confirmation of transmission.
13. Non-Abatement of Royalties.
13.1 Energy Systems and Licensee acknowledge that certain of the
Proprietary Rights may expire prior to the conclusion of the term of this
Agreement; however, Energy Systems and Licensee agree that the royalty rates
provided for hereinabove shall be uniform and undiminished except pursuant to
this Agreement.
14. Waivers
14.1 The failure of Energy Systems at any time to enforce any provisions of
this Agreement or to exercise any right or remedy shall not be construed to be
a waiver or such provisions or of such rights or remedy or the right of Energy
Systems thereafter to enforce each and every provision, right or remedy.
15. Modifications
15.1 It is expressly understood and agreed by the parties hereto that this
instrument contains the entire agreement between the parties with respect to
the
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<PAGE> 12
subject matter hereof and that all prior representations, warranties, or
agreements relating hereto have been merged into this document and are thus
superseded in totality by this Agreement. This Agreement may be amended or
modified only by a written instrument signed by the duly authorized
representatives of both of the parties.
16. Headings.
16.1 The headings for the sections set forth in this Agreement are strictly
for the convenience of the parties hereto and shall not be used in any way to
restrict the meaning or interpretation of the substantive language of this
Agreement.
17. Law
17.1 This Agreement shall be construed according to the laws of the State
of Tennessee and the United States of America.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed in their respective names by their duly authorized
representatives.
"Energy& Systems"
MARTIN MARIETTA ENERGY SYSTEMS, INC.
By: /s/ William R. Martin
----------------------------------------
Name: (typed) William R. Martin
------------------------------
Title: Vice President, Technology Transfer
-------------------------------------
Date: 3 May 95
--------------------------------------
"Licensee"
- ----------
By: /s/ Mark A. Samuels
----------------------------------------
Name: (typed) Mark A. Samuels
--------------------------------------
Title: President and CEO
-------------------------------------
Date: May 5, 1995
--------------------------------------
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<PAGE> 13
EXHIBIT A. PROPRIETARY RIGHTS
U.S. Patent Application, serial no. 300,202, filed September 2, 1994, for ESID
1194-X, entitled "Synchronous Luminescence System"
Initials:
Energy Systems: /s/ WRM
---------------
Date: 3 May 95
-------------------------
Licensee: /s/ MAS
---------------------
Date: 3 May 95
-------------------------
<PAGE> 14
EXHIBIT B. EXECUTION FEE, ROYALTIES AND
MINIMUM ANNUAL ROYALTIES AMOUNTS
In consideration of the rights and licenses granted herein, Licensee
agrees to pay Energy Systems an up-front fee of Thirty Thousand U.S. Dollars
($30,000) in two installments. The first installment payment of Ten Thousand
U.S. Dollars ($10,000) shall be made on the execution of this Agreement, and
the second installment payment, of Twenty Thousand U.S. Dollars ($20,000),
shall be made to Energy Systems by September 30, 1995.
The royalty rate shall not exceed Six Percent (6%) of Net Sales of
Products. Energy Systems agrees to negotiate with Licensee in good faith, a
lower royalty rate, provided adequate and documented justification for a lower
royalty rate is supplied to Energy Systems by Licensee.
The minimum annual royalties shall be calculated as follows:
If, by December 31, 1997, and all anniversary dates thereof,
Licensee's annual payments to Energy Systems, for calendar year 1997 and all
subsequent calendar years, respectively, do not amount to Ten Thousand U.S.
Dollars ($10,000) annually, then Licensee shall pay the difference between the
amount of actual royalties paid and the minimum annual royalty of $10,000
within thirty (30) days of said anniversary dates.
NOTICE
THIS EXHIBIT CONTAINS FINANCIAL AND COMMERCIAL INFORMATION THAT IS
BUSINESS CONFIDENTIAL AND THE PARTIES HEREBY AGREE NOT TO USE OR DISCLOSE THIS
EXHIBIT TO ANY THIRD PARTY WITHOUT THE ADVANCE WRITTEN APPROVAL OF THE OTHER
PARTY HERETO, EXCEPT TO THOSE NECESSARY TO ENABLE THE PARTIES TO PERFORM UNDER
THIS AGREEMENT OR AS MAY BE REQUIRED BY THE ENERGY SYSTEMS CONTRACT WITH THE
DOE UNDER THE SAME RESTRICTIONS AS SET FORTH HEREIN.
Initials:
Energy Systems: /s/ WRM
---------------
Date: 3 May 95
-------------------------
Licensee: /s/ MAS
---------------------
Date: 3 May 95
-------------------------
<PAGE> 15
EXHIBIT C. DEVELOPMENT AND COMMERCIALIZATION PLAN
Licensee agrees to invest in engineering/R&D activities and marketing
development, by committing Licensee's resources, at a minimum, per the
following plan.
FOR ENGINEERING/R&D:
-- Within 6 months of execution of Agreement, Licensee will test
30 diabetic patients using Synchronous Luminescence Technology, at an estimated
cost of $50,000.
-- Within 12 months of execution of Agreement, Licensee will test
250 patients using Synchronous Luminescence Technology, at an estimated cost of
$100,000.
-- Within 24 months of execution of Agreement, Licensee will
develop a Product suitable for the market, based on Synchronous Luminescence
Technology, at an estimated cost of $1,000,000.
FOR MARKETING DEVELOPMENT:
-- Within 12 months of execution of Agreement, Licensee will
develop a marketing specification for the Synchronous Luminescence Product,
using focus groups and survey instruments.
-- Within 24 months of execution of Agreement, Licensee will
launch the Product in the United States.
-- The total estimated cost of these two marketing-development
activities is $350,000.
<PAGE> 16
EXHIBIT C., CONTINUED
Progress and substantiation of Licensee's good faith effort to meet
these requirements shall be provided to Energy Systems in the form of a written
report to be presented to Energy Systems no later than December 31, 1995, and
each annual anniversary thereafter of the date thereof.
NOTICE
THIS EXHIBIT CONTAINS FINANCIAL AND COMMERCIAL INFORMATION THAT IS
BUSINESS CONFIDENTIAL AND THE PARTIES HEREBY AGREE NOT TO USE OR DISCLOSE THIS
EXHIBIT TO ANY THIRD PARTY WITHOUT THE ADVANCE WRITTEN APPROVAL OF THE OTHER
PARTY HERETO, EXCEPT TO THOSE NECESSARY TO ENABLE THE PARTIES TO PERFORM UNDER
THIS AGREEMENT OR AS MAY BE REQUIRED BY THE ENERGY SYSTEMS CONTRACT WITH THE
DOE UNDER THE SAME RESTRICTIONS AS SET FORTH HEREIN.
Initials:
Energy Systems: /s/ WRM
---------------
Date: 3 May 95
-------------------------
Licensee: /s/ MAS
---------------------
Date: 3 May 95
-------------------------
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<PAGE> 17
<TABLE>
<S> <C>
OAK RIDGE NATIONAL LABORATORY
MANAGED BY LOCKHEED MARTIN ENERGY RESEARCH CORPORATION PHONE: (423) 576-8369
FOR THE U.S. DEPARTMENT OF ENERGY FAX: (423) 576-9465
INTERNET: [email protected]
POST OFFICE BOX 2009
OAK RIDGE, TN 37831-8242
</TABLE>
WILLIAM R. MARTIN
VICE PRESIDENT, TECHNOLOGY TRANSFER
May 17, 1996
Mr. Mark A. Samuels
SpectRx
6025A Unity Drive
Norcross, Georgia 30071
Dear Mr. Samuels:
TERMINATION OF LICENSE AGREEMENT
Our letter of February 7, 1996, provided you with written notice of your breach
of the Agreement as a result of a delinquent $20,000 royalty payment and sales
report. This breach remains uncorrected after 60 days. Therefore, we hereby
exercise our right to terminate the Agreement pursuant to section 9.2 thereof.
The effective date of the termination will be April 7, 1996.
As stated in section 10.1 of the Agreement, your obligation to pay the $20,000
in delinquent royalties (plus interest) that are due is not relieved by this
termination. Therefore, please submit payment of $21,873.97 immediately.
If you have any questions, please contact Licensing Executive, Russ Miller, at
(423) 574-8746 or Jim Ferguson at (423) 241-2353, both of my staff.
Thank you.
/s/ W.R. Martin
- -----------------------------
William R. Martin
WRM:CWG.jaf
By certified mail
c: H. W. Adams
J. E. Ferguson
C. W. Griffith
R. R. Miller
S. Scott
<PAGE> 1
EXHIBIT 10.17
Agreement
This Agreement is made and effective as of the 10th day of July, 1995
by and between
Teijin Limited, a Japanese corporation, having its registered office
and principal place of business at 6-7, Minami-hommachi 1-chome, Chuo-ku, Osaka
541, Japan ("Teijin")
and
SpectRx Inc., a Delaware corporation, having its registered office at
6025A Unity Drive, Norcross, GA 30071, U.S.A. ("SpectRx").
WITNESSETH:
WHEREAS, both parties hereto are engaged in the design, development,
production and sale of certain health care medical equipment;
WHEREAS, SpectRx, as a research and development company, believes it
has enough expertise and capacity to develop and/or produce the non-invasive
HbAlc monitoring product;
WHEREAS, Teijin is interested in the commercialization of such product
in Japan and in other Asian and Oceania countries and has enough capacity to
commercialize such product; and
WHEREAS, both parties hereto are willing to conduct the joint
development of such product on terms and conditions set forth herein,
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
Definitions
1.1 As used in this Agreement:
"Product" shall mean a non-invasive HbAlc monitoring product
developed by both parties hereto under this Agreement and using SpectRx's
established basic quantitative technology. The SpectRx's basic quantitative
technology is based on the measurement of fluorescent intensity and the Raleigh
scattering properties of the cornea aqueous and lens tissue of the eye.
<PAGE> 2
ARTICLE 2
Subject Matter
2.1 Subject to the terms and conditions of this Agreement, both parties
hereto shall collaborate with each other in carrying out the Development Program
as described in Exhibit A attached hereto for the commercialization of the
Product. The Development Program will be scheduled over a period of twenty-four
(24) months commencing the date hereof.
2.2 Each party hereto will give the other party such technical and/or
business information as useful to research, develop, manufacture, use and/or
sell the Product during the term of this Agreement.
ARTICLE 3
Assignment of Joint Development
3.1 During the term of this Agreement, each party hereto shall take its
share separately of the Development Program;
for Teijin: Testing and evaluating the Product
(including the prototype model), and conduct
of necessary procedures (including clinical
trials) for the commercialization of the
Product in Japan, and giving financial
support to SpectRx described herein,
for SpectRx: Research, designing, pre-producing and
producing of the Product.
Notwithstanding the foregoing, the basic design and final
evaluation of the Product shall be made jointly by both parties hereto.
ARTICLE 4
Design and Pre-Production
4.1 SpectRx shall design the Product and shall produce some of the
prototype models of the Product at its facility in accordance with the
specifications separately agreed upon between the parties hereto and applicable
regulatory requirements.
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<PAGE> 3
ARTICLE 5
Evaluation and Acceptance
5.1 Teijin shall test and evaluate the prototype model of the Product
produced by SpectRx. If satisfactory, Teijin shall apply to the Japanese
Ministry of Health and Welfare for an import and/or manufacturing approval of
the Product with assistance of SpectRx in terms of necessary documents.
5.2 If the prototype models of the Product are in accordance with the
specifications, but found to be unsatisfactory to Teijin, Teijin may request
SpectRx to continue the development of the Product, for which terms and
conditions shall be separately negotiated.
ARTICLE 6
Funds and Share of Cost
6.1 Teijin shall provide SpectRx with funds totaling one million five
hundred thousand US dollars ($1,500,000) for the development of the Product and
rights to distribute the Product in Japan and in other Asian and Oceania
countries. Provision of the funds shall be made by interbank telegraphic
transfer in U.S. dollars to Wachovia Bank, Oakbrok Parkway, Norcross, Georgia;
Routing #061-00-00-10; SpectRx Inc. in accordance with the following schedule:
1)First payment: Two hundred thousand U.S. dollars
($200,000) upon the execution of this
Agreement;
2)Second payment: Three hundred thousand U.S. dollars
($300,000) upon the completion of the pilot
study in the Development Program;
3)Third payment: Two hundred fifty thousand U.S. dollars
($250,000) upon the mutually agreed decision
of the specifications of the Product;
4)Forth payment: Five hundred thousand U.S. dollars
($500,000) upon the completion and delivery
of the prototype models of the Product; and
5)Fifth payment: Two hundred fifty thousand U.S. dollars
($250,000) upon the obtainment of the import
approval of the Product from the Japanese
Ministry of Health and Welfare.
6.2 Teijin shall have the right to evaluate the progress and result of
the Development Program at any milestone described in Section 6.1 hereof. If
such progress and result are unsatisfactory to Teijin, Teijin may terminate the
Development Program at any milestone in spite of Section 16.1 hereof, thereafter
Teijin will have no obligation to pay the remainder of the above funding and
SpectRx will have no obligation to pay royalty or refund any of the money
hereunder and all terms and conditions of this Agreement will be terminated
except Article 14 hereof.
6.3 Each party hereto shall bear any cost arising from its own
activities hereunder.
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<PAGE> 4
ARTICLE 7
Purchase of Prototype Model
7.1 Teijin will purchase at least one set of the prototype model of the
research grade Product from SpectRx. The price of such prototype model does not
exceed eighty-five thousand U.S. dollars ($85,000) per set. A deposit of fifty
percent (50%) of the purchase price, forty-two thousand five hundred U.S.
dollars ($42,500) in case of one set order, is required with the order, delivery
to be one hundred twenty (120) days from receipt of the order and deposit for
each hand research instrument made by SpectRx hereunder.
ARTICLE 8
Result and Patent
8.1 The result made solely by Teijin by non-invasive testing using the
research instrument made by SpectRx hereunder in the eye will be jointly owned
by both parties hereto. The result made jointly by Teijin and SpectRx using the
research instrument made by SpectRx hereunder in the eye shall be jointly owned
by both parties hereto.
8.2 The patent on jointly owned result (hereinafter "Joint Patent")
shall be filed by both parties hereto in any country. Any expenses to be
incurred in filing and maintaining the Joint Patent shall be born equally by
both parties hereto. If either of the parties hereto has no intention to file
the Joint Patent in a country or countries, such party (hereinafter
"Non-desiring party") shall notify its intentions to the other party as soon as
possible. After receipt of such notice from the Non-desiring party or after
failure of either party to notify the other party of its intention to join
within thirty (30) days from the delivery of written notice by such other party
expressing its desire to file the Joint Patent in a country or countries
(hereinafter "Desiring Party"), whichever comes earlier, the Desiring party has
the right to file the Joint Patent in its single name in such country or
countries.
8.3 Should either party hereto intend to withdraw or abandon its
patent, the party shall notify the other party of its intentions and provide an
opportunity for such other party to acquire the subject patent in its single
name.
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<PAGE> 5
ARTICLE 9
Product Infringement of Intellectual Property Rights
9.1 SpectRx agrees to produce the Product without knowingly infringing
any third party patent, patent application and/or other intellectual property
rights, and indemnify and save Teijin harmless from any liability, costs and/or
expenses resulting from any claim that such Product infringe any third party
patent, patent application and/or other intellectual property rights, while
Teijin agrees to monitor the patent situation including new patent applications
in Japan. Teijin shall notify SpectRx of any potential infringement as soon as
it is discovered, and both parties hereto will discuss on measures to cope with
such potential infringement.
ARTICLE 10
Commercial Production
10.1 Once the Product is granted the necessary approval for import into
and/or, distribution in Japan, Teijin and SpectRx shall enter an OEM Supply
Agreement.
10.2 At the time of this Agreement, Teijin wishes to launch the Product
in Japanese market, once the approval of the Product is successfully obtained
and enough clinical data for marketing use is accumulated, at the earliest time
after Teijin obtains the import and/or distribution approval from Japanese
government.
10.3 In case that Teijin desires to manufacture the Product, SpectRx
will consider granting to Teijin an exclusive right and license, which will not
be unreasonably withheld, to manufacture, have manufactured, use and/or sell the
Product in Japan under SpectRx's technology. However, SpectRx will retain the
right to manufacture the electro optical sensor module for sale in Japan only or
in other markets to be negotiated on a case by case basis.
ARTICLE 11
Distribution Rights
11.1 Teijin and its subsidiary(ies) have the exclusive rights for sale
and distribution of the Product in Japan. Such rights are granted after the
fifth payment is made per Section 6.1 hereof. Further, Teijin is hereby granted
the first refusal right to sell and/or distribute the Product in other Asian and
Oceania countries.
11.2 SpectRx shall not supply the competitive product of the Product to
any third party for the market of Japan and permitted countries, as far as
Teijin has the exclusive rights for sale and distribution of the Product in such
countries.
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<PAGE> 6
11.3 Information gained from early introduction of the Product into
Japanese market will help the introduction of the Product in non-Japanese
markets. As such, if SpectRx sells the Product in other countries than Japan,
SpectRx will pay to Teijin a commission of two percent (2%) of invoiced sales of
the Product sold by SpectRx to customers other than Teijin.
ARTICLE 12
Further Development
12.1 If either party hereto desires to proceed the further development
of the other product based on the similar technology of the Product, the other
party would have the first refusal right to commercialize the other product with
such party. In case that both parties hereto agree to develop such other
product, a new agreement shall be executed by the parties hereto.
ARTICLE 13
Warranty
13.1 Teijin and SpectRx hereby warrant to each other that:
a) their obligations hereunder are not subject to prior
commitments or obligations to any third party;
b) SpectRx has not entered into any agreement with other
party(ies) relating to research, development, manufacture, use and/or sale of
the Product for the market of Japan and permitted countries;
c) they act in good faith in connection with the obligations
hereunder.
13.2 An agreement dated December 2, 1994 exists between SpectRx and
Boehringer Mannheim Corporation as defined in Exhibit B attached hereto. SpectRx
hereby warrant to Teijin that such agreement between SpectRx and Boehringer
Mannheim Corporation does not infringe upon the rights SpectRx is granting to
Teijin for a "non-invasive quantitative replacement for the hemoglobin Alc
test".
ARTICLE 14
Confidentiality
14.1 Each of the parties hereto agrees that any data and information of
a technical or commercial nature which is furnished to the other in written or
tangible form by either party hereto under or in connection with this Agreement
will be maintained by the receiving party in confidence and not disclosed to any
third party for the duration hereof and a period of five (5) years thereafter
and will not be used by the receiving party except as permitted in this
Agreement. Neither party
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<PAGE> 7
hereto shall be under any obligation to maintain in confidence any portion of
the received information which is (i) already in possession of the receiving
party; (ii) independently developed by the receiving party; (iii) publicly
disclosed by the disclosing party; (iv) rightfully received by the receiving
party from a third party:,or (v) disclosed pursuant to the requirement or
request of a governmental agency or third party to the extent such disclosure is
required by operation of law, regulation or court order.
14.2 Any data and/or information which is orally transmitted at the
time as being of a proprietary or trade secret nature, shall be considered by
the receiving party to be proprietary data and/or information, provided that the
disclosing party notifies the receiving party in writing, within thirty (30)
days of the oral transmission, identifying specifically the data and/or
information so transmitted.
ARTICLE 15
Force Majeure
15.1 If either party's performance hereunder is prevented, restricted
or interfered with by reason of fire, explosion, strike, labor dispute, casualty
or accident, unavailability of raw materials, flood, war, civil commotion, acts
of God, any law, order or decree of any government or subdivision thereof or any
other cause whatsoever, whether similar or dissimilar to those above enumerated,
beyond the reasonable control of such party, the party who affected shall be
excused from performance hereunder to the extent and for the duration of such
prevention, restriction or interference.
ARTICLE 16
Term and Termination
16.1 This Agreement shall come into force on the date first above
written. Unless the parties executes a written termination agreement of this
Agreement, this Agreement shall remain in force.
16.2 Section 16.1 hereof notwithstanding, either party hereto may
terminate this Agreement forthwith in the event that the other party:
a) materially and substantially breaches this Agreement and
does not cure or remedy such breach within sixty (60) days of receipt of the
first party's notification of its intention to terminate this Agreement because
of such breach as: (i) failure to complete a milestone per schedule; (ii)
failure to make a milestone payment; (iii) failure to seek Ministry of Health
and Welfare approval in Japan; (iv) failure to sell after Japanese approval at
levels agreed to in the supply agreement;
b) becomes insolvent, enters bankruptcy or ceases to pay its
debts when due.
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<PAGE> 8
16.3 In the event of termination of this Agreement pursuant to Section
16.2 hereof, all sums paid or payable shall remain the property of SpectRx and
shall not be refundable.
16.4 Upon termination of this Agreement by SpectRx pursuant to Section
16.2 hereof, Teijin will use its reasonable efforts to cause to be transferred
to SpectRx any governmental approvals obtained by Teijin and necessary for
SpectRx to market the device in Japan or other permitted markets.
16.5 Upon termination of this Agreement, all provisions end except
Article 14 hereof.
ARTICLE 17
Miscellaneous
17.1 All notices, demands and other communications hereunder shall be
made in writing and shall be addressed as follows:
If to Teijin:
attn: General Manager of Home Health Care
Planning Dept. Teijin Limited
1-1, Uchisaiwai-cho 2-chome, Chiyoda-ku,
Tokyo 100, Japan
If to SpectRx:
attn:
------------------------
SpectRx Inc.
6025A Unity Drive,
Norcross, GA 30071, U.S.A.
17.2 This Agreement shall inure to the benefit of and be binding upon
and enforceable by the parties and their successors and permitted assigns.
However, neither party may assign or delegate any of its rights or obligations
under this Agreement without the prior written consent of the other, which will
not be unreasonably withheld, except that such rights and obligations may be
assigned or delegated by either party to any affiliated party in connection with
reorganization whose performance of this Agreement is guaranteed by the
co-signing party hereto or to a corporation or other business concern which
acquires substantially all of the assets of that party.
17.3 Should it be determined, in a form and manner which render such
determination enforceable against either or both of the parties, that any
provision of this Agreement is void, invalid, unenforceable or illegal, such
determination shall not affect any other provision of this Agreement, and this
Agreement shall be constructed and performed as if such void, invalid,
unenforceable or illegal provision had never been contained herein.
-8-
<PAGE> 9
17.4 This Agreement constitutes the entire agreement and understanding
of the parties hereto regarding all matters involving the transactions herein
described, and supersedes all prior understandings, representations or
agreements between the parties hereto regarding any such matters or
transactions.
17.5 This Agreement is executed in the English language in two
counterparts, each of which shall for all purposes be deemed an original. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Georgia, U.S.A.
17.6 The parties hereto agree to effectuate all reasonable efforts to
resolve in an amicable manner any and all disputes between them including claims
with respect to the use of the Product in the market in connection with this
Agreement. In case that such disputes are not resolved within a reasonable
period, they shall be finally settled by arbitration in accordance with the
rules of Conciliation and Arbitration of the International Chamber of Commerce
in New York, New York, U.S.A.
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<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
entered into as of the date first above written.
TEIJIN LIMITED SPECTRX Inc.
By: /s/ Yasuatsu Yuasa By: /s/ Keith Ignotz
------------------------------------- --------------------------------
Yasuatsu Yuasa
Title: Managing Director, Title: Chief Operating Officer
Member of the Board Member of the Board
General Manager of Home Health
Care Division
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<PAGE> 11
EXHIBIT A
SPECTRX INC. - TEIJIN LIMITED January 5, 1995
PROPOSED OPTION AND LICENSE PLAN WITH MILESTONES KDI/mlh
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
| | | |
| | | |
<S> <C> <C> <C> <C>
License Acceptance of Teijin provides final SpectRx completes Teijin conducts Beta
Japan clinical data Japan product development and prototype clinicals and
specification to delivers 3 Alpha Accepts product
SpectRx prototypes
_____d Submit application
_____ KOUSEI-SHO
rights
___pectRx
If Japan clinical is SpectRx mutually Teijin begins Alpha Teijin & SpectRx
rejected, SpectRx may agrees to Japan testing enter Supply
license to competition product specification Agreement
- ---------------------------------------------------------
| |
| |
<S> <C> <C>
Teijin Obtains SpectRx ships product
KOUSEI-SHO and per the Supply
other required Agreement
approvals
_____d
_____
rights
___pectRx
</TABLE>
<PAGE> 12
EXHIBIT B
DEVELOPMENT AND LICENSE AGREEMENT
This Agreement is entered into and made effective as of this 2nd day of
December, 1994, by and between Boehringer Mannheim Corporation, an Indiana
corporation having a principal place of business at 9115 Hague Road,
Indianapolis, Indiana 46250 ("BMC"); and SpectRx, Inc., a Delaware corporation
having a principal place of business at 6025 A Unity Drive, Norcross, Georgia
30071 ("SI").
RECITALS:
A. BMC is in the medical diagnostics business and has experience and
expertise in the areas of testing and marketing of medical diagnostics products.
B. Pursuant to a License Agreement dated as of May 7, 1991, between
Georgia Tech Research Corporation ("GTRC") and Laser Atlanta Optics, Inc.
("LAO"), which was assigned to SI on January 16, 1993, and amended on October
19, 1993 (the "GTRC License"), SI is the exclusive licensee of GTRC for certain
know-how relating to a method and apparatus using non-invasive instrumentation
to measure molecular changes in human lenses for the purpose of detecting
diabetes.
C. SI has developed a device to detect diabetes in humans and has built
prototype devices and is conducting clinical trials of such devices.
<PAGE> 13
D. BMC has expressed an interest in participating as a member of SI's
project team during the building of prototype devices and the execution of
definitive clinical trials; as well as in acquiring worldwide, exclusive
marketing rights to such device.
THEREFORE, in consideration of the premises and mutual
agreements expressed herein, the parties agree as follows:
1.0 DEFINITIONS
1.1 "Affiliate" shall mean, with respect to either party, any
corporation, partnership or other business entity that now or in the future
controls, is controlled by, or is under common control with, such party.
"Control" shall mean the direct or indirect ownership of fifty percent (50%) or
more of the voting interest in, or a fifty percent (50%) or more interest in the
income of, such corporation or other business entity, or such other relationship
as, in fact, constitutes actual control.
1.2 "Device" shall mean any non-invasive instrument and improvements
thereto developed by, for or with SI using the Know-How (defined below) that
measures changes in human lenses for the qualitative detection of diabetes for
screening purposes.
1.3 "Know-How" shall mean all knowledge of SI, regardless of its
source, relating to a method of using non-invasive instrumentation to measure
molecular changes in living human lenses for the purpose of detecting diabetes,
including, but not limited to, information not in the public domain obtained by
way of the GTRC License.
2.0 RIGHTS GRANTED BY SI
2.1 Effective upon payment in full to SI of the development payments
described in Section 3, SI hereby grants to BMC a license to sell and market the
Device on a world-wide and exclusive basis, subject to the terms set forth in
this Agreement (the "Marketing License"). SI may
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<PAGE> 14
not, during the term of the Marketing License, sell, market or distribute, or
give any third party rights to sell, market or distribute, any non-invasive
instrument developed by, for or with SI using the Know-How that measures changes
in human lenses for the qualitative detection of diabetes for screening
purposes. The Marketing License gives BMC the right to market the device for
screening for diabetes. The term of the Marketing License, unless sooner
terminated pursuant to the terms and conditions of this Agreement, shall be
coincident with the term of the GTRC.
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<PAGE> 15
APPENDIX "A"
1. NON INVASIVE DIABETES SCREENING INSTRUMENTS;
The instrument will have the ability to detect diabetes and is intended
to be used for screening for diabetes. The SI diabetes screening instrument will
present data useful for screening in a qualitative manner. The presentation of
data will not compromise the quantitative data presentation of the SI
instrument. The SI screening instrument will not be used, nor can the data be
presented in such a manner that it could be used to evaluate long-term glucose
control in a manner similar to the HbAlc test that the SI monitoring instrument
is designed to replace.
2. PRODUCT SPECIFICATIONS;
Details to follow
<PAGE> 1
EXHIBIT 10.18A
LICENSE AGREEMENT
THIS AGREEMENT is made and entered into as of the date last entered
below ("the Effective Date"), by and between Joseph R. Lakowicz, Ph.D., an
individual having an address of 10037 Fox Den Road, Ellicott City, Maryland
21042 ("DR. LAKOWICZ") and SpectRx, Inc., a Delaware corporation having its
principal office at 6025A Unity Drive, Norcross, Georgia 30071 ("SRX").
WHEREAS, DR. LAKOWICZ owns rights in and to technology relating to
fluorescence spectroscopy, including the Licensed Technology further described
and defined below;
AND WHEREAS, SRX desires to obtain the exclusive right to utilize the
Licensed Technology;
NOW, THEREFORE, for and in consideration of the foregoing and the
mutual covenants and agreements contained herein, the parties hereto agree as
follows:
1. Definitions
As used herein:
1.1 "Licensed Patents" means:
(a) United States Patent Application Serial No.
08/183,238, filed April 12, 1993, entitled "Fluorescent Energy Transfer
Immunoassay";
(b) Canadian Patent Application No. 2087413, filed
January 15, 1993, entitled "Fluorescent Energy Transfer Immunoassay";
(c) European Patent Application No. 93400091.0, filed
January 15, 1993, entitled "Fluorescent Energy Transfer Immunoassay";
(d) Japanese Patent Application No. 006057/1993, filed
January 15, 1993, entitled "Fluorescent Energy Transfer Immunoassay";
(e) United States Patent Application Serial No.
08/403,554, filed March 14, 1995, entitled "pH and pCO2 Sensing by Luminescent
Lifetimes and Energy Transfer";
(f) Canadian Patent Application No. 2087412, filed
January 15, 1993, entitled "pH and pCO2 Sensing by Luminescent Lifetimes and
Energy Transfer";
(g) European Patent Application No. 93400089.4, filed
January 15, 1993, entitled "pH and pCO2 Sensing by Luminescent Lifetimes and
Energy Transfer";
<PAGE> 2
(h) Japanese Patent Application No. 006047/1993, filed
January 18, 1993, entitled "pH and pCO2 Sensing by Luminescent Lifetimes and
Energy Transfer";
(i) United States Patent Application Serial No.
08/173,277, filed December 27, 1993, entitled "Chemical Sensing by
Phase-Modulation Fluorometry";
(j) European Patent Application No. 92911548.3, filed May
4, 1992, entitled "Chemical Sensing by Phase-Modulation Fluorometry";
(k) United States Patent Application Serial No.
08/102,806, filed August 6, 1993, entitled "Method for Optically Measuring
Chemical Analytes";
(l) United States Patent No. 5,409,835, issued April 25,
1995, entitled "Long-Wavelength Fluorescent Probe Compounds for Calcium Ions
and their Use in Ratiometrically Measuring Calcium Ion Concentrations";
(m) United States Patent Application Serial No.
08/094,016, filed July 23, 1993, entitled "Apparatus for Multi-Dimensional
Phase Fluorescence Lifetime Imaging";
(n) European Patent Application No. 92903893.3, filed
January 23, 1992, entitled "Method and Apparatus for Multi-Dimensional Phase
Fluorescence Lifetime Imaging";
(o) U.S. Patent No. 5,246,867, issued September 21, 1993,
entitled "Determination and Quantification of Saccharides by Luminescence
Lifetimes and Energy Transfer";
(p) Canadian Patent Application No. 2087411, filed
January 15, 1993, entitled "Determination and Quantification of Saccharides by
Luminescence Lifetimes and Energy Transfer";
(q) European Patent Application No. 93400090.2, filed
January 15, 1993, entitled "Determination and Quantification of Saccharides by
Luminescence Lifetimes and Energy Transfer";
(r) Japanese Patent Application No. 006052/1993, filed
January 18, 1993, entitled "Determination and Quantification of Saccharides by
Luminescence Lifetimes and Energy Transfer";
(s) United States Patent No. 5,196,709, issued March 23,
1993, entitled "Fluorometry Method and Apparatus Using a Semiconductor Laser
Diode as a Light Source";
(t) United States Patent No. 5,281,828, issued January
25, 1994, entitled "Phase Fluorometry using a Modulated Electroluminescent Lamp
as a Light Source";
(u) United States Patent Application Serial No.
08/150,122, filed April 12, 1993, entitled "Method and Apparatus for Performing
Phase Fluorescence Lifetime Measuring in Flow Cytometry";
-2-
<PAGE> 3
(v) European Patent Application No. 91918387.1, filed
October 10, 1991, entitled "Method and Apparatus for Performing Phase
Fluorescence Lifetime Measuring in Flow Cytometry";
(w) United States Patent Application Serial No.
08/330,743, filed October 28, 1994, entitled "Long Lifetime Anisotropy
(Polarization) Probes for Clinical Chemistry, Immunoassays, Affinity Assays and
Biomedical Research";
(x) International Application No. PCT/US95/ __________,
filed October 27, 1995, entitled "Long Lifetime Anisotropy (Polarization)
Probes for Clinical Chemistry, Immunoassays, Affinity Assays and Biomedical
Research";
(y) all patents which issue from such applications and
all divisionals, continuations, reissues, extensions, and foreign counterparts
of these applications and patents, and all utility models, design registrations
or similar rights corresponding thereto.
1.2 "Licensed Technology" means the Licensed Patents and all
designs, technical information, know-how, knowledge, data, specifications, test
results and other information (including designs, technical information,
know-how, knowledge, data, specifications, test results and other information
previously disclosed to SRX) relating to medical applications under the
Licensed Patents.
1.3 "Licensed Territory" means the entire world.
1.4 "Licensed Method" means any method which is claimed in a
pending patent application or covered by an issued, unexpired claim of a patent
contained in the Licensed Patents.
1.5 "Licensed Product(s)" means any product which is claimed in a
pending patent application or covered by an issued, unexpired claim of a patent
contained in the Licensed Patents.
1.6 "Affiliate" means an entity of which SRX has at least twenty
(20) percent ownership, or an entity having at least twenty (20) percent
ownership of SRX.
1.7 "Net Selling Price" of a Licensed Product means the gross
selling price to an unrelated purchaser of such Licensed Product from SRX or an
Affiliate or sublicensee less only:
(a) customary trade discounts or allowances actually
allowed and taken;
(b) any freight or other transportation costs, insurance
charges, duties and tariffs separately invoiced to
and paid or reimbursed by such unrelated purchaser;
(c) returns which are accepted by SRX or such Affiliate
or sublicensee from such unrelated purchaser; and
(d) sales or excise taxes which SRX or such Affiliate or
sublicensee is obligated to pay.
-3-
<PAGE> 4
1.8 "Net Sales" of Licensed Products means the sum of the Net
Selling Price of each Licensed Product sold by SRX or an Affiliate or
sublicensee to an unrelated purchaser.
1.9 "Agreement" means this Agreement including all Exhibits
attached to this Agreement together with any written amendments of any of the
foregoing.
2. Grant of License
2.1 License. Subject to the exceptions of paragraph 11.2, DR.
LAKOWICZ hereby grants to SRX the exclusive right and license to use and
exploit the Licensed Technology to make, have made, use, market, lease and sell
Licensed Products and to practice Licensed Methods in the Licensed Territory
during the term of this Agreement unless sooner terminated as provided in this
Agreement. The license granted herein with respect to the Licensed Patents
listed in paragraph 11.2 is subject to the prior agreement between the
University of Maryland and Becton, Dickinson and Company, referred to in
paragraph 11.2.
2.2 Sublicenses. SRX shall be allowed to grant sublicenses under
this Agreement.
2.3 Development Information. Upon execution of this agreement,
DR. LAKOWICZ shall provide SRX or its nominees with the Licensed Technology and
all information relating to the development of the Licensed Technology,
including but not limited to blueprints, working drawings, and data and
information relating to manufacture of Licensed Products.
3. Royalties, Payments and Reimbursement
3.1 Lump Sum Payments. In partial consideration of the right and
license granted in the Agreement and regardless of any obligation to pay
royalties, SRX shall pay to DR. LAKOWICZ the sum of fifteen thousand dollars
(US$15,000.00) within seven (7) days after the Effective Date of this
Agreement. Subject to the provisions of paragraph 10.4(b), SRX shall also pay
to DR. LAKOWICZ a maintenance fee of ten thousand dollars (US$10,000.00) within
seven (7) days after each anniversary of the Effective Date in which this
Agreement is in force.
3.2 Timing of Royalty Payments. Royalties shall be paid
quarterly, within thirty (30) days after each calendar quarter ending March 31,
June 30, September 30, and December 31 of each year in which this Agreement is
in force.
3.3 Calculation of Royalty Payments. For a particular calendar
quarter, the royalty payment due pursuant to paragraph 3.2 shall be the sum of
(a) three (3) percent of the Net Sales of Licensed Products manufactured by or
for SRX or an Affiliate and sold by SRX and its Affiliates and any sublicensees
during such quarter in each country in the Licensed Territory in which a patent
of the Licensed Patents exists or a patent application of the Licensed Patents
is pending, and (b) one and one-half (1 1/2) percent of the Net Sales of
Licensed Products manufactured by or for SRX or an Affiliate and sold by SRX
and its Affiliates and any sublicensees during such quarter in each country
-4-
<PAGE> 5
in the Licensed Territory in which no patent of the Licensed Patents exists or
no application of the Licensed Patents is pending.
3.4 Minimum Royalty Payments. Commencing at the end of the
calendar quarter following the fourth anniversary of the Effective Date of this
Agreement ("Year 5") and subject to the provisions of paragraph 10.4(b), SRX
shall be obligated to make minimum royalty payments to DR. LAKOWICZ as provided
in paragraph 3.5.
3.5 Calculation of Minimum Royalty Payment. In the event the sum
of the royalties due pursuant to paragraphs 3.3 and 3.7 for the calendar year
commencing Year 5 and each subsequent year does not exceed one hundred thousand
dollars (US$100,000.00), SRX shall also pay DR. LAKOWICZ, at the appropriate
time under paragraph 3.2, the difference between the royalties due for such
years pursuant to paragraphs 3.3 and 3.7 and one hundred thousand dollars
(US$100,000.00). The effect of this provision is to provide DR. LAKOWICZ a
minimum royalty payment of one hundred thousand dollars (US$100,000.00) for
each year commencing Year 5, payable in arrears.
3.6 No Multiple Royalties. No multiple royalties shall be payable
because any Licensed Product is covered by more than one patent within the
Licensed Patents.
3.7 Royalties Paid by Sublicensees for Licensed Technology. If
SRX sublicenses Licensed Technology pursuant to paragraph 2.2, for sales under
such sublicense of Licensed Products which are not manufactured by or for SRX
or an Affiliate, SRX shall pay to DR. LAKOWICZ, at the appropriate time under
paragraph 3.2, fifty (50) percent of the royalties actually received by SRX
from the sublicensee rather than any royalties calculated under paragraph 3.3.
4. Improvements In Licensed Technology
4.1 Notification of Improvements. DR. LAKOWICZ shall promptly
inform SRX of any improvements to the Licensed Technology developed or acquired
by DR. LAKOWICZ during the term of this Agreement, except where such
improvements are subject to DR. LAKOWICZ' employment agreement with the
University of Maryland. Improvements in the Licensed Technology developed
during the term of this Agreement which are owned or controlled by DR. LAKOWICZ
and not subject to DR. LAKOWICZ' employment agreement with the University of
Maryland automatically become part of the Licensed Technology. DR. LAKOWICZ
will not communicate confidential University of Maryland-owned information to
SRX without a suitable Confidentiality Agreement between the University of
Maryland and SRX as set forth in paragraph 9.2. SRX recognizes that other work
is performed in DR. LAKOWICZ' laboratory that is fluorescence-based but which
is not Licensed Technology and which is not related to this Agreement.
-5-
<PAGE> 6
5. Records
5.1 Records of Sales. SRX shall at all times during the term of
this Agreement keep at its principal place of business true and accurate
records of all sales subject to Section 3 of this Agreement in such form and
manner that royalties owed hereunder to DR. LAKOWICZ may be readily and
accurately determined.
5.2 Inspection. Once annually, an independent certified public
accountant acceptable to SRX shall have the right, at DR. LAKOWICZ' expense,
during normal business hours and after providing at least five business days'
notice, during the period of this Agreement, to examine those records of SRX
which may reasonably be needed for the purpose of verifying the amounts owed to
DR. LAKOWICZ hereunder and the accuracy of the reports furnished by SRX under
Section 6 of this Agreement. Such certified public accountant shall maintain
the confidentiality of all confidential information obtained by it from
examination of SRX's records and shall use such information only for the
purposes of this Agreement.
6. Reports
6.1 Quarterly Reports. When making each royalty payment pursuant
to Section 3, SRX shall prepare and deliver to DR. LAKOWICZ a true and accurate
report, giving such particulars of the business conducted by SRX and its
sublicensees during the preceding calendar quarter as is required to calculate
the royalties due DR. LAKOWICZ hereunder. If no payment is due for a
particular calendar quarter, SRX shall so report.
7. Patent Maintenance
7.1 Responsibility. SRX shall be responsible for the payment of
all fees, costs, and expenses paid or incurred connected with the payment of
any maintenance fee or annuities to maintain the Licensed Patents licensed to
SRX under this Agreement and for filing and prosecuting all patent applications
relating to Licensed Technology licensed to SRX during the term of this
Agreement. SRX shall involve DR. LAKOWICZ' regular patent attorney in such
prosecution for two (2) years following the Effective Date; provided, however,
that during such two-year period such regular patent attorney shall, in SRX's
opinion, provide satisfactory and cost-effective performance. DR. LAKOWICZ
shall cooperate (and cause his employees and agents to cooperate) as reasonably
requested by SRX in any such filings and prosecutions, such cooperation to
include executing or supplying without additional compensation all papers
(including those evidencing the grant of the license to SRX under this
Agreement) and other instruments, information, or testimony deemed appropriate
by SRX for such filings and prosecutions. If SRX, in its sole discretion,
elects not to file a patent application or not to continue prosecuting a patent
application relating to Licensed Technology in a particular country, DR.
LAKOWICZ shall have the right, at his sole expense, to file or continue
prosecuting and to maintain such application and, as to such application and
any patent issuing thereon, SRX's rights and license shall be non-exclusive
rather than exclusive.
-6-
<PAGE> 7
7.2 Notification. SRX shall, within fourteen (14) days of the
event, advise DR. LAKOWICZ of the filing of any patent application under
paragraph 7.1 and, as appropriate, advise DR. LAKOWICZ of the prosecution of
such application and maintenance of any patent issuing thereon.
7.3 Inventions Made by SRX. Inventions made by SRX relating to
the subject matter of the Licensed Technology, and any patents based thereon,
shall belong to SRX.
8. Patent Infringement
8.1 Notice of Infringement. SRX and DR. LAKOWICZ shall take all
reasonable steps to protect the Licensed Patents in all parts of the Licensed
Territory, and each of DR. LAKOWICZ and SRX shall give prompt notice to the
other of any infringement or threatened or suspected infringement thereof that
shall at any time come to his or its knowledge together with such detailed
information as shall from time to time be available to such party relating to
such infringement or threatened or suspected infringement.
8.2 Defense. In the event that a declaratory judgment action,
cancellation, opposition or similar proceeding alleging invalidity,
unenforceability or noninfringement of any of the Licensed Patents shall be
brought by a third party against DR. LAKOWICZ, SRX shall have the right to
defend or settle such action or proceeding; provided, however, that if SRX
determines at any time that it does not desire to defend (or continue to
defend) such action, SRX shall promptly so advise DR. LAKOWICZ, and DR.
LAKOWICZ shall then have the right to defend (or continue to defend) such
action at DR. LAKOWICZ' expense.
8.3 Infringement Suits. SRX shall be responsible for instituting
legal action against infringers of the Licensed Patents, if it is of the
opinion that such infringement will seriously affect its business. The
decision to institute or settle legal action will be solely that of SRX. If
DR. LAKOWICZ disagrees with SRX's decision not to institute legal action
against infringers, DR. LAKOWICZ shall have the option to institute legal
action for patent infringement at his own expense and the right to retain all
damages (including attorneys' fees) obtained as a result of such legal action.
If SRX chooses to institute legal action against infringers, it shall be
entitled to deduct its costs relating to each such legal action from any
damages (including attorneys' fees) obtained as a result of the action. Should
any monies then remain of the damages, SRX shall retain seventy-five (75)
percent of such remaining monies and shall pay to DR. LAKOWICZ the other
twenty-five (25) percent of such remaining monies.
8.4 Cooperation. In any suit either party may commence or defend
against a third party pursuant to its rights under this Agreement in order to
enforce or defend the validity or enforceability of the Licensed Patents, the
other party shall, at the request and expense of the party initiating or
defending such suit, cooperate in all respects and, to the extent possible,
have its or his employees testify when requested and make available relevant
records, papers, information, samples, specimens and the like.
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9. Confidentiality
9.1 Agreement Terms.
(a) During the term of this Agreement and for five (5)
years thereafter, SRX shall not divulge to any third party (excluding its
employees, Affiliates, and sublicensees) any written information provided by
DR. LAKOWICZ pursuant to paragraph 2.3 and prominently marked "CONFIDENTIAL"
when so provided; provided, however, that SRX shall not be obligated to
maintain as confidential any information now or hereafter in the public domain
through no fault of SRX, any information in SRX's possession prior to May 1,
1995, or any information ordered to be divulged by a court of competent
jurisdiction.
(b) During the term of this Agreement and for five (5)
years thereafter, DR. LAKOWICZ shall not divulge to any third party any written
information provided by SRX and prominently marked "CONFIDENTIAL" when so
provided; provided, however, that DR. LAKOWICZ shall not be obligated to
maintain as confidential any information now or hereafter in the public domain
through no fault of DR. LAKOWICZ, any information in DR. LAKOWICZ' possession
prior to May 1, 1995, or any information ordered to be divulged by a court of
competent jurisdiction.
9.2 University of Maryland. Nothing in this Agreement shall
require DR. LAKOWICZ to divulge to SRX information provided to him in
confidence by the University of Maryland and considered confidential and
proprietary to the University of Maryland unless a suitable confidentiality
agreement exists between SRX and the University of Maryland.
10. Term and Termination
10.1 Duration. The term of this Agreement shall commence upon the
Effective Date and, unless sooner terminated as otherwise provided in this
Agreement, shall continue for fifteen (15) years or until all patents for
Licensed Technology licensed to SRX under this Agreement have expired,
whichever is later.
10.2 Termination of Exclusivity or Agreement.
(a) If SRX defaults in any payment or in rendering any
report to DR. LAKOWICZ required by this Agreement and remains in default for
thirty (30) days after receiving written notice from DR. LAKOWICZ pursuant to
paragraph 12.5, DR. LAKOWICZ may convert the exclusive license granted in
paragraph 2.1 to a non-exclusive license and reduce by twenty-five (25) percent
all annual minimum royalties to be paid pursuant to paragraphs 3.4 and 3.5 and
all annual maintenance fees to be paid pursuant to paragraph 3.1, without
prejudice to monies previously due to DR. LAKOWICZ.
(b) If SRX defaults in performing any other material
obligation under this Agreement and remains in default for sixty (60) days
after receiving written notice from
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<PAGE> 9
DR. LAKOWICZ pursuant to paragraph 12.5, or if SRX is adjudicated bankrupt or
insolvent, or if SRX enters into a composition with its creditors, or if a
receiver is appointed for any portion of SRX's assets, then DR. LAKOWICZ may
terminate this Agreement upon giving written notice to SRX at least thirty (30)
days prior to the effective date of the termination.
(c) If during the year following the Effective Date SRX
fails to make reasonable effort to commercialize or sublicense the Licensed
Technology or Licensed Products, then DR. LAKOWICZ may, upon thirty (30) days'
written notice to SRX, terminate this Agreement, without prejudice to monies
previously due to DR. LAKOWICZ. For purposes of this provision, SRX's
expenditure of two hundred fifty thousand dollars (US$250,000.00) in attempting
to commercialize or sublicense the Licensed Technology or Licensed Products
during this period is per se reasonable effort.
10.3 Termination by SRX. SRX may terminate this Agreement at any
time by giving DR. LAKOWICZ thirty (30) days' prior written notice of SRX's
election to terminate. Alternatively, upon thirty (30) days' prior written
notice, SRX may convert the exclusive license granted in paragraph 2.1 to a
non-exclusive license and reduce by twenty-five (25) percent all annual minimum
royalties to be paid pursuant to paragraphs 3.4 and 3.5 and all annual
maintenance fees to be paid pursuant to paragraph 3.1, without prejudice to
monies previously due to DR. LAKOWICZ.
10.4 Events Following Termination. If this Agreement is terminated
by DR. LAKOWICZ under paragraph 10.2 or by SRX under paragraph 10.3, then:
(a) All rights and obligations in relation to the
Licensed Technology and improvements thereto made solely by and/or assigned
solely to DR. LAKOWICZ shall revert to DR. LAKOWICZ and may be exploited by DR.
LAKOWICZ as his unencumbered beneficially owned property.
(b) The provisions of Section 3 concerning the payment of
royalties shall continue to bind the parties until all royalties payable under
this Agreement are paid; provided, however, that no maintenance fee under
paragraph 3.1 and no minimum royalty under paragraph 3.4 shall be due to DR.
LAKOWICZ for any year commencing on or after the anniversary of the Effective
Date of this Agreement most immediately following the date of termination.
(c) The termination of this Agreement shall not affect
any right of action which may have accrued to either party in respect of any
breach prior to the date of such termination.
11. Warranties
11.1 DR. LAKOWICZ' Warranties. DR. LAKOWICZ hereby makes the
following representations and warranties to SRX, which representations and
warranties are true and correct on the date hereof:
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<PAGE> 10
(a) Except as expressly set forth to the contrary in
paragraph 11.2 of this Agreement, DR. LAKOWICZ is the sole owner of the
Licensed Patents and Licensed Technology;
(b) DR. LAKOWICZ has the right to grant the rights and
license granted in this Agreement and has executed no agreement in conflict
herewith;
(c) Excepting the Licensed Patents, and subject matter
which is subject to DR. LAKOWICZ' employment agreement with the University of
Maryland, DR. LAKOWICZ has not filed, caused to be filed, or participated in
filing any applications for patent, nor has he obtained in his name, or caused
to be obtained in the name of another, any patent based on or covering the
Licensed Technology;
(d) DR. LAKOWICZ is unaware of any knowledge of
invalidity of or allegation of invalidity of any claim of any patent in the
Licensed Patents; and
(e) There are no claims (relating to patent infringement
or any other matters), actions, suits, agreements, proceedings, arbitrations or
investigations existing or pending or, to the best of DR. LAKOWICZ' knowledge,
threatened, against DR. LAKOWICZ or others which if adversely determined would
adversely affect the Licensed Technology (or the patentability thereof) or DR.
LAKOWICZ, ability to enter into or carry out this Agreement or license Licensed
Technology.
11.2 Licensed Patents Subject to Other Agreement. The following
Licensed Patents are subject to a prior agreement between University of
Maryland and Becton, Dickinson and Company dated February 16, 1989:
(a) United States Patent Application Serial No.
08/183,238, filed April 12, 1993, entitled "Fluorescent Energy Transfer
Immunoassay";
(b) Canadian Patent Application No. 2087413, filed
January 15, 1993, entitled "Fluorescent Energy Transfer Immunoassay";
(c) European Patent Application No. 93400091.0, filed
January 15, 1993, entitled "Fluorescent Energy Transfer Immunoassay";
(d) Japanese Patent Application No. 006057/1993, filed
January 15, 1993, entitled "Fluorescent Energy Transfer Immunoassay";
(e) U.S. Patent No. 5,246,867, issued September 21, 1993,
entitled "Determination and Quantification of Saccharides by Luminescence
Lifetimes and Energy Transfer";
(f) Canadian Patent Application No. 2087411, filed
January 15, 1993, entitled "Determination and Quantification of Saccharides by
Luminescence Lifetimes and Energy Transfer";
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<PAGE> 11
(g) European Patent Application No. 93400090.2, filed
January 15, 1993, entitled "Determination and Quantification of Saccharides by
Luminescence Lifetimes and Energy Transfer";
(h) Japanese Patent Application No. 006052/1993, filed
January 18, 1993, entitled "Determination and Quantification of Saccharides by
Luminescence Lifetimes and Energy Transfer";
(i) United States Patent Application Serial No.
08/150,122, filed April 12, 1993, entitled "Method and Apparatus for Performing
Phase Fluorescence Lifetime Measuring in Flow Cytometry"; and
(j) European Patent Application No. 91918387.1, filed
October 10, 1991, entitled "Method and Apparatus for Performing Phase
Fluorescence Lifetime Measuring in Flow Cytometry".
11.3 University of Maryland Inventions. Inventions which are
subject to DR. LAKOWICZ' employment agreement with the University of Maryland
are not the property of DR. LAKOWICZ and are not included in Licensed
Technology.
12. Miscellaneous and General
12.1 Independent Contractor. SRX shall not be the agent of DR.
LAKOWICZ and shall have no authority to act for or on behalf of DR. LAKOWICZ in
any matter. Persons retained by SRX as employees or agents shall not by reason
thereof be deemed to be employees or agents of DR. LAKOWICZ. DR. LAKOWICZ
shall not be the agent of SRX and shall have no authority to act for or on
behalf of SRX in any matter. Persons retained by DR. LAKOWICZ as employees or
agents shall not by reason thereof be deemed to be employees or agents of SRX.
12.2 Patent Marking. SRX agrees to mark the Licensed Products sold
in the United States with all applicable United states patent numbers. All
Licensed Products shipped to or sold in other countries shall be to the extent
practical marked in such a manner as to conform with the patent laws and
practice of the country of sale.
12.3 Interpretation. The parties are equally responsible for the
preparation of this Agreement, and in any judicial proceeding the terms hereof
shall not be more strictly construed against one party than the other.
12.4 Resolution of Disputes. In the event the parties have a
dispute or claim of any kind arising under this Agreement that they are unable
to resolve through direct communications, such dispute shall be resolved
through arbitration pursuant to the rules of the American Arbitration
Association; provided, however, that (1) the Federal Rules of Evidence shall
apply during any such arbitration, (2) any discovery permitted during such
arbitration shall be completed within ninety (90) days of commencement of such
arbitration, (3) such arbitration shall be held in Washington, D.C. if SRX
asserts a claim against DR. LAKOWICZ, and (4) such arbitration shall be held in
Atlanta, Georgia if DR. LAKOWICZ asserts a claim against SRX.
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<PAGE> 12
12.5 Notices. All notices, statements and reports required or
contemplated herein by one party to the other shall be in writing and shall be
deemed to have been given upon delivery in person or upon the expiration of
seven (7) days after deposit in a lawful mail depository, registered or
certified mail postage prepaid, and addressed as follows:
If to SRX:
Mr. Mark A. Samuels
SpectRx, Inc.
6025A Unity Drive
Norcross, Georgia 30071
Facsimile: (770) 242-8639
With a copy to:
Dean W. Russell, Esq.
Kilpatrick & Cody
Suite 2800
1100 Peachtree Street
Atlanta, Georgia 30309-4530
Facsimile: (404) 815-6555
If to DR. LAKOWICZ:
Joseph R. Lakowicz, Ph.D.
10037 Fox Den Road
Ellicott City, Maryland 21042
With a copy to:
Frank Rothwell, Esq.
Rothwell, Figg, Ernst, Kurz, P.C.
555 13th Street, N.W.
Washington, D.C. 20004
Facsimile: (202) 783-6031
Either party hereto may change the address to which notices to such party are
to be sent by giving notice to the other party at the address and in the manner
provided above. Any notice herein required or permitted to be given may be
given, in addition to the manner set forth above, by telex, facsimile or cable,
provided that the party giving such notice obtains acknowledgment by telex,
facsimile or cable that such notice has been received by the party to be
notified. Notice made in this manner shall be deemed to have been given when
such acknowledgement has been transmitted.
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<PAGE> 13
12.6 Assignments and Inurement. Except to the extent otherwise
herein provided, neither party shall grant, transfer, convey, sublicense or
otherwise assign any of its rights or delegate any of its obligations under
this Agreement without the prior written consent of the other, which consent
shall not be unreasonably withheld, except in connection with the
reorganization or sale of substantially all of the assets of the party's
business or as otherwise explicitly permitted in this Agreement, and any
attempt to do so shall be of no effect. This Agreement shall be binding upon
and inure to the benefit of the successors and permitted assigns of the parties
hereto.
12.7 Entire Agreement. This Agreement constitutes the entire
agreement among DR. LAKOWICZ and SRX with respect to the subject matter hereof
and shall not be modified, amended or terminated except as herein provided or
except by another agreement in writing executed by the parties hereto.
12.8 Headings. The section and paragraph headings are for
convenience only and are not a part of this Agreement.
12.9 Severability. All rights and restrictions contained herein
may be exercised and shall be applicable and binding only to the extent that
they do not violate any applicable laws and are intended to be limited to the
extent necessary so that they will not render this Agreement illegal, invalid
or unenforceable. If any provision or portion of any provision of this
Agreement not essential to the commercial purpose of this Agreement shall be
held to be illegal, invalid or unenforceable by a court of competent
jurisdiction, it is the intention of the parties that the remaining provisions
or portions thereof shall constitute their agreement with respect to the
subject matter hereof, and all such remaining provisions or portions thereof
shall remain in full force and effect. To the extent legally permissible, any
illegal, invalid or unenforceable provision of this Agreement shall be replaced
by a valid provision which will implement the commercial purpose of the
illegal, invalid or unenforceable provision. In the event that any provision
essential to the commercial purpose of this Agreement is held to be illegal,
invalid or unenforceable and cannot be replaced by a valid provision which will
implement the commercial purpose of this Agreement, this Agreement and the
rights granted herein shall terminate.
12.10 Choice of Law. This Agreement is acknowledged to have been
made in and shall be construed in accordance with the laws of the State of
Georgia, United States of America; provided that all questions concerning the
construction or effect of Licensed Patents shall be decided in accordance with
the laws of the country in which the particular patent application concerned
has been filed or granted, as the case may be.
12.11 Indemnification. SRX shall indemnify, hold harmless and
defend (including paying reasonable attorneys' fees) DR. LAKOWICZ from and
against any and all losses, including but not limited to injury to persons,
property, and the environment, caused by the Licensed Products or arising out
of the manufacture, use, sale, promotion or possession of the Licensed Products
or any intermediate activity thereof or by the performance of any activities by
SRX as a result of this Agreement.
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<PAGE> 14
12.12 Use of Names. SRX shall not use DR. LAKOWICZ' name, or the
name of any entity affiliated with DR. LAKOWICZ, in any advertisement or sales
material unless it obtains the prior written consent of such person or entity
proposed to be named.
12.13 Research Agreement. SRX agrees to fund a research program
under the direction of DR. LAKOWICZ at the University of Maryland, any future
employer of DR. LAKOWICZ, or any other organization designated by DR. LAKOWICZ,
at a level not less than two hundred fifty thousand dollars (US$250,000.00) per
year, which funding is in addition to the expenditures referred to in paragraph
10.2(c).
12.14 Consulting Services. DR. LAKOWICZ shall render to SRX such
services in a consulting capacity at his regular consulting rates as may be
requested by SRX to instruct SRX, or its nominees, in all areas pertaining to
exploitation of the Licensed Technology; provided, however, that DR. LAKOWICZ
shall not be required to expend more than two (2) days per month consulting in
such capacity except by mutual agreement of the parties.
IN WITNESS WHEREOF, DR. LAKOWICZ has executed this Agreement and SRX
has caused this Agreement to be executed by its duly authorized representative
as of the day and year first above written.
JOSEPH R. LAKOWICZ, Ph.D.
Date: November 22, 1995 By: /s/ Joseph R. Lakowicz, Ph.D.
----------------------------- ------------------------------------
SPECTRX, INC.
Date: November 22, 1995 By: /s/ Mark A. Samuels
----------------------------- ------------------------------------
Name: Mark A. Samuels
----------------------------------
Title: President and Chief
Executive Officer
---------------------------------
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<PAGE> 1
EXHIBIT 10.18B
AMENDMENT OF LICENSE AGREEMENT
This Amendment of License Agreement is made and entered into as of the
date last entered below, by and between Joseph R. Lakowicz, Ph.D., an individual
having an address of 10037 Fox Den Road, Elliott City, MD 21042 ("Dr. Lakowicz")
and SpectRx, Inc., a Delaware corporation having its principal offices at 6025A
Unity Drive, Norcross, Georgia 30071 ("SRX").
WHEREAS, Dr. Lakowicz and SRX entered into a License Agreement
("License Agreement"), the terms of which are incorporated herein in their
entirety by reference, which License Agreement was executed by Dr. Lakowicz and
by Mark A. Samuels on behalf of SRX on November 22, 1995;
AND, WHEREAS, Dr. Lakowicz and SRX desire to extend to January 2, 1996
the due date for payment of the first lump sum payment of fifteen thousand
dollars (US$15,000.00) due initially under Paragraph 3.1 of the License
Agreement within seven (7) days after the effective date of the License
Agreement;
NOW, THEREFORE, for and in consideration of the sum of one dollar
(US$1.00) and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the due date for that lump sum payment of
fifteen thousand dollars (US$15,000.00) under Paragraph 3.1 of the License
Agreement, originally set at seven (7) days after the effective date of November
22, 1995, is hereby amended to January 2, 1996.
IN WITNESS WHEREOF, the parties have hereunto signed this Amendment of
License Agreement on the day hereinbefore referred to.
SpectRx, Inc. Joseph R. Lakowicz, Ph.D.
By: /s/ Mark A. Samuels By: /s/ Joseph R. Lakowicz
----------------------------- -----------------------------
Mark A. Samuels, CEO Joseph R. Lakowicz
Date: November 28, 1995 Date: November 28, 1995
----------------------------- -----------------------------
<PAGE> 1
EXHIBIT 10.19
LICENSE AND JOINT DEVELOPMENT AGREEMENT BETWEEN
NIMCO, ALTEA AND SPECTRX
This License and Joint Development Agreement is made as of the 1st day
of March, 1996 (Effective Date), by and between SpectRx, Inc. ("SRX"), a
Delaware corporation having its principal offices at 6025A Unity Drive,
Norcross, Georgia and both Non-Invasive-Monitoring Company, Inc. ("NIMCO") and
Altea Technologies, Inc. ("ALTEA"), both Delaware corporations having their
principal place of business at 2844 Jasmine Court, Atlanta, Georgia 30345 (each
a "Party," collectively "the Parties").
WHEREAS, NIMCO and ALTEA are the owners of certain TECHNOLOGY (as
defined hereinafter) and SRX and Altea are jointly the owners of certain
TECHNOLOGY.
WHEREAS, TECHNOLOGY is useful in MONITORING TECHNOLOGY (as defined
hereinafter) and is also useful in DELIVERY TECHNOLOGY (as defined hereinafter).
WHEREAS, MONITORING TECHNOLOGY and DELIVERY TECHNOLOGY are specifically
embodied and claimed in one or more of the LICENSED PATENTS (as defined
hereinafter), EXISTING JOINT TECHNOLOGY PATENTS (as defined hereinafter), and in
associated supporting proprietary confidential information and know-how.
WHEREAS, NIMCO, ALTEA and SRX wish to enter into a License and Joint
Development Agreement ("AGREEMENT") whereby SRX will receive exclusive rights to
any MONITORING TECHNOLOGY and ALTEA will receive and/or retain exclusive rights
to DELIVERY TECHNOLOGY.
WHEREAS, in accordance with JOINT DEVELOPMENT (as defined hereinafter)
activities, ALTEA and SRX, may also discover, conceive and during the TERM of
this AGREEMENT, have reduced to practice, additional JOINT TECHNOLOGY (as
defined hereinafter) which may be applicable to either MONITORING TECHNOLOGY
and/or DELIVERY TECHNOLOGY.
WHEREAS, the Parties from time to time have disagreed as to the
interpretation of the Option Agreement dated June 27, 1995 and certain
employment agreements relating to TECHNOLOGY, the Parties now wish through this
AGREEMENT to resolve these differences.
NOW THEREFORE, in consideration of the mutual promises contained herein
and other good and valuable consideration, receipt of which is hereby
acknowledged, the Parties agree to be bound by the following terms and
conditions.
<PAGE> 2
1. DEFINITIONS
As used herein:
1.1 (a) "LICENSE PATENTS" means:
(i) United States Patent No. 5,458,140, issued
October 17, 1995, entitled "Enhancement of Transdermal Monitoring Applications
With Ultrasound and Chemical Enhancers" and any reissuances thereof (owned by
NIMCO);
(ii) Divisional application Serial No. 08/465,874
filed June 6, 1995 and any patent issuances or reissuances thereof (TNW File
T1214DIV, owned by NIMCO);
(b) "EXISTING JOINT TECHNOLOGY PATENTS" means the following
patent applications and resulting patents issued therefrom (including foreign
filings and issued patents therefrom):
(i) United States Patent continuation-in-part
application Serial No. 08/520,547 filed August 29, 1995 (TNW File T1214CIP,
jointly owned by ALTEA and SRX);
(ii) Application relating to optical poration filed
in the U.S. Patent Office on October 30, 1995 (TNW File T3491, jointly owned by
ALTEA and SRX); and
(iii)Application relating to mechanical poration
(TNW File T3621, jointly owned by ALTEA and SRX).
1.2 "AFFILIATE" of a party means an entity of which that party has,
directly or indirectly, at least fifty (50) percent ownership of or the power to
direct the voting activities of 50% or more of the voting stock of such entity.
1.3 "AGREEMENT" means this agreement including all Exhibits attached to
this Agreement together with any written amendments of any of the foregoing as
mutually executed by the applicable Parties.
1.4 "EFFECTIVE DATE" means March 1, 1996.
1.5 "ENDUSER" means (a) the first THIRD PARTY purchaser of a product,
use, or other application of TECHNOLOGY, other than a SUBCONTRACTOR, in the
distribution line who sells such product, use or other application of TECHNOLOGY
directly to the retailer, or customer, including the final wholesalers, supply
houses, distributors and/or retailers; and (b) a THIRD PARTY customer who is the
patient or consumer, if SRX or ALTEA their AFFILIATES or their SUBCONTRACTOR(S),
sell such product, use or application of TECHNOLOGY to such patient or consumer
without an intermediary wholesaler or retailer.
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<PAGE> 3
For Example: ENDUSERS include wholesalers and supply houses; or
the patient or the consumer if products, use or applications
of TECHNOLOGY are sold directly to such patients, or consumers
by SRX or ALTEA; their AFFILIATES, SUBCONTRACTOR(S).
1.6 (a) "JOINT DEVELOPMENT" means development of JOINT TECHNOLOGY (as
defined hereinafter), exclusive of LICENSED PATENTS, resulting from the
cooperative efforts of ALTEA and SRX regardless of where conceived or reduced to
practice. An outline of the research program for JOINT DEVELOPMENT activities is
attached as EXHIBIT A, and shall be mutually updated annually or as otherwise
agreed by ALTEA and SRX.
(b) "JOINT TECHNOLOGY" means all TECHNOLOGY other than
LICENSED PATENTS, or United States Patent No. 5,445,611 or reissuance thereof,
both
(i) discovered or conceived by ALTEA and/or SRX until
SRX's rights and obligations to MONITORING TECHNOLOGY under this AGREEMENT are
no longer in effect, and
(ii)reduced to practice by SRX or jointly by SRX and ALTEA prior
to the EFFECTIVE DATE and hereinafter jointly by SRX and ALTEA pursuant
to the cooperative efforts of SRX and ALTEA under the AGREEMENT, or by
SRX alone, but only for so long as SRX retains all or part (such part to at
least encompass the Western Hemisphere pursuant to Section 2.6(a)) of its rights
and obligations to MONITORING TECHNOLOGY; or if conceived by SRX either solely
or jointly with ALTEA pursuant to (i) above, and reduced to practice by ALTEA at
any time after the EFFECTIVE DATE and during the TERM.
Such JOINT TECHNOLOGY, which includes EXISTING JOINT TECHNOLOGY PATENTS
and JOINT TECHNOLOGY PATENTS, is jointly owned by ALTEA and SRX, subject to the
terms and conditions of this AGREEMENT.
(c) "JOINT DELIVERY TECHNOLOGY" means DELIVERY TECHNOLOGY part
of JOINT TECHNOLOGY.
1.7 "JOINT TECHNOLOGY PATENTS" means all patent applications and issued
patents claiming JOINT TECHNOLOGY and shall be jointly owned by ALTEA and SRX
subject to the terms and conditions of this AGREEMENT.
1.8 "MONITORING TECHNOLOGY" means TECHNOLOGY, including JOINT
TECHNOLOGY, that is useful in transdermal/intradermal monitoring, detection,
sampling, measuring, and/or quantification of substances from within a living
organism (ANALYTES) including but not limited to human beings, and is to be used
solely for monitoring applications. For clarification, MONITORING TECHNOLOGY
does not include technologies (a) developed or acquired by any Party specific to
quantitation methodologies, for example biosensor technology, enzyme or
immunoassay technologies, optical assay technologies, and the like, or (b) in
which no ANALYTES crosses the stratum corneum or mucosal membrane.
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<PAGE> 4
1.9 (a) "LIQUIDITY EVENT" or "Liquidity Event" shall mean
(i) an INITIAL PUBLIC OFFERING of shares or stock of SRX or
an AFFILIATE who is carrying out SRX's obligations under this AGREEMENT;
(ii) any sale (by means of a sale of assets, merger,
consolidation, or otherwise) of SRX or any AFFILIATE who is carrying out SRX's
obligations under this AGREEMENT or of all or substantially all of the assets of
SRX or any AFFILIATE who is carrying out SRX's obligations under this AGREEMENT
in either case to any person who is not an AFFILIATE;
(iii) the assignment of SRX's or its AFFILIATES' rights and
obligations under this AGREEMENT to a THIRD PARTY or group of THIRD PARTIES
acting in concert; or
(iv) any transaction or series of transactions pursuant to
which or in connection with which the stockholders of SRX (a) sell, transfer or
exchange a material portion of the equity securities of SRX, (b) receive any
material dividend (special, liquidating or otherwise), distribution or other
payment (whether in cash or kind) with respect to their SRX equity securities
or (c) otherwise receive a material payment (of cash or other property) or a
material amount of the securities (equity or debt, other than securities of an
AFFILIATE) of any other persons with respect to their SRX equity securities.
(b) "INITIAL PUBLIC OFFERING (IPO)" with respect to any person
means the closing of the initial underwritten public offering of shares of stock
of that person pursuant to an effective registration statements under the
Securities Act of 1933, as amended.
(c) "CONTROLLING INTEREST" with respect to any person, means
(i) the ownership of more than 50% of the common stock or other equity interests
of such person, (ii) the ability to elect, appoint or designate a majority of
the members of the board of directors or other governing body of such person
(including, without limitation, the general partner of such person) or having
the power, direct or indirect, to direct or cause the direction of the
management and policies of such person by contract or otherwise, or (iii) the
ability to acquire the equity interest described in clause (i) or the direction
of management and policies described in clause (ii), whether through option,
other contract or otherwise.
(d) "CHANGE IN CONTROL TRANSACTION" means any transaction
subsequent to which any THIRD PARTY or group of THIRD PARTIES acting in concert
obtains a CONTROLLING INTEREST in SRX.
1.10 "MAJOR COUNTRY" means any or all of the United States and/or
Canada; the European countries of France, Germany, Italy, Spain, and/or the
United Kingdom; and/or Japan.
1.11 "NET REVENUES" means the gross realization by SRX or ALTEA and
their AFFILIATES as the case may be from: (i) any revenues, payments including
payments for equity or other fees SRX or ALTEA and their AFFILIATES receive from
any product, use or application of
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<PAGE> 5
TECHNOLOGY, including all disposable and nondisposable components of such
product, from any of their SUBCONTRACTOR(S) (who are not ENDUSERS) in relation
to TECHNOLOGY to which they have rights, less, in the same consecutive twelve
(12) month period, (ii) the actual Manufacturing Cost by SRX or ALTEA of such
products of TECHNOLOGY so sold or transferred to such SUBCONTRACTOR; or less, in
the same consecutive twelve (12) month period, (iii) any consecutive twelve (12)
month period actual reasonable research expenses incurred by SRX or ALTEA in
carrying out development activities on TECHNOLOGY prior to its
COMMERCIALIZATION, with both (ii) and (iii) calculated in accordance with
Generally Accepted Accounting Principles ("GAAP"), consistently applied.
Manufacturing Cost includes the cost of tooling, equipment, labor and materials
used in manufacture of such products, as well as reasonable manufacturing
overhead for such manufacture, such components and costs of Manufacturing Cost
are to be reviewed and agreed upon by the Parties at the time of commencement of
such commercial manufacture of such product by SRX or ALTEA. For clarification,
NET REVENUES includes all payments received by SRX or ALTEA from any
SUBCONTRACTOR in relation to TECHNOLOGY.
1.12 "NET SALES" from a product, use or application of TECHNOLOGY,
including all disposable and nondisposable components associated therewith,
means the total gross realization for commercial sale or other commercial
transfer or application, including lease and related arrangements, to an ENDUSER
of such TECHNOLOGY including all disposable and nondisposable components
associated therewith, from SRX or ALTEA, or their AFFILIATES or their
SUBCONTRACTOR(S), less only: deductions for the following to the extent actually
paid, and not reimbursed by the ENDUSER:
(a) customary trade, quantity, or cash discounts actually
allowed and taken;
(b) any freight or other transportation costs, insurance
charges, duties and tariffs separately invoiced and paid;
(c) returns which are accepted by SRX or ALTEA or their
AFFILIATES or their SUBCONTRACTORS from such ENDUSER in accordance with normal
practice and for which credit is given to such ENDUSER; and
(d) sales or use taxes which are required to be paid, when paid.
Where a product, use or application of TECHNOLOGY, including all
disposable and nondisposable components associated therewith, is sold, leased or
otherwise commercially transferred as one of a number of items without a
separate price, or the consideration shall include any non-cash element or is
transferred in any manner other than an invoiced sale. NET SALES shall be
calculated for sale, use or application of, for the same units of, TECHNOLOGY,
when sold or otherwise commercially transferred with an invoiced sale or lease
price at that time in that country.
1.13 "DELIVERY TECHNOLOGY" means TECHNOLOGY, including JOINT
TECHNOLOGY, that is useful in transdermal/intradermal delivery of substances
into a living organism (DRUGS, TATTOOS, ETC.) including but not limited to human
beings, and is to be used solely for delivery applications.
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1.14 "TECHNOLOGY" means technology (including uses, applications and
products) relating to transdermal/intradermal transport, migration, and/or
movement of substances utilizing microporation, ultrasound, chemical and
physical enhancers, and heat, including but not limited to optical, mechanical,
hydraulic, pneumatic, thermal, chemical, electrical, and/or ultrasound mediated
or assisted permeation, poration and/or migration but shall not include
technology meeting the terms of this definition which is in the public domain
and/or belongs to THIRD PARTIES, now or in the future.
1.15 "TERM" means the period commencing on the EFFECTIVE DATE and
terminating on the earlier of (a) subject to Section 7.1, the date of the last
to expire of LICENSED PATENTS or EXISTING JOINT TECHNOLOGY PATENTS in the
TERRITORY or, because of JOINT DEVELOPMENT activities, JOINT TECHNOLOGY PATENTS
in the TERRITORY, containing a claim not adjudicated invalid by a competent
court or administrative body that covers a use, application or product of
TECHNOLOGY, or (b) the date of earlier termination pursuant to the AGREEMENT.
1.16 "TERRITORY" means the entire world.
1.17 "NIMCO and/or ALTEA" means the relevant Party having ownership
rights as defined in Sections 1.1(a), 1.1(b), 1.6(a), 1.6(b) and 1.7.
1.18 "SUBCONTRACTOR" means a distributor or sublicense of SRX or ALTEA,
or any THIRD PARTY that has entered into an agreement with SRX or ALTEA relating
to MONITORING TECHNOLOGY or JOINT DELIVERY TECHNOLOGY pursuant to which it makes
payments to SRX or ALTEA as the context indicates, or an AFFILIATE of any such
THIRD PARTY. "SUBCONTRACT" means to grant rights held by the granting Party
under the AGREEMENT to a SUBCONTRACTOR.
1.19 "THIRD PARTY" means a party other than the Parties or their
AFFILIATES.
1.20 "INTEGRATED TESTING" means a clinical test on a human subject
wherein the method of harvesting the subject's interstitial fluid "ISF" and
assaying the glucose levels may be implemented in its entirety with laboratory
based prototype devices which may have physical embodiment substantially
different from the production design to be realized later, but which utilize the
basic concepts (e.g., microporation, ultrasonic pumping, or whatever basic
concepts are employed) and demonstrate the feasibility of these concepts in a
clinical testing environment showing the ability to produce an assayable amount
of ISF within two minutes, without causing tissue damage greater than grade two
on a scale of one to four, wherein grade one is mild erythema and grade four is
blistering of the skin.
1.21 "ALPHA PROTOTYPE" means a prototype system that utilizes the same
underlying sample collection technique, sample handling and as much as possible
the same glucose assay techniques as anticipated for the production design at
the time of fabrication of the ALPHA PROTOTYPE. The glucose assay of the
harvested ISF may be performed with any of the wide variety of commercially
available or laboratory glucose assay systems. The ALPHA PROTOTYPE must exhibit
an output with a repeatability both within a factor of two of these parameters
exhibited by at least one of the currently available home glucose monitoring
systems when both are tested on aqueous standard solution.
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1.22 "PROTOTYPE PRODUCTION UNIT" means a system which contains all of
the basic functional elements and physical form factors of a manufacturable
design, but which has been fabricated without the benefit of production tooling,
(e.g. molds, stamping, custom glucose assay disposable components, etc.) The
PROTOTYPE PRODUCTION UNIT must have the capability of harvesting the ISF and
performing the glucose assay when operated by the test subjects themselves.
1.23 "COMMERCIALIZATION" to "COMMERCIALIZE" means the first NET SALES
and NET SALES thereafter by a Party of a product, use, or application of
MONITORING TECHNOLOGY or JOINT DELIVERY TECHNOLOGY as the case may be.
2. GRANT OF LICENSE AND SUBCONTRACT RIGHTS
2.1 License.
(a) NIMCO and/or ALTEA hereby grant to SRX the exclusive right
and license to use and exploit any MONITORING TECHNOLOGY which NIMCO and/or
ALTEA own; to make, have made, use, market, lease and sell products and to
practice uses and applications encompassing MONITORING TECHNOLOGY for monitoring
applications in the TERRITORY during the TERM. The right and license granted in
this Article 2 are subject to the other provisions of this AGREEMENT, including
modifications as may be required pursuant to Section 11.1.
(b) SRX hereby grants to ALTEA the exclusive right and license to
use and exploit any JOINT DELIVERY TECHNOLOGY which SRX owns; to make, have
made, use, market, lease and sell products and to practice uses and applications
encompassing such JOINT DELIVERY TECHNOLOGY for delivery applications in the
TERRITORY during the TERM. The right and license granted in this Article 2 are
subject to the other provisions of this AGREEMENT.
2.2 Subcontract Rights. SRX and ALTEA shall be allowed to grant
SUBCONTRACT rights under this AGREEMENT, to the extent of their respective
rights, subject to: (i) NIMCO and/or ALTEA's consent as to the identity of such
SRX SUBCONTRACTOR other than licensees in the European Union, such consent, not
to be unreasonably withheld or delayed, (ii) SRX's consent as to the identity of
such ALTEA SUBCONTRACTOR (except if such SUBCONTRACTOR is TheraTech Inc., for
which no consent by SRX is required) other than licensees in the European Union,
such consent, not to be unreasonably withheld or delayed, and (iii) SRX or ALTEA
guaranteeing and being liable for the performance of such SUBCONTRACTOR in
agreement and compliance with the terms of this AGREEMENT. NIMCO and/or ALTEA
may participate in such SUBCONTRACT negotiations in collaboration with SRX, if
mutually agreed.
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2.3 Development Information.
(a) NIMCO and ALTEA shall provide SRX with, upon the EFFECTIVE
DATE and thereafter, as requested, all information which is reasonably available
to NIMCO and/or ALTEA to which it has rights to disclose without obligation to
any THIRD PARTY relating to the development of the MONITORING TECHNOLOGY.
(b) SRX shall provide NIMCO and/or ALTEA with, upon the
EFFECTIVE DATE and thereafter, as requested, all information which is reasonably
available to SRX to which it has rights to disclose without obligation to any
THIRD PARTY relating to the development of the DELIVERY TECHNOLOGY.
2.4 Future Inventions by SRX and ALTEA.
(a) Future inventions made by ALTEA on MONITORING TECHNOLOGY
during the TERM which ALTEA owns with the right to license as above without any
obligations to THIRD PARTIES, will automatically become part of MONITORING
TECHNOLOGY but will not be part of JOINT TECHNOLOGY unless reduced to practice
jointly by SRX and ALTEA pursuant to the cooperative efforts of SRX and ALTEA
under this AGREEMENT.
(b) Future inventions made by SRX on DELIVERY TECHNOLOGY
during the TERM which SRX owns with the right to license as above without any
obligations to THIRD PARTIES, will automatically become part of DELIVERY
TECHNOLOGY and JOINT TECHNOLOGY.
(c) For clarification, neither 2.4(a) nor (b) above gives
ALTEA or SRX the right to offer such specified future inventions to THIRD
PARTIES. If ALTEA or SRX makes such a future invention in conjunction with a
THIRD PARTY concerning MONITORING TECHNOLOGY or DELIVERY TECHNOLOGY, ALTEA or
SRX shall ensure in their agreements with such THIRD PARTY that ALTEA or SRX has
exclusive rights to such MONITORING TECHNOLOGY or DELIVERY TECHNOLOGY,
respectively. ALTEA or SRX shall offer their exclusive rights in such invention
to the respective other Party, subject to whatever terms are in place with the
THIRD PARTY.
2.5 Ownership. Subject to this Article 2, Section 11.1, and the other
terms of this AGREEMENT the Parties agree that TECHNOLOGY claimed in LICENSED
PATENTS is the sole and exclusive property of NIMCO, as specified in Section
1.1(a), that all TECHNOLOGY conceived by ALTEA (and not jointly with SRX) and
reduced to practice by other than SRX is the sole and exclusive property of
ALTEA and that, subject to Sections 1.6(a), 1.6(b), 1.6(c) and 1.7, all other
TECHNOLOGY reduced to practice by SRX, or jointly by SRX and ALTEA, during the
TERM shall be JOINT TECHNOLOGY.
2.6 Diligence.
(a) (i) NIMCO and/or ALTEA can revoke all of SRX's rights
under this AGREEMENT as relates to MONITORING TECHNOLOGY, which thereby will
terminate all of SRX's
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obligations, except those of confidentiality pursuant to Article 9 and indemnity
pursuant to Article 12, as relates to MONITORING TECHNOLOGY after the date of
such revocation of rights, if a product utilizing MONITORING TECHNOLOGY is not
yet COMMERCIALIZED in any MAJOR COUNTRY by the later of December 31, 2001 or
five years after the date of reduction to practice prior to December 31, 2001 of
a Major New Invention of MONITORING TECHNOLOGY (either by SRX and/or ALTEA or a
THIRD PARTY from which SRX or ALTEA so acquires rights to such MONITORING
TECHNOLOGY, and such Major New Inventions if part of LICENSED PATENTS or
EXISTING JOINT TECHNOLOGY PATENTS or improvements thereof), provided that such
Major New Invention of MONITORING TECHNOLOGY is required to bring the MONITORING
TECHNOLOGY to a stage suitable for COMMERCIALIZATION as agreed by all Parties,
such agreement not to be unreasonably withheld.
(ii) In addition, by the later of December 31, 2003,
or five years after the date of reduction to practice prior to December 31, 2003
of a Major New Invention of MONITORING TECHNOLOGY (either by SRX and/or ALTEA or
a THIRD PARTY from which SRX or ALTEA so acquires rights to such MONITORING
TECHNOLOGY, and such Major New Invention is not part of LICENSED PATENTS or
EXISTING JOINT TECHNOLOGY PATENTS or improvements thereof), provided that such
Major New Invention of MONITORING TECHNOLOGY is required to bring the MONITORING
TECHNOLOGY to a stage suitable for COMMERCIALIZATION as agreed by all Parties,
such agreement not to be unreasonably withheld, if SRX or its AFFILIATES or
SUBCONTRACTORS fails to COMMERCIALIZE in the United States, and/or at least two
MAJOR COUNTRIES in Europe, and/or in Japan, then all rights to MONITORING
TECHNOLOGY to the entire region respectively revert, be conveyed, and solely
belong to NIMCO and/or ALTEA for the regions of (x) the Western Hemisphere if
such country in which sales have not developed is the United States, (y) Asia if
such country in which sales have not been developed is Japan, and (z) the Rest
Of The World (i.e., the entire world minus the Western Hemisphere and Asia) if
such countries in which sales have not developed are two MAJOR COUNTRIES in
Europe. If rights to an entire region revert to NIMCO and/or ALTEA, then the
minimum royalties henceforward specified in Section 3.5 will be henceforward
reduced by 50% if such region is the Western Hemisphere, by 25% if such region
is Asia and by 25% if such region is the Rest Of The World.
For example: If SRX loses rights to Asia and the
Western Hemisphere prior to January 1, 1997,
the minimum royalty pursuant to Sections 3.4
and 3.5 for 1997 would be
______________________.
(iii) If, any time greater than two years after first
COMMERCIALIZATION in the United States of MONITORING TECHNOLOGY by SRX, the
earned royalties pursuant to Section 3.3(b) payable to SRX to NIMCO and/or ALTEA
are less than the minimum payments due on MONITORING TECHNOLOGY pursuant to
Sections 3.4 and 3.5, then SRX may either:
(x) pay the full minimum payment pursuant to
Sections 3.4 and 3.5 and maintain its exclusive right and license to MONITORING
TECHNOLOGY (subject to the other provisions of this AGREEMENT, including those
in Section 2.6(a)(i) and (ii)); or
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pay the earned royalties pursuant to Section 3.3(b) when
due, in which case, subject to the other provisions of this AGREEMENT
(including those in Sections 2.6(a)(i) and (ii), 7.1 and 10.3), the right and
license to MONITORING TECHNOLOGY granted to SRX pursuant to this AGREEMENT,
shall immediately become nonexclusive. SRX shall immediately provide copies to
NIMCO and/or ALTEA as the case may be of all data, documents, including videos,
technical, clinical and regulatory data and documents and submissions and
approvals, and allow ALTEA (or NIMCO for LICENSED PATENTS) to cross-reference
all regulatory documents, and SRX and its AFFILIATES and SUBCONTRACTORS shall
take all other reasonable steps necessary or useful to enable ALTEA (or NIMCO,
for LICENSED PATENTS) to carry out the development and/or marketing of
products, uses or applications of MONITORING TECHNOLOGY in all countries of the
TERRITORY without delay; and SRX (and its AFFILIATES and SUBCONTRACTORS) shall
thereafter offer to ALTEA right of first refusal to acquire exclusive rights to
such MONITORING TECHNOLOGY in all countries of the TERRITORY on
commercially-reasonable terms. For clarification, such right of first refusal
means that should SRX (and its AFFILIATES and/or SUBCONTRACTORS) decide to
offer any of the remainder of SRX's rights to MONITORING TECHNOLOGY to THIRD
PARTIES SRX shall first offer to ALTEA, upon commercially-reasonable terms, the
right to obtain exclusively SRX's rights to MONITORING TECHNOLOGY. If SRX and
ALTEA have negotiated in good faith but have not reached agreement on basic
terms within ninety (90) days of such offer to ALTEA, then SRX shall be free to
SUBLICENSE (pursuant to this AGREEMENT) its rights in MONITORING TECHNOLOGY to
a THIRD PARTY, provided that if the terms offered to such THIRD PARTY are more
favorable than those offered to ALTEA, the SRX shall re-offer such rights to
ALTEA on the new more favorable terms pursuant to this Section 2.6(a)(iii).
(b) If ALTEA is not actively developing or having developed
JOINT DELIVERY TECHNOLOGY by June 30, 2003, SRX shall notify ALTEA if SRX
desires to develop and COMMERCIALIZE such JOINT DELIVERY TECHNOLOGY itself. If
SRX so notifies ALTEA, if ALTEA does not then commence development of such
DELIVERY TECHNOLOGY by December 31, 2003, then ALTEA shall grant an exclusive
license to SRX for all of ALTEA's rights and obligations to JOINT DELIVERY
TECHNOLOGY under this AGREEMENT and 2.6(c) applies.
For clarification, "actively developing JOINT DELIVERY
TECHNOLOGY" is achieved by ALTEA's SUBCONTRACTING of such rights with such
SUBCONTRACTOR carrying out such development, or other research collaboration
with a THIRD PARTY concerning such technology, or by ALTEA'S own work as
documented by its notebooks and other research documents.
(c) If SRX so acquires rights to JOINT DELIVERY TECHNOLOGY
pursuant to 2.6(b) above, then:
(i) All rights and obligations under this AGREEMENT,
any uses, applications or products of JOINT DELIVERY TECHNOLOGY thereto made
jointly by ALTEA and SRX, shall be conveyed exclusively to SRX and may be
exploited by SRX as its unencumbered beneficially owned property. ALTEA shall
immediately transfer to SRX ownership of, and where possible possession of all
data, documents, including videos, technical, clinical and regulatory data and
documents, relating to
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JOINT DELIVERY TECHNOLOGY, and where possession is not possible, allow SRX to
cross-reference and make copies of all such data and documents including
laboratory notebooks.
(ii) SRX shall pay royalties to ALTEA on JOINT DELIVERY
TECHNOLOGY pursuant to Section 3.3(a).
(iii) SRX shall pay additional minimum payments to ALTEA, in
accordance with 50% of the schedule shown in Section 3.5, except that
the amount shown for 1996 shall be payable quarterly pursuant to Section 3.5 but
commencing in 2004; for 1997 commencing in 2005; for 1998 commencing in 2006;
and so forth with the amount shown for 2002 commencing in 2010 and each calendar
year thereafter for the TERM.
(iv) If SRX does not actively develop JOINT DELIVERY
TECHNOLOGY or fails to make the minimum payments pursuant to Section 2.6(c)(iii)
at any time after acquiring rights pursuant to Section 2.6(b) above, then from
thenceforth ALTEA shall notify SRX if ALTEA desires to develop and commercialize
such JOINT DELIVERY TECHNOLOGY. If SRX does not then commence or continue active
development of such JOINT DELIVERY TECHNOLOGY (defined in a reciprocal manner as
for ALTEA in 2.6(b), last sentence), within 6 months then SRX shall so convey
all such rights and obligations under this AGREEMENT, uses, applications, or
products, data and documents of JOINT DELIVERY TECHNOLOGY, to ALTEA in a
reciprocal manner as specified in Section 2.6(c)(i).
2.7 The Parties agree that if a "closed loop" insulin delivery/glucose
monitoring system utilizing MONITORING TECHNOLOGY and JOINT DELIVERY TECHNOLOGY
(or DELIVERY TECHNOLOGY if ALTEA owns with the right to license, without
obligation to THIRD PARTIES, such DELIVERY TECHNOLOGY outside of JOINT DELIVERY
TECHNOLOGY) becomes technically feasible, within five (5) years of the EFFECTIVE
DATE, SRX and ALTEA agree to work together to develop/COMMERCIALIZE such a
system, with terms of such development/COMMERCIALIZATION to be mutually agreed
upon and commercially reasonable to all Parties. SRX and ALTEA shall include
provisions in agreements with SUBCONTRACTOR(S) reserving and/or specifying such
joint rights for a "closed loop" insulin delivery/glucose monitoring system so
utilizing MONITORING TECHNOLOGY and JOINT DELIVERY TECHNOLOGY.
3. Royalties, Payments and Reimbursement.
3.1 Lump Sum Payments and Stock. In partial consideration of the right
and licenses granted in this AGREEMENT and regardless of any obligation to pay
royalties or early termination, except as otherwise provided for in Section 10.7
as applied to (c) below, SRX shall pay to ALTEA.
(a) the sum of ______________________________ due within seven
(7) days after the EFFECTIVE DATE of this AGREEMENT;
(b) the sum of ______________________________ due within
ninety (90) days after the EFFECTIVE DATE of this AGREEMENT; and
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(c) the sum of ______________________________ due within 180
days after the EFFECTIVE DATE of this AGREEMENT; provided, however, if SRX so
terminates this AGREEMENT pursuant to Section 10.7, the _________ fee pursuant
to this Section 3.1(c) shall not be due.
In partial consideration of the right and license granted in this
AGREEMENT and regardless of any obligation to pay royalties or early
termination, SRX has already paid to NIMCO in 1995 the sum of $5,000.00, and SRX
shall sell to ALTEA _________________ of SRX common stock at the par value of
___________ per share, for a total cost of ___________ with the fair market
value last determined as ___________ per share, within seven (7) days after the
EFFECTIVE DATE. If SRX so terminates this AGREEMENT pursuant to Section 10.7
within four months after the EFFECTIVE DATE, upon such termination (i) SRX may
buy back the 100,000 shares granted to ALTEA above, at the cost of
_____________, and (ii) ALTEA shall additionally pay to SRX the remainder of
__________ minus the tax liability incurred from the initial acquisition by
ALTEA of the __________ shares of SRX stock.
3.2 Timing and Duration of Royalty Payments. Earned royalties shall be
paid in United States dollars quarterly, within forty-five (45) days after each
calendar quarter ending March 31, June 30, September 30, and December 31 of each
year during the TERM.
(a) Royalties shall be paid by SRX to NIMCO if they result
from the use by SRX (or its AFFILIATES, or SUBCONTRACTORS) of MONITORING
TECHNOLOGY owned by NIMCO, and to ALTEA if they result from the use by SRX of
MONITORING TECHNOLOGY (including MONITORING TECHNOLOGY of JOINT TECHNOLOGY)
owned by ALTEA or by ALTEA and SRX. In the case both NIMCO and/or ALTEA own
patents form which such royalties are derived, the Parties shall agree at the
time of regulatory submission of products, the appropriate division of such
royalty payments between NIMCO and ALTEA, in accordance with the use,
protection, and exclusively provided by their respective patents.
(b) Royalties shall be paid by ALTEA to SRX if they result
from the use of JOINT DELIVERY TECHNOLOGY by ALTEA (or its AFFILIATES or
SUBCONTRACTORS) pursuant to Section 3.7(c).
(c) (i) If earned royalties from SRX for a calendar quarter on
MONITORING TECHNOLOGY or JOINT DELIVERY TECHNOLOGY are in excess of the minimum
payment due for that quarter on that TECHNOLOGY by SRX to ALTEA, the earned
royalty payment shall be paid in full and no minimum payment pursuant to
Sections 3.4 and 3.5 shall be due for that quarter subject to (iii) below, or
(ii) if earned royalties from SRX for a calendar quarter on
MONITORING TECHNOLOGY or JOINT DELIVERY TECHNOLOGY are less than the
minimum payment due for that quarter on that TECHNOLOGY by SRX to ALTEA, then
the minimum payment shall be paid in full for that quarter pursuant to Sections
3.4 and 3.5 subject to (iii) below, and
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(iii) notwithstanding (i) and (ii) above, the application of
minimum payments for MONITORING TECHNOLOGY or JOINT DELIVERY
TECHNOLOGY towards earned royalties for that TECHNOLOGY for each calendar
quarter shall be reconciled not only for that quarter but also for the preceding
calendar quarters (Q) in that same calendar year. By way of example, for 1997
for MONITORING TECHNOLOGY COMMERCIALIZED by SRX, assuming the earned royalties
shown:
3.3 Calculation of Royalty Payment.
(a) SRX shall pay a royalty on MONITORING TECHNOLOGY prior to
its COMMERCIALIZATION, and on JOINT DELIVERY TECHNOLOGY (pursuant to Section
2.6(c)(ii) to NIMCO and/or ALTEA as shown below, and ALTEA shall pay a royalty
to SRX on JOINT DELIVERY TECHNOLOGY pursuant to Section 3.7(c).
For a particular calendar quarter, the royalty payment due pursuant to
Section 3.2 shall be the greater of:
(i) ___________________ of the NET SALES during such
quarter; or
(ii) ___________________ of the NET REVENUES during
such quarter.
In no event shall a royalty be paid on both (i) and (ii) for the same
transaction, although in any quarter a combination of (i) and (ii) may apply for
different transactions.
(b) SRX shall pay a royalty to NIMCO and/or ALTEA on
MONITORING TECHNOLOGY after its COMMERCIALIZATION as shown below:
For a particular calendar quarter, the royalty payment due pursuant to
Section 3.2 shall be the greater of:
(i) ___________________ of the NET SALES during such
quarter; or
(ii) ___________________ of the NET REVENUES during
such quarter.
In no event shall a royalty be paid on both (i) and (ii) for the same
transaction, although in any quarter a combination of (i) and (ii) may apply for
different transactions.
3.4 Minimum Payments. Commencing on January 1, 1996, and subject to the
provisions of Sections 2.6(a), 3.8, 10.3, and 10.4(c), SRX shall be obligated to
make minimum payments to ALTEA for MONITORING TECHNOLOGY during the TERM and for
so long as SRX has rights to MONITORING TECHNOLOGY. If SRX acquires rights to
JOINT DELIVERY TECHNOLOGY pursuant to Section 2.6(b), SRX shall pay additional
minimum payments to ALTEA for such JOINT DELIVERY TECHNOLOGY pursuant to Section
2.6(c)(iii). Minimum payments for each calendar year are fully earned when due
and are non-refundable and shall only be applied to earned royalties for such
TECHNOLOGY for the calendar year for which such minimum payments are due.
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3.5 Calculation of Minimum Payments. Subject to the other terms of this
AGREEMENT including Section 3.4, except as noted below for calendar year 1996,
SRX shall pay minimum payments to ALTEA forty-five (45) days following March
31st, June 30th, September 30th and December 31st of each calendar year during
the TERM according to the following schedule, with each quarterly payment equal
to one fourth of the amount shown below for that calendar year, such amounts to
be adjusted annually from January 1, 1997 for the increase in the United States
Consumer Price Index (CPI) from January 1, 1996, for so long as this AGREEMENT
is in effect. Further, under all conditions, if SRX has been released from its
obligation to pay royalties on MONITORING TECHNOLOGY to ALTEA under this
AGREEMENT pursuant to Section 3.8, then no minimum payments on MONITORING
TECHNOLOGY shall be due.
3.6 No Multiple Royalties. No multiple royalties shall be payable
because any product covered by TECHNOLOGY is covered by more than one patent
within the LICENSED PATENTS, EXISTING JOINT TECHNOLOGY PATENTS or JOINT
TECHNOLOGY PATENTS.
3.7 Delivery Technology/License to ALTEA.
(a) The Parties agree that ALTEA owns all rights in DELIVERY
TECHNOLOGY other than JOINT DELIVERY TECHNOLOGY.
(b) SRX agrees to work with ALTEA on certain aspects of JOINT
DELIVERY TECHNOLOGY as mutually agreed.
(c) For so long as ALTEA has rights to JOINT TECHNOLOGY, ALTEA
shall pay to SRX a royalty on JOINT DELIVERY TECHNOLOGY in the TERRITORY during
the TERM claimed in EXISTING JOINT TECHNOLOGY PATENTS and/or JOINT TECHNOLOGY
PATENTS for as long as there is an EXISTING JOINT TECHNOLOGY PATENT or JOINT
TECHNOLOGY PATENT containing a claim not adjudicated invalid by a competent
court or administrative body claiming such JOINT DELIVERY TECHNOLOGY in the
TERRITORY with the provision that the royalty payable from ALTEA to SRX shall be
calculated at a rate which is equal to 50% of the royalty rate payable to NIMCO
and/or ALTEA by SRX as shown in Section 3.3(a) herein, and paid by ALTEA in
accordance with Section 3.2.
3.8 Sales of Licensed Technology.
(a) For so long as SRX has an obligation to pay royalties or
minimum payments to NIMCO and/or ALTEA on MONITORING TECHNOLOGY, NIMCO and/or
ALTEA may sell their entire right to and interest in MONITORING TECHNOLOGY at
the sole discretion of ALTEA, to SRX, upon the occurrence of a LIQUIDITY EVENT,
and SRX, shall buy such rights and interest upon ALTEA's notification and SRX's
receipt of the Response Notice (as described in Section 3.8(b) below). Upon the
occurrence of such LIQUIDITY EVENT and pursuant to ALTEA's notice and SRX's
receipt of the Response Notice as described in Section 3.8(b) below, NIMCO
and/or ALTEA shall, in exchange for the consideration described in Section 3.8
below:
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4. Improvements in Licensed Technology.
4.1 Notification/Licensing of Improvements.
(a) ALTEA and SRX shall promptly inform the other Party of any
improvements to the MONITORING TECHNOLOGY or JOINT DELIVERY TECHNOLOGY as the
case may be, pursuant to Section 2.4.
(b) All TECHNOLOGY which, according to Section 1.6(a), (b) and
(c), is considered JOINT TECHNOLOGY, shall be communicated by the discovering or
conceiving Party, to the other Party, as promptly as possible following such
discovery or conception.
5. Records.
5.1 Records of Sales. SRX and NIMCO and/or ALTEA shall at all times
during the TERM and for a period of two (2) years after termination of this
AGREEMENT keep at its principal place of business true and accurate records of
all sales or other commercial applications or transfers subject to Article 3.0
of this AGREEMENT in such form and manner that all payments owed hereunder to
SRX or NIMCO or ALTEA may be readily and accurately determined.
5.2 Inspection by NIMCO and/or ALTEA. Once annually, an independent
accountant or auditor chosen by NIMCO and/or ALTEA shall have the right, at
NIMCO and/or ALTEA's expense, during normal business hours and after providing
at least five business days' notice, during the TERM and for two (2) years
thereafter, to examine those records of SRX which may reasonably be needed for
the purpose of verifying the amounts owed to NIMCO and/or ALTEA under this
AGREEMENT, or the amount of SRX investment "X" pursuant to Section 10.4(b), and
the accuracy of the reports furnished by SRX under Section 6 of this AGREEMENT
and such independent accountant or auditor shall maintain the confidentiality of
all confidential information obtained by it from examination of SRX's records
and shall use such information only for the purposes of this AGREEMENT. If the
results of such inspection show that SRX had underpaid NIMCO and/or ALTEA by 25%
in any year, then costs of such inspection shall be paid for by SRX, and SRX
shall pay such outstanding balance owed to NIMCO and/or ALTEA including interest
determined pursuant to Section 6.2
5.3 Inspection by SRX. Once annually, an independent accountant or
auditor chosen by SRX shall have the right, at SRX's expense, during normal
business hours and after providing at least five business days' notice, during
the TERM, and for two (2) years thereafter, to examine those records of ALTEA
which may reasonably be needed for the purpose of verifying the amounts owed to
SRX under this AGREEMENT and the accuracy of the reports furnished by ALTEA
under Section 6 of this AGREEMENT and such independent accountant or auditor
shall maintain the confidentiality of all confidential information obtained by
it from examination of ALTEA's records and shall use such information only for
the purposes of this AGREEMENT. If the results of such inspection show that
ALTEA had underpaid SRX by 25% in any year, then costs of such inspection shall
be paid for by
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ALTEA, and ALTEA shall pay such outstanding balance owed to SRX including
interest determined pursuant to Section 6.2.
6. Reports and Payments.
6.1 Quarterly Reports SRX. When making each payment pursuant to
Sections 3.2 and 3.3, SRX shall prepare and deliver to NIMCO and/or ALTEA a true
and accurate report, giving such particulars of the business conducted by SRX,
its AFFILIATES, and its SUBCONTRACTOR(S) during the preceding calendar quarter
as is required to calculate the payment and royalties due ALTEA (and NIMCO, if
royalties are so paid to NIMCO) hereunder. If no payment is due for a particular
calendar quarter, SRX shall so report.
6.2 Interest. SRX and ALTEA shall pay interest compounded monthly on
any amounts overdue under this AGREEMENT at a rate of two percent (2%) above the
United States Dollar ("$" or "USD") prime or equivalent rate quoted by Citibank
N.A. or another mutually acceptable United States bank, as in effect during the
period from the date due until payment.
6.3 Exchange Rate. All payments provided in this AGREEMENT shall be
made in USD and based on the exchange rate for the last business day of the
calendar month in which such sales occurred, as calculated using the midpoint of
the rates quoted by the Wall Street Journal, or the rate quoted by Citibank N.A.
or another mutually acceptable United States bank in the absence of a quotation
by the Wall Street Journal.
6.4 Quarterly Reports ALTEA. When making each payment pursuant to
Section 3.7(c), ALTEA shall prepare and deliver to SRX a true and accurate
report, giving such particulars of the business conducted by ALTEA, its
AFFILIATES, and its SUBCONTRACTOR(S) during the preceding calendar quarter as is
required to calculate the payment and royalties due SRX hereunder and if no
payment is due for a particular calendar quarter, ALTEA shall so report.
6.5 (a) As long as SRX has rights to MONITORING TECHNOLOGY and as long
as the sale of MONITORING TECHNOLOGY pursuant to Section 3.8 has not occurred,
SRX shall pay, within 30 days of date of invoice and as agreed upon by SRX in
advance for any single expense in excess of $100 (such amount to be adjusted
annually for increase in the CPI), all reasonable out-of-pocket expenses
incurred by NIMCO and ALTEA in performing activities relating to MONITORING
TECHNOLOGY pursuant to this AGREEMENT, and
(b) SRX shall also pay to employees of NIMCO and ALTEA, if not
simultaneously employed at SRX, a consulting fee of $150/hour for services if
mutually agreed pursuant to Section 2.2 or as otherwise mutually agreed. Such
fees shall be adjusted annually from January 1, 1997, for the increase in the
United States CPI.
6.6 All payments under this AGREEMENT are non-refundable and are
payable in USD when due. So long as all Parties are United States corporations,
there shall be no withholdings from payments
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under this AGREEMENT. Prior to any Party assigning its rights to any non-United
States entity, the Parties shall agree on how foreign withholding taxes shall be
handled, such consent not to be unreasonably withheld or delayed.
7. Patent Maintenance.
7.1 Responsibility. For so long as SRX has an obligation to pay
royalties or minimum payments to NIMCO and/or ALTEA on MONITORING TECHNOLOGY,
SRX shall be responsible for the payment of all fees, costs, and expenses paid
or incurred connected with the payment of any issuance fees, maintenance fees or
annuities to maintain the LICENSED PATENTS, EXISTING JOINT TECHNOLOGY PATENTS
and JOINT TECHNOLOGY PATENTS and for filing and prosecuting all such patent
applications in all countries of the TERRITORY to which SRX wishes to maintain
its rights hereunder relating to MONITORING TECHNOLOGY, inclusive of JOINT
TECHNOLOGY, during the TERM. EXISTING JOINT TECHNOLOGY PATENTS and JOINT
TECHNOLOGY PATENTS shall be jointly assigned to ALTEA and SRX pursuant to
ownership specified in Section 1.7. NIMCO and/or ALTEA shall cooperate (and
cause their officers, directors, employees, and agents to cooperate) as
reasonably requested by SRX in any such filings and prosecutions, such
cooperation to include executing without additional compensation (other than
actual reasonable expenses which shall be paid by SRX) all papers and other
instruments deemed appropriate by SRX for such filings and prosecutions. Except
if NIMCO and/or ALTEA has sold their entire rights to and interest in MONITORING
TECHNOLOGY to SRX pursuant to Section 3.8, if SRX, in its sole discretion,
elects not to file a patent application or not to continue prosecuting a patent
application or not to maintain a patent relating to MONITORING TECHNOLOGY,
including JOINT TECHNOLOGY, in a particular country, it shall so immediately
notify NIMCO and/or ALTEA, and NIMCO and/or ALTEA shall have the right, at its
sole expense, to file or continue prosecuting and to maintain such application
and all rights to any patent issuing from such application as well as MONITORING
TECHNOLOGY, including JOINT TECHNOLOGY, claimed in such patent shall revert, be
conveyed, and belong solely to NIMCO and/or ALTEA depending on the original
ownership of such invention pursuant to Sections 1.1(a) and (b), 1.6(a), (b) and
(c), and 1.7; any such valid patent shall no longer be licensed hereunder and
shall not apply to extending the TERM pursuant to Section 1.15, nor shall SRX be
obligated to pay royalties to ALTEA on such patent claiming MONITORING
TECHNOLOGY, nor shall ALTEA be obligated to pay royalties to SRX on any such
patent claiming JOINT DELIVERY TECHNOLOGY.
7.2 Delivery Technology Patents.
(a) (i) Provided that EXISTING JOINT TECHNOLOGY PATENTS or
JOINT TECHNOLOGY PATENTS claiming MONITORING TECHNOLOGY to which SRX has rights
can also claim DELIVERY TECHNOLOGY, SRX shall be responsible for the protection
of JOINT DELIVERY TECHNOLOGY to the same extent as in Section 7.1 for MONITORING
TECHNOLOGY. However, if NIMCO and/or ALTEA has sold its entire right and
interest in MONITORING TECHNOLOGY pursuant to Section 3.8, then SRX shall still
have the obligations pursuant to Sections 7.1 and 7.2 for those EXISTING JOINT
TECHNOLOGY PATENTS and JOINT
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TECHNOLOGY PATENTS that claim or can claim MONITORING TECHNOLOGY and JOINT
DELIVERY TECHNOLOGY.
(ii) After ALTEA has entered into a SUBCONTRACT
agreement on JOINT DELIVERY TECHNOLOGY, then ALTEA (or its SUBCONTRACTOR) shall
be responsible for (including the costs thereof) the patent filings,
prosecution, and maintenance as relates to JOINT DELIVERY TECHNOLOGY, and SRX
and ALTEA shall cooperate on a filing strategy for MONITORING TECHNOLOGY and
JOINT DELIVERY TECHNOLOGY, respectively.
(iii) In the event that any EXISTING JOINT TECHNOLOGY
PATENTS and/or JOINT TECHNOLOGY PATENTS claim only JOINT DELIVERY TECHNOLOGY,
such EXISTING JOINT TECHNOLOGY PATENTS and/or JOINT TECHNOLOGY PATENTS shall be,
subject to the terms and conditions of this AGREEMENT, the sole property of
ALTEA who shall assume the full responsibility of prosecuting and protecting
such EXISTING JOINT TECHNOLOGY PATENTS or JOINT TECHNOLOGY PATENTS at its sole
expense (unless SRX has rights to JOINT DELIVERY TECHNOLOGY pursuant to Section
2.6(b), in which case SRX shall assume such responsibility and expense).
(b) Notwithstanding the above, SRX shall be responsible for
the payment of all fees, costs and expenses paid or incurred connected with the
filing, prosecution, issuance, and maintenance of JOINT TECHNOLOGY PATENTS
claiming JOINT DELIVERY TECHNOLOGY and not MONITORING TECHNOLOGY, through the
earlier of (i) December 31, 1996, or (ii) ALTEA entering into a SUBCONTRACT
agreement covering JOINT DELIVERY TECHNOLOGY. ALTEA shall reimburse SRX for such
fees paid by SRX by paying an additional royalty upon commercialization of such
JOINT DELIVERY TECHNOLOGY pursuant to Section 3.7(c), such additional royalty to
be equal to that specified in Section 3.7(c), until the fees paid by SRX on
ALTEA's behalf for such patent filings claiming JOINT DELIVERY TECHNOLOGY and
not MONITORING TECHNOLOGY, are fully reimbursed; unless ALTEA enters into a
SUBCONTRACT agreement relating to JOINT DELIVERY TECHNOLOGY; in which case ALTEA
shall reimburse SRX for SRX's actual expenses paid on ALTEA's behalf pursuant to
this sentence, within sixty (60) days after entering into such SUBCONTRACT
agreement.
7.3 NIMCO and/or ALTEA shall determine which patent counsel to employ
in the filing and prosecution and maintenance of patents relating only to JOINT
DELIVERY TECHNOLOGY, and for as long as SRX has rights to MONITORING TECHNOLOGY
SRX shall determine which patent counsel to employ in the filing, prosecution
and maintenance of patents relating only to MONITORING TECHNOLOGY, except as
modified pursuant to Section 7.1. ALTEA and SRX shall agree upon which patent
counsel to employ in the filing, prosecution and maintenance of LICENSED
PATENTS, as well as JOINT TECHNOLOGY PATENTS claiming both JOINT DELIVERY and
MONITORING TECHNOLOGY in the TERRITORY for as long as SRX has rights to
MONITORING TECHNOLOGY; otherwise ALTEA shall solely determine the patent
counsel.
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8. Patent Infringement.
8.1 Notice of Infringement.
(a) SRX shall take all commercially reasonable steps to
protect the LICENSED PATENTS, EXISTING JOINT TECHNOLOGY PATENTS and JOINT
TECHNOLOGY PATENTS in all parts of the TERRITORY in which a patent application
or patent is present or patent application can be filed concerning MONITORING
TECHNOLOGY to which SRX has rights, and each of NIMCO, ALTEA and SRX shall give
prompt notice to the other Parties of any infringement or threatened or
suspected infringement thereof that shall at any time come to its knowledge
together with such detailed information as shall from time to time be available
to such Party relating to such infringement or threatened or suspected
infringement.
(b) SRX shall give ALTEA prompt notice of any infringement or
suspected infringement of JOINT DELIVERY TECHNOLOGY of which SRX becomes aware.
8.2 Defense. In the event that a declaratory judgment action,
cancellation, opposition or similar proceeding alleging invalidity,
unenforceability or noninfringement of any of the LICENSED PATENTS, EXISTING
JOINT TECHNOLOGY PATENTS or JOINT TECHNOLOGY PATENTS claiming MONITORING
TECHNOLOGY shall be brought by a THIRD PARTY against NIMCO and/or ALTEA, and/or
SRX, as long as SRX has rights to MONITORING TECHNOLOGY, SRX shall have the
right to defend and/or settle such action or proceeding as it relates to the
issues of noninfringement. Without NIMCO's and/or ALTEA's knowledge and written
consent, SRX may not settle issues of unenforceability or invalidity of such
LICENSED PATENTS, EXISTING JOINT TECHNOLOGY PATENTS or JOINT TECHNOLOGY PATENTS
in any manner. Subject to Article 12, if SRX determines at any time that it does
not desire to defend and/or settle (or continue to defend and/or settle) such
action, SRX shall promptly so advise NIMCO and/or ALTEA, and NIMCO and/or ALTEA
shall then have the right to defend and/or settle (or continue to defend and/or
settle) such action at NIMCO and/or ALTEA's expense and SRX shall, without cost
or delay, provide NIMCO and/or ALTEA with all unprivileged information, data,
documents, and pleadings it has in its possession to enable NIMCO and/or ALTEA
to defend (or continue to defend) such action. Any privileged information, such
as attorney work product, attorney client communications, legal assessments,
opinions or the like which has been, or can be, asserted by SRX shall also be
provided to NIMCO and/or ALTEA to the extent that such information will not, in
the opinion of counsel for SRX, be detrimental to SRX if the privilege is lost
or which can be passed from counsel for SRX to counsel for NIMCO and/or ALTEA
under a confidential disclosure agreement, protective order, or other
relationship which would not destroy such privilege. NIMCO and/or ALTEA shall
not be liable to SRX for any costs incurred by SRX prior to SRX advising NIMCO
and/or ALTEA of its decision not to defend (or continue to defend) such action.
However, such action by NIMCO and/or ALTEA shall not relieve SRX of its
obligations pursuant to Articles 3 and 12, including defending and indemnifying
NIMCO and/or ALTEA relating to claims relating to ownership or inventorship of
patents, except, however, that SRX shall not be liable for any costs of NIMCO
and/or ALTEA's in defending the LICENSED PATENTS, EXISTING JOINT TECHNOLOGY
PATENTS or JOINT TECHNOLOGY PATENTS pursuant to this Section 8.2. Any action
referenced above pertaining solely to JOINT DELIVERY TECHNOLOGY shall be the
sole responsibility of ALTEA (unless SRX
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has acquired right to JOINT DELIVERY TECHNOLOGY, in which case SRX shall be
solely responsible), and SRX agrees to cooperate with ALTEA in its defense of
such pursuant to Section 8.4
8.3 Infringement Suits.
(a) (i) SRX shall be responsible for instituting legal
action, at its sole expense, against infringers of MONITORING TECHNOLOGY to
which SRX has rights claimed in the LICENSED PATENTS, EXISTING JOINT TECHNOLOGY
PATENTS and JOINT TECHNOLOGY PATENTS, if it is of the opinion that such
infringement will seriously affect its business. The decision to institute or
settle legal action will be solely that of SRX. If NIMCO and/or ALTEA disagrees
with SRX's decision not to institute legal action against infringers, NIMCO
and/or ALTEA shall have the option to institute legal action for patent
infringement at its own expense. If SRX chooses to institute legal action
against infringers, all damages, including attorneys' fees obtained as a result
of such action, shall be retained by SRX. If NIMCO and/or ALTEA chooses
pursuant to this paragraph to so institute legal action against infringers, all
damages, including attorney fees obtained as a result of such legal action,
shall be retained by NIMCO and/or ALTEA, respectively. SRX shall not be liable
for any loss suffered by NIMCO and/or ALTEA as a result of NIMCO's and/or
ALTEA's legal action against an infringer.
(ii) ALTEA shall be responsible for instituting legal
action, at its sole expense, against all infringers of JOINT DELIVERY TECHNOLOGY
to which ALTEA has rights claimed in the EXISTING JOINT TECHNOLOGY PATENTS and
JOINT TECHNOLOGY PATENTS, if its is of the opinion that such infringement will
seriously affect its business. The decision to institute or settle legal action
will be solely that of ALTEA. IF SRX disagrees with ALTEA's decision not to
institute legal action against infringers, SRX shall have the option to
institute legal action for patent infringement at its own expense. If ALTEA
chooses to institute legal action against infringers, all damages, including
attorneys' fees obtained as a result of such action, shall be retained by ALTEA.
If SRX chooses pursuant to this paragraph to so institute legal action against
infringers, all damages, including attorney fees obtained as a result of such
legal action, shall be retained by SRX. ALTEA shall not be liable for any loss
suffered by SRX as a result of SRX's legal action against an infringer.
(b) (i) If any THIRD PARTY accuser institutes action against
SRX, NIMCO or ALTEA alleging that the use of MONITORING TECHNOLOGY to which SRX
has rights is an infringement of THIRD PARTY technology or patents, SRX shall be
responsible at its sole expense for defending itself, and defending and
indemnifying NIMCO and ALTEA against such actions. If SRX shall be liable for
obtaining a license under such THIRD PARTY patents and/or making payments to
such THIRD PARTIES, SRX shall be solely responsible for any payments due to such
THIRD PARTIES. SRX shall consult with NIMCO and/or ALTEA in any such defense and
settlement, and shall reach a settlement that is reasonably agreeable to all
Parties, such agreement not to be unreasonably withheld.
(ii) If any THIRD PARTY accuser institutes action against
ALTEA or SRX alleging that the use of JOINT DELIVERY TECHNOLOGY to which ALTEA
has rights is an infringement of THIRD PARTY technology or patents, ALTEA shall
be responsible, at its sole expense, for defending itself and SRX against such
actions. If ALTEA shall be liable for obtaining a license under
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such THIRD PARTY patents and/or making payments to such THIRD PARTIES, ALTEA
shall be solely responsible for any payments due to such THIRD PARTIES. ALTEA
shall consult with SRX in any such defense and settlement, and shall reach a
settlement that is reasonably agreeable to all Parties, such agreement not to be
unreasonably withheld.
8.4 Cooperation. In any suit, either Party may commence or defend
against a THIRD PARTY pursuant to its rights under this AGREEMENT in order to
enforce or defend the validity or enforceability of the LICENSED PATENTS,
EXISTING JOINT TECHNOLOGY PATENTS or JOINT TECHNOLOGY PATENTS, the other Party
shall, at the request and expense of the Party initiating or defending such
suit, cooperate in all respects and, to the extent possible, have its employees
testify when requested and make available without delay relevant records,
papers, information, samples, specimens and the like.
9. Confidentiality.
9.1 Confidentiality Nondisclosure. During the TERM and for seven (7)
years thereafter without regard to the means of termination or expiration,
neither SRX, NIMCO, nor ALTEA, nor any of their respective AFFILIATES shall
reveal or disclose to THIRD PARTIES any confidential information received from
the other Party under this AGREEMENT or under prior agreements without first
obtaining the written consent of the other Party, except (i) as may be required
for securing regulatory approval, subject to seeking confidential treatment
where available; (ii) as may be required to be disclosed to an agency or as
otherwise required by law, or court order, subject to seeking confidential
treatment where available. This confidentiality obligation shall not (a) apply
to such information which is or becomes a matter of public knowledge other than
through breach of this AGREEMENT; (b) is already in the possession of the
receiving Party; (c) is disclosed non-confidentiality to the receiving Party by
a THIRD PARTY having the right to do so, (d) is subsequently and independently
developed by employees of the receiving Party or AFFILIATES thereof who had no
knowledge of the confidential information disclosed. The Parties shall take
reasonable measures to assure that no unauthorized use or disclosure is made by
others to whom access to such information is granted.
9.2 Scope of Confidentiality. SRX, NIMCO, and ALTEA agree to limit the
disclosure of any technical data and information or other confidential
information received hereunder to such employees and consultants as are
reasonably necessary to carry out the provisions of this AGREEMENT and such
employees and consultants are likewise bound by the provisions of this Section
9.0. In addition any Party may disclose confidential information related to
TECHNOLOGY to which they have rights to THIRD PARTIES under conditions at least
as stringent as those in Section 9.1 at any time after the TERM. If after
termination or expiration, any Party has rights to all confidential information
generated under this AGREEMENT, then such Party shall not be restricted in its
use of such confidential information.
9.3 Notwithstanding the foregoing Sections 9.1 and 9.2, any Party is
permitted to disclose TECHNOLOGY to which it has COMMERCIALIZATION rights under
this AGREEMENT to THIRD PARTIES at its sole discretion under confidentiality
under conditions at least as stringent as those in Sections 9.1 and 9.2.
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10. Term and Termination.
10.1 Duration. The term of this AGREEMENT shall be the TERM as defined
in Section 1.15.
10.2 Termination for Breach. A non-defaulting Party shall have the
option, in addition to all other legal and equitable rights and remedies
available to it, to terminate this AGREEMENT effective immediately upon the
expiration of any applicable cure period, in the event of a "default" by the
other Party (as defined below) if written notice of the defaulting activity has
been given to the Party in default. Written notice of termination following the
providing of written notice of default shall not be a prerequisite to
termination. The term "default" shall mean any of the following events:
(a) failure by SRX, NIMCO or ALTEA to comply with or perform
any provision of this AGREEMENT such that it materially adversely affects the
other Party's aggregate rights and benefits hereunder, and such default remains
uncured for ninety (90) days following written notice of the defaulting activity
provided that if the default is cured within such notice period the notice shall
become null and void and of no further effect.
10.3 Termination of SRX MONITORING RIGHTS by SRX. SRX may terminate all
its rights and obligations, except confidentiality pursuant to Article 9 and
indemnity pursuant to Article 12, to MONITORING TECHNOLOGY under this AGREEMENT
at any time by giving NIMCO and/or ALTEA three (3) months prior written notice
if before COMMERCIALIZATION of MONITORING TECHNOLOGY and six (6) months prior
written notice if after COMMERCIALIZATION of MONITORING TECHNOLOGY of SRX's
election to so terminate its rights. SRX may terminate its rights in less than
three (3) or six (6) months as the case may be upon receiving written permission
from NIMCO and/or ALTEA to do so. For clarification, SRX's termination of its
MONITORING RIGHTS pursuant to this Section 10.3 shall not terminate this
AGREEMENT.
10.4 Events Following Termination or Expiration.
(a) Unless this AGREEMENT is terminated by SRX for default by
NIMCO and/or ALTEA pursuant to Section 10.2, upon expiration or termination of
this AGREEMENT in accordance with the provisions herein, or revocation or
termination of SRX's rights pursuant to Sections 2.6(a) or 10.3, all rights to
TECHNOLOGY and JOINT TECHNOLOGY (except for TECHNOLOGY conceived, after the
termination of this AGREEMENT, by SRX without benefit of confidential
information pursuant to this AGREEMENT), any uses, applications or products
encompassing TECHNOLOGY, including JOINT TECHNOLOGY shall become or remain, the
exclusive property of ALTEA, except that all rights to LICENSED PATENTS shall
become or remain the exclusive property of NIMCO. NIMCO and/or ALTEA shall then
have the right to continue or commence the development and/or COMMERCIALIZATION
of, with all rights to, any products, uses or applications of TECHNOLOGY whether
or not they were developed under this AGREEMENT (except for TECHNOLOGY
conceived, after termination of this AGREEMENT by SRX without benefit of
confidential information pursuant to this AGREEMENT). All rights and
obligations, and all data and documents in relation to such TECHNOLOGY thereto
made solely by NIMCO and/or ALTEA, or jointly by ALTEA and SRX, and all
improvements thereto shall remain with or revert exclusively to NIMCO and/or
ALTEA and may be
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exploited by NIMCO and/or ALTEA as its unencumbered beneficially owned property,
except as stated in 10.4(b) herein.
If this AGREEMENT is terminated by SRX for default by NIMCO and/or
ALTEA pursuant to Section 10.2, upon such termination,
(i) all rights to MONITORING TECHNOLOGY (except for
MONITORING TECHNOLOGY conceived, after termination of this AGREEMENT, by ALTEA
without benefit of confidential information pursuant to this AGREEMENT) in the
countries in which SRX has retained its exclusive rights pursuant to Sections
2.6(a) and 7.1 including MONITORING TECHNOLOGY of JOINT TECHNOLOGY, any uses,
applications or products encompassing MONITORING TECHNOLOGY, shall become the
exclusive property of SRX. In the countries where SRX has non-exclusive rights
to MONITORING TECHNOLOGY pursuant to Section 2.6(a)(iii), each Party shall
retain their non-exclusive rights. SRX shall then have the right to continue or
commence development and/or COMMERCIALIZATION of, with rights (exclusive or
non-exclusive, as the case may be) to, any products, uses or applications of
such MONITORING TECHNOLOGY, and
(ii) all rights to DELIVERY TECHNOLOGY (except for
DELIVERY TECHNOLOGY conceived, after termination of this AGREEMENT, by SRX
without benefit of confidential information pursuant to this AGREEMENT),
including JOINT DELIVERY TECHNOLOGY (or excluding JOINT DELIVERY TECHNOLOGY if
SRX has acquired and retained rights to JOINT DELIVERY TECHNOLOGY pursuant to
Section 2.6(b) and (c)) any uses, applications or products encompassing DELIVERY
TECHNOLOGY, shall become or remain the exclusive property of ALTEA. ALTEA shall
then have the right to continue or commence development and/or COMMERCIALIZATION
of, with all rights to, any products, uses or applications of JOINT DELIVERY
TECHNOLOGY as well as DELIVERY TECHNOLOGY outside of JOINT DELIVERY TECHNOLOGY.
(b) Unless this AGREEMENT is terminated by NIMCO and/or ALTEA
for default by SRX pursuant to Section 10.2, if SRX loses its rights to
MONITORING TECHNOLOGY pursuant to Sections 2.6(a) or 10.3 prior to
COMMERCIALIZATION of MONITORING TECHNOLOGY, then
(i) in the case where SRX loses all its rights to
MONITORING TECHNOLOGY, NIMCO and/or ALTEA agrees to pay to SRX after such
reacquisition of all rights to MONITORING TECHNOLOGY form SRX, an amount (Z)
reflective of SRX's and NIMCO and/or ALTEA's relative investment by way of a
royalty calculated at a rate which is equal to that defined in Section 3.3(a)
herein where;
Z=6X-3Y; and
X=SRX investment after June 27, 1995
directly used by SRX in the development of
MONITORING TECHNOLOGY and not subsequently
applied to other technologies or projects.
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<PAGE> 24
Y=NIMCO and/or ALTEA investment after
reacquisition of all rights to MONITORING
TECHNOLOGY under this AGREEMENT for
development of MONITORING TECHNOLOGY,
updated annually.
Z=Maximum Amount to be paid to SRX as a
royalty on NET SALES by NIMCO and/or ALTEA.
The calculation of Z shall be updated
annually and once the updated amount Z has
been paid to SRX pursuant to this Section
10.4(b), NIMCO and/or ALTEA shall have no
further obligation to SRX, and
(ii) in the case where SRX has lost part of its
rights pursuant to Section 2.6(a), Section 10.4(d) shall apply for those
countries for which SRX has lost its rights.
(c) The provisions of Section 3.0 concerning the payment of
royalties and other fees shall continue to bind the Parties if this AGREEMENT
expires or is terminated or SRX's MONITORING RIGHTS are limited or terminated
for any reason until all payments payable under this AGREEMENT accrued during
its TERM or prior to such termination of rights are paid; provided, however,
upon expiration or termination of this AGREEMENT or termination of SRX's rights
pursuant to Sections 2.6(a) or 10.3,
(i) the final minimum payment accrued as described
above and payable under paragraph 3.4 and 3.5 shall be due to ALTEA upon the
date of termination except if terminated pursuant to section 10.7 and shall be
prorated for that portion of the year prior to such termination,
For Example: If the AGREEMENT or SRX's rights are so terminated on
September 30, 1997, the minimum royalty due to ALTEA on September 30, 1997 is
__________ and
(ii) if this AGREEMENT or SRX's rights to MONITORING
TECHNOLOGY are terminated (except if terminated pursuant to Section 10.7) prior
to January 1, 1997, SRX agrees to pay to ALTEA the full remaining minimum
payment that would have been due for Calendar Year 1996 upon the date of
termination.
(d) Upon termination or expiration of this AGREEMENT or
termination of SRX's or ALTEA's rights to any aspect of MONITORING TECHNOLOGY or
JOINT DELIVERY TECHNOLOGY, the Party who does not have rights to the field of
TECHNOLOGY pursuant to Section 10.4(a) above shall immediately transfer to the
other Party (NIMCO and/or ALTEA, or SRX) ownership of, and where possible
possession of, all data, documents, including videos, technical, clinical and
regulatory data and documents, and submissions and approvals, and as applicable
all LICENSED PATENTS, EXISTING JOINT TECHNOLOGY PATENTS, JOINT TECHNOLOGY
PATENTS, samples, inventory, work-in-progress, products, customer and
distribution lists, promotional materials and the like relating to MONITORING
TECHNOLOGY or JOINT DELIVERY TECHNOLOGY, and where possession is not possible,
allow the other Party to cross-reference and make copies of all such data and
documents including laboratory notebooks, and the Party not having MONITORING
TECHNOLOGY or JOINT DELIVERY TECHNOLOGY rights shall take all other steps
necessary or
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<PAGE> 25
useful to enable the other Party to carry out the development and/or marketing
or products, uses or applications covered by MONITORING TECHNOLOGY or JOINT
DELIVERY TECHNOLOGY, as the case may be, in all countries to which that Party
has rights to such TECHNOLOGY of the TERRITORY without delay.
10.5 The expiration or termination of this AGREEMENT shall not affect
any rights and obligations of the Parties under this AGREEMENT which are
intended by the Parties to survive such termination. Without limiting the
generality of the foregoing, the following provisions of this AGREEMENT shall
survive expiration or termination hereof: Articles 1 (to the extent definitions
apply to termination or expiration events), 5, 6 (to the extent for payments due
or accrued prior to termination or expiration) 9, 11, and 12 and Sections 7.1,
7.2, 8.2 (last sentence), 10.4, 10.5, 10.6, 13.3, 13.4 13.7(b), 13.15, Exhibits
B and C and any other Sections that are intended by the Parties to survive
expiration or termination. Such expiration or termination shall not prejudice
NIMCO and/or ALTEA's rights to any royalties and other sums due hereunder and
shall not prejudice any cause of action or claim of NIMCO and/or ALTEA accrued
or to accrue on account of any breach or default by SRX. Such expiration or
termination shall not prejudice SRX's rights to any royalties and other sums due
hereunder and shall not prejudice any cause of action or claim of SRX accrued or
to accrue on account of any breach or default by NIMCO and/or ALTEA.
10.6 Neither Party shall be entitled to any compensation whatsoever as
a result of termination or expiration of this AGREEMENT, but without limiting
either Party's damages for any breach of this AGREEMENT.
10.7 SRX shall have the right to terminate this AGREEMENT at any time
within four months of the EFFECTIVE DATE, upon written notice if NIMCO does not
resolve the dispute with MIT under terms satisfactory to SRX.
11. Warranties.
11.1 General. As of the EFFECTIVE DATE, SRX, NIMCO and ALTEA are aware
of claims and actions raised by the Massachusetts Institute of Technology (MIT),
Robert Langer and Joseph Kost, with respect to the MONITORING TECHNOLOGY. While
NIMCO and ALTEA vigorously deny such claims, NIMCO and ALTEA make no warranty
that the claims raised by MIT, Robert Langer or Joseph Kost will be found to be
invalid. If such claims are found to be valid or a settlement is otherwise
reached, the license and rights granted herein, in Article 2, shall be modified
in accordance and agreement with the resolution of such claims.
11.2 NIMCO and ALTEA Representations and Warranties. As of the
EFFECTIVE DATE, except as stated in Section 11.1, NIMCO and/or ALTEA warrant and
represent to SRX that they are owners of the MONITORING TECHNOLOGY as listed in
Section 1.1, and that they are not aware of any THIRD PARTY claims or rights to
MONITORING TECHNOLOGY, except as noted herein.
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<PAGE> 26
11.3 SRX Representation and Warranty. SRX represents that it is fully
aware of and has reviewed the claims and actions referenced in Section 11.1, and
the LICENSED PATENTS and the EXISTING JOINT TECHNOLOGY PATENTS, and that it is
entering into this AGREEMENT with this knowledge. As of the EFFECTIVE DATE,
except as stated in Section 11.1, SRX warrants and represents that it is not
aware of any THIRD PARTY claims or rights to MONITORING TECHNOLOGY, SRX warrants
that it has the full right and authority to enter into this AGREEMENT.
11.4 NO PARTY MAKES ANY WARRANTY, OTHER THAN AS STATED IN SECTIONS 11.2
AND 11.3, EXPRESS OR IMPLIED, WITH RESPECT TO THE TECHNOLOGY. EACH PARTY
EXPRESSLY DISCLAIMS ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR NON-INFRINGEMENT. IN NO EVENT SHALL ANY PARTY BE LIABLE
FOR ANY INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES EXCEPT FOR
DAMAGES ARISING OUT OF BREACH BY THAT PARTY OF THIS AGREEMENT.
12. Indemnification.
(a) SRX shall (and shall require its SUBCONTRACTORS to)
indemnify, hold harmless, defend NIMCO and ALTEA, their directors, officers,
employees, permitted successors and assigns, AFFILIATES, and agents from and
against any and all monetary losses including but not limited to any claims
(including but not limited to claims for injury to tangible property or the
environment, and claims for injury to persons and other product liability
claims), legal actions, lawsuits, and the like made or filed by THIRD PARTIES
(including but not limited to directors, officers, employees and agents of SRX)
against or naming NIMCO and/or ALTEA, their directors, officers, employees,
permitted successors and assigns, AFFILIATES; and agents (collectively
"NIMCO/ALTEA LOSSES"), and shall pay reasonable attorneys' fees of NIMCO and
ALTEA directly connected with such NIMCO/ALTEA LOSSES, relating to any
activities undertaken by SRX, its AFFILIATES or SUBCONTRACTORS relating to any
aspect of TECHNOLOGY or the subject matter of this AGREEMENT, provided that any
activities undertaken by Jonathan Eppstein (JAE) as part of his employment by
SRX or its successors or assigns and any activities undertaken by NIMCO or ALTEA
or their AFFILIATES or SUBCONTRACTORS with the prior consent of SRX, with prior
or subsequent confirmation in writing, shall be deemed to be activities of SRX
for the purposes of this indemnity.
(b) NIMCO and ALTEA shall (and shall require their
SUBCONTRACTORS to) indemnify, hold harmless, and defend SRX, its directors,
officers, employees, permitted successors and assigns, AFFILIATES, and agents
from and against any and all monetary losses including but not limited to any
claims (including but not limited to claims for injury to tangible property or
the environment, and claims for injury to persons and other product liability
claims), legal actions, lawsuits, and the like made or filed by THIRD PARTIES
(including but not limited to directors, officers, employees and agents of NIMCO
and ALTEA other than JAE in his role as employee of SRX or its successors or
assigns) against or naming SRX, its directors, officers, employees, permitted
successors and assigns, AFFILIATES, and agents (collectively "SRX LOSSES"), and
shall pay reasonable attorneys fees of SRX directly connected with such SRX
LOSSES, relating to any activities undertaken after the EFFECTIVE DATE by NIMCO
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<PAGE> 27
or ALTEA, their AFFILIATES or SUBCONTRACTORS relating to any aspect of
TECHNOLOGY or the subject matter of this AGREEMENT, other than as indemnified
and defended by SRX pursuant to Sections 12(a) and (c). For purposes of
clarification, the agreement of the Parties is that Section 12(a) shall without
limiting its generality indemnify and defend NIMCO and ALTEA against all product
liability claims arising out of commercialization of TECHNOLOGY by SRX or its
AFFILIATES or SUBCONTRACTORS and that Section 12(b) shall without limiting its
generality indemnify and defend SRX against all product liability claims arising
out of commercialization of TECHNOLOGY by NIMCO or ALTEA or their AFFILIATES or
SUBCONTRACTORS through THIRD PARTIES.
(c) SRX shall (and shall require its SUBCONTRACTORS to)
indemnify, hold harmless, and defend NIMCO and ALTEA, their directors, officers,
employees, permitted successors and assigns, AFFILIATES, and agents from and
against any claims, legal actions, lawsuits and the like made or filed by the
Massachusetts Institute of Technology, Ben Gurion University, Robert Langer or
Joseph Kost, (the "MIT PARTIES") relating to inventorship, ownership or rights
of LICENSED PATENTS made after June 27, 1995 and thereafter during the period
that SRX shall have rights to MONITORING TECHNOLOGY, provided NIMCO's and
ALTEA's response to any such action is agreed upon with SRX (such agreement to
be confirmed in writing), and provided further that in this instance the
indemnity shall be limited to payment of damages or other payments to the MIT
PARTIES together with reasonable attorneys' fees of NIMCO and ALTEA directly
connected with the foregoing and SRX's costs of defense.
(d) All reasonable expenses paid by SRX in defense and
indemnity of NIMCO and/or ALTEA of claims under Section 12(c) shall be
subtracted from the amount of payments thereafter due from SRX under Sections
3.4 and 3.5, until paid or this AGREEMENT is terminated or expires, but at a
rate no grater than twenty five percent (25%) of any annual payment in excess of
fifty thousand dollars ($50,000). Such payments shall be reconciled each quarter
not only for that quarter but also for the preceding calendar quarters in that
same calendar year.
(e) In the event of any matter referenced in Section 12(c) in
which the Parties do not agree on the course of action in defending NIMCO and/or
ALTEA against such claims, if NIMCO and/or ALTEA shall continue such defense on
its own, then NIMCO may, at its sole option, delete the relevant LICENSED
PATENTS from this AGREEMENT and SRX, its AFFILIATES and SUBCONTRACTORS shall no
longer have rights to such LICENSED PATENTS.
13. Miscellaneous and General.
13.1 Independent Contractor.
(a) SRX's relationship to NIMCO and ALTEA hereunder, whether
as a licensee, licensor or joint developer, shall be that of an independent
contractor only. SRX shall not be the agent of NIMCO or ALTEA and shall have no
authority to act for or on behalf of NIMCO or ALTEA in any matter. Persons
retained by SRX as employees or agents shall not by reason thereof be deemed to
be employees or agents of NIMCO or ALTEA.
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<PAGE> 28
(b) NIMCO or ALTEA's relationship to SRX hereunder, whether as
a licensee, licensor or JOINT DEVELOPER, shall be that of an independent
contractor only. NIMCO or ALTEA shall not be the agent of SRX and shall have no
authority to act for or on behalf of SRX in any matter. Persons retained by
NIMCO as employees or agents shall not by reason thereof be deemed to be
employees or agents of SRX.
13.2 Patent Marking. SRX and ALTEA agree to mark the products covered
by LICENSED PATENTS, EXISTING JOINT TECHNOLOGY PATENTS and JOINT TECHNOLOGY
PATENTS sold in the United States with all applicable United States patent
numbers. All products shipped to or sold in other countries shall be to the
extent practical marked in such a manner as to conform with the patent laws and
practice of the country of sale.
13.3 Interpretation. In this AGREEMENT, the singular shall include the
plural and vice versa, and the word "including" shall be deemed to be followed
by the phrase "without limitation."
13.4 Resolution of Disputes. In the event the Parties have a dispute or
claim of any kind arising under this AGREEMENT that they are unable to resolve
through direct communications, such dispute shall be resolved through
arbitration pursuant to the commercial rules of the American Arbitration
Association with one arbitrator chosen by NIMCO and/or ALTEA, one arbitrator
chosen by SRX, and the third arbitrator chosen by the proceeding first two
arbitrators.
13.5 No term or condition of this AGREEMENT shall be considered waived
unless reduced to writing and duly executed by an officer of the waiving Party.
Any waiver by any Party of a breach of any term or condition of this AGREEMENT
will not be considered as a waiver of any subsequent breach of this AGREEMENT,
of that term or condition or any other term or condition hereof.
13.6 Neither Party shall be virtue of this AGREEMENT have any power to
bind the other to any obligation, nor shall this AGREEMENT create any
relationship of agency, partnership or joint venture.
13.7 Joint Development Activities.
(a) For so long as (JAE) is employed by SRX and, during the
TERM, JAE's activities relating to JOINT DEVELOPMENT shall be allocated to both
ALTEA and SRX.
(b) If any of the terms and conditions of this AGREEMENT are
in conflict with any SRX. NIMCO, or ALTEA employment agreement, the terms and
conditions of this AGREEMENT shall prevail.
(c) If any Party finds that any of the terms and conditions
(other than obligations of minimum payments and royalties) prevents that Party
from entering into a SUBCONTRACT agreement that is mutually beneficial to all
Parties, the Parties shall meet to discuss the situation and attempt to resolve
the situation to the mutual benefit of all Parties. If the terms of this
AGREEMENT are found to present a substantial barrier to COMMERCIALIZATION of
either MONITORING TECHNOLOGY
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or JOINT DELIVERY TECHNOLOGY and this AGREEMENT can be modified without material
damage to any Party, while providing equivalent economic benefit to each Party,
then the Parties agree to negotiate in good faith to so modify this AGREEMENT to
eliminate such barrier to COMMERCIALIZATION to the benefit of all Parties.
13.8 Legal Compliance. SRX and ALTEA shall comply with all rules and
regulations concerning TECHNOLOGY or the sale of any product, use or application
thereof, in any country of the TERRITORY in which the Parties, their AFFILIATES
or their SUBCONTRACTOR(S) are selling, leasing or otherwise commercially
transferring products, uses or applications covered by the TECHNOLOGY, including
JOINT TECHNOLOGY.
13.9 Notices. Any notices required or permitted to be given hereunder
shall be in writing in the English language and shall be delivered in person or
by Federal Express (or other reputable express courier service documenting proof
of receipt) or by telecopy confirmed by a documented proof of receipt as above,
to the addresses set forth below. The Parties may change the address at which
notice is to be given by giving notice to the other Party as herein provided.
All notices shall be deemed effective upon the courier confirmed receipt by the
Party to whom it is addressed, or upon personal delivery.
If to SRX: Mr. Mark A. Samuels
SpectRx, Inc.
6025A Unity Drive
Norcross, Georgia 30071
Facsimile: (770) 242-8723
With a copy to: Dean W. Russell, Esq.
Kilpatrick & Cody
Suite 2800, 1100 Peachtree Street
Atlanta, Georgia 30309-4530
Facsimile: (404) 815-6555
If to NIMCO: Dr. Deborah A. Eppstein
Non-Invasive Monitoring Company, Inc.
1675 Emigration Canyon Road
Salt Lake City, Utah 84108
Facsimile: (801) 582-1317
With a copy to: Jonathan A. Eppstein
Non-Invasive Monitoring Company, Inc.
12844 Jasmine Court
Atlanta, Georgia 30345
Facsimile: (770) 908-1981
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and a copy to: Stephen Johnson, Esq.
Kirkland & Ellis
153 East 53rd Street
New York, New York 10022-4675
Facsimile: (212) 446-4900
If to ALTEA: Dr. Deborah A. Eppstein
Altea Technologies, Inc.
1675 Emigration Canyon Road
Salt Lake City, Utah 84108
Facsimile: (801) 582-1317
With a copy to: Jonathan A. Eppstein
Non-Invasive Monitoring Company, Inc.
2844 Jasmine Court
Atlanta, Georgia 30345
Facsimile: (770) 908-1981
and a copy to: Stephen Johnson, Esq.
Kirkland & Ellis
153 East 53rd Street
New York, New York 10022-4675
Facsimile: (212) 446-4900
Any Party hereto may change the address to which notices to such Party are to be
sent by giving notice to the other Party at the address and in the manner
provided above. Any notice herein required or permitted to be given may be
given, in addition to the manner set forth above, by telex, facsimile or cable,
provided that the Party giving such notice obtains acknowledgment by telex,
facsimile or cable that such notice has been received by the Party to be
notified. Notice made in this manner shall be deemed to have been given when
such acknowledgment has been transmitted.
13.10 Force Majeure. If either Party is prevented from complying,
either totally or in party, with any of the terms or provisions of this
AGREEMENT, by reason of force majeure, including, but not limited to fire,
flood, earthquake, explosion, storm, strike, lockout or other labor trouble,
riot, war, rebellion, accident, acts of God and/or any other cause or externally
induced casualty beyond its reasonable control, whether similar to the foregoing
matters or not, then, upon written notice by the Party liable to perform to the
other Party, the requirements of this AGREEMENT or such of its provisions as may
be affected, and to the extent so affected, shall be suspended during the period
of such disability; provided that the Party asserting force majeure shall bear
the burden of establishing the existence of such force majeure by clear and
convincing evidence; and provided further, that the Party prevented from
complying shall use its best efforts to remove such disability within thirty
(30) days, and shall continue performance with the utmost dispatch whenever such
causes are removed, and shall notify the other Party of the event no more than
five (5) working days from the time of the event. When such circumstances arise,
the Parties shall discuss what, if any, modification of the terms of this
AGREEMENT may be
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required in order to arrive at an equitable solution. Notwithstanding the
foregoing, in the event that a material event of force majeure shall continue
for a period of longer than six (6) months, then the Party unaffected by such
event may terminate this AGREEMENT by not less than ninety (90) days written
notice of termination to the other Party.
13.11 Assignments and Inurement. Except to the extent otherwise herein
provided, no Party shall grant, transfer, convey, or otherwise assign any of its
rights to delegate any of its obligations (except in the occurrence of an event
as described in Section 1.9(a)(ii) or (iv), for either SRX, NIMCO or ALTEA) as
relates to MONITORING TECHNOLOGY or JOINT DELIVERY TECHNOLOGY under this
AGREEMENT to a THIRD PARTY without the prior written consent of the other, which
consent shall not be unreasonably withheld, provided that such THIRD PARTY has
the capability to and agrees to comply with the terms of this AGREEMENT
including Section 3.8; as relates to events as described in Section 1.9(a)(ii)
and (iv) for either SRX, NIMCO or ALTEA, such Party may assign this AGREEMENT
without the consent of the other Parties, provided such THIRD PARTY agrees to
comply with the terms of this AGREEMENT including Section 3.8; provided however
that the Parties agree that SRX shall not be permitted to partially assign its
rights or delegate its obligations under this AGREEMENT. SRX shall be permitted
to transfer its rights, hereunder only if it shall transfer all of its rights
and obligations hereunder to such THIRD PARTY or AFFILIATE. This AGREEMENT shall
be binding upon and inure to the benefit of the successors and permitted assigns
of the Parties hereto. Notwithstanding the foregoing, any Party shall be
permitted to perform this AGREEMENT in whole or in part through its AFFILIATES
controlled by such Party, provided that such Party shall be responsible and
liable for performance by that AFFILIATE.
13.12 Entire AGREEMENT. This AGREEMENT supersedes all prior agreements,
both verbal and written, between NIMCO and SRX, and between ALTEA and SRX, with
respect to the subject matter hereof and constitutes the entire agreement
between the Parties with respect to the subject matter hereof, and shall not be
modified, amended or terminated except as herein provided or except by another
agreement in writing executed by the affected Parties hereto.
13.13 Headings. The section and paragraph headings are for convenience
only and are not a part of this AGREEMENT.
13.14 Severability. All rights and restrictions contained herein may be
exercised and shall be applicable and binding only to the extent that they do
not violate any applicable laws and are intended to be limited to the extent
necessary so that they will not render this AGREEMENT illegal, invalid or
unenforceable. If any provision or portion of any provision of this AGREEMENT
not essential to the commercial purpose of this AGREEMENT shall be held to be
illegal, invalid or unenforceable by a court of competent jurisdiction, it is
the intention of the Parties that the remaining provisions or portions thereof
shall constitute their AGREEMENT with respect to the subject matter hereof, and
all such remaining provisions or portions thereof shall remain in full force and
effect. To the extent legally permissible, any illegal, invalid or unenforceable
provision of this AGREEMENT shall be replaced by a valid provision which will
implement the commercial purpose, to the extent possible, with similar economic
benefits to each of the Parties of the illegal, invalid or unenforceable
provision. In the event that any provision essential to the commercial purpose
of this AGREEMENT is held to be illegal, invalid
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<PAGE> 32
or unenforceable and cannot be replaced by a valid provision which will
implement the commercial purpose of this AGREEMENT, NIMCO and/or ALTEA or SRX
shall have the right to terminate this AGREEMENT and the rights granted herein
shall terminate unless the Parties agree to other terms with comparable economic
benefit to each Party.
13.15 Choice of Law. This AGREEMENT is acknowledged to have been made
under and shall be construed in accordance with and governed in all respects by
the laws of the State of Delaware, United States of America as they apply to
contracts made and performed entirely within such state.
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EXHIBIT A
OUTLINE OF RESEARCH PROGRAM FOR JOINT DEVELOPMENT ACTIVITIES
SRX/ALTEA JOINT DEVELOPMENT PLAN FOR JOINT TECHNOLOGY
MARCH 1, 1996
This plan presents an outline of the first two years activities for the
JOINT DEVELOPMENT program to be executed by SpectRx, Inc. and Altea
Technologies, Inc. Whereas this plan is focused on describing the tasks related
to developing a system to sample the interstitial fluid, it is to be understood
that virtually all of these development activities have direct applications to
the enhancement of transdermal delivery capabilities, and while not specifically
stated in this outline, a parallel set of activities led by ALTEA in
collaboration with SRX will be conducted evaluating the delivery aspects of the
work as it progresses.
For Task Areas:
- Interstitial Fluid Pumping sub-system, ultrasonic, pneumatic,
or otherwise.
- Micro-poration sub-system.
- Selection and development of disposable component and assay
sub-system.
- Clinical testing of prototype systems to establish feasibility
of Interstitial Fluid Harvesting techniques, laboratory quantitation of
Interstitial Fluid glucose levels and correlation to blood glucose levels.
For each of these efforts, a basic plan has been outlined based on the
current level of understanding of problems and risks associated with each
different area of activity. This is presented below with a brief option of the
specific task.
If pumping sub-system, Ultrasonic
1.1.1 Assemble an ultra-sonic in vitro test bed.
1.1.2 Based on integration discussions with the other subsystem
development teams, refine the design for the ultrasonic subsystem.
1.1.7 Fabricate prototypes of ultrasonic subsystem design.
Exhibit A-1
<PAGE> 34
If pumping sub-system, Mechanical
2.1 Survey and evaluate different forms of mechanical pumps possibly
applicable to the system, i.e. suction, vibrator, etc . . .
If Micro-poration sub-system, Optical
2.1.1 Build evaluation test cell to candidate the relative performance
of the different candidate approaches and wavelengths.
2.1.2 Based on integration discussions with the other subsystem
development teams, refine the design for the micro-poration subsystem to be
compatible with the developing overall system design.
2.1.3 Fabricate and test prototype micro-poration subsystems.
Section and development of disposable component and assay sub-system
3.1 Identify and if appropriate form development partnership with
existing bio-sensor or other quantitation technology manufacturer.
3.2 In cooperation with the bio-sensor/quantitation technology
development partner, evaluate the requirements for a custom designed
bio-sensor/quantitation technology for this application re: volume of
interstitial fluid needed, packaging considerations, method of interface to the
reading mechanism, etc. . . .
3.3 Working with the system integration development team, build the
final design sensor/disposable subsystem design prototype, test, and integrate
into the total system.
Clinical testing
4.1 Clinical testing of ALPHA PROTOTYPE systems to establish
feasibility of Interstitial Fluid Harvesting techniques, laboratory quantitation
of Interstitial Fluid glucose levels and correlation to blood glucose levels.
4.2 Clinical testing of PROTOTYPE PRODUCTION UNIT to establish
correlation between Interstitial Fluid glucose levels and blood glucose levels.
Exhibit A-2
<PAGE> 35
EXHIBIT A-1
NOTICE OF EXERCISE
To: SPECTRX, INC.
(Company Name)
1. The undersigned hereby:
[ ] elects to purchase __________ shares of Common Stock
of the Company pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase
price of such shares in full; or
[ ] elects to exercise its net insurance rights pursuant
to Section 3.2 of the attached Warrant with respect
to __________ shares of Common Stock.
2. Please have a certificate or certificates representing said shares
in the name of the undersigned or in such other name or names as are specified
below:
--------------------------------------
(Name)
--------------------------------------
(Address)
--------------------------------------
(Address)
3. The undersigned represents that the aforesaid shares being acquired
for the account of the undersigned for investment and not with a view to, or for
resale in connection with, the distribution thereof and that the undersigned has
no present intention of distributing or reselling such shares.
- ---------------------------------
(Date)
------------------------------------
(Signature)
Exhibit A1-1
<PAGE> 36
EXHIBIT A-2
NOTICE OF EXERCISE
To: SPECTRX, INC.
(Company Name)
1. Contingent upon and effective immediately prior to the closing (the
"Closing") of the Company's public offering contemplated by the Registration
Statement on Form S-___, filed on __________, 19___, the undersigned hereby:
[ ] elects to purchase __________ shares of Common Stock
of the Company (or such lesser number of shares as
may be sold on behalf of the undersigned at the
Closing) pursuant to the terms of the attached
Warrant; or
[ ] elects to exercise its net issuance rights pursuant
to Section 3.2 of the attached Warrant with respect
to __________ shares of Common Stock.
2. Please deliver to the custodian for the selling stockholders a stock
certificate representing such __________ shares.
3. The undersigned has instructed the custodian for the selling
stockholders to deliver to the Company $__________ or, if less, the net proceeds
due the undersigned from the sale of shares in the aforesaid public offering. If
such net proceeds are less than the purchase price for such shares, the
undersigned agrees to deliver the difference to the Company prior to the
Closing.
- ---------------------------------
(Date)
------------------------------------
(Signature)
Exhibit A2-1
<PAGE> 37
APPENDIX I
ADJUSTMENT PROVISIONS
1. Capitalized Terms. Capitalized terms used in this Appendix I that
are not otherwise defined herein shall have the respective meanings assigned to
them in the Warrant, dated as of January ___, 1996, to which this Appendix I is
attached, if therein defined.
2. Reclassification or Merger. In case of any reclassification, change
or conversion of securities of the class issuable upon exercise of this Warrant
(other than a change in par value, or from par value to no par value, or from no
par value to par value, or as a result of a subdivision or combination), the
Company shall execute a new Warrant providing that the holder(s) of this Warrant
shall have the right to exercise such new Warrant and upon such exercise to
receive, in lieu of each share of Common Stock theretofore issuable upon
exercise of this Warrant, the kind and amount of shares of stock, other
securities, money and property receivable upon such reclassification or change
by a holder(s) of one share of Common Stock. Such new Warrant shall provide for
adjustments that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Appendix I. The provisions of this Section 2
shall similarly apply to successive reclassifications, changes, mergers and
transfers.
3. Subdivision or Combination of Shares. If the Company at any time
while this Warrant remains outstanding and unexpired shall subdivide or combine
its Common Stock, the Exercise Price and the number of Shares issuable upon
exercise hereof shall be proportionately adjusted.
4. Stock Dividends. If the Company at any time while this Warrant is
outstanding and unexpired shall pay a dividend payable in shares of Common
Stock, then the Exercise Price shall be adjusted, from and after the date of
determination of stockholders entitled to receive such dividend or distribution,
to that price determined by multiplying the Exercise Price in effect immediately
prior to such date of determination by a fraction (a) the numerator of which
shall be the total number of shares of Common Stock outstanding immediately
prior to such dividend or distribution, and (b) the denominator of which shall
be the total number of shares of Common Stock outstanding immediately after such
dividend or distribution and the number of Shares subject to this Warrant shall
be proportionately adjusted.
5. Other Distributions. In the event the Company shall declare a
dividend or distribution payable in cash, securities of other persons, evidences
of indebtedness issued by the Company or other persons, assets or options or
rights not referred to in Section 2, 3 or 4 of this Appendix I, then, in each
such case, provision shall be made by the Company such that the holder(s) of
this Warrant shall receive upon exercise of this Warrant a proportionate share
of any such dividend or distribution as though it were the holder(s) of the
Shares as of the record date fixed for the determination of the stockholders of
the Company entitled to receive such dividend or distribution.
6. Notice of Adjustments. Whenever the Exercise Price shall be adjusted
pursuant to the provisions thereof, the Company shall within thirty (30) days of
such adjustment deliver a certificate
Appendix I-1
<PAGE> 38
signed by its chief financial officer to the registered holder(s) hereof setting
forth, in reasonable detail, the event requiring the adjustment, the amount of
the adjustment, the method by which such adjustment was calculated, and the
Exercise Price after giving effect to such adjustment.
Appendix I-2
<PAGE> 39
EXHIBIT D
AGREEMENT BETWEEN THERATECH, INC., NIMCO, AND ALTEA
Exhibit D-1
<PAGE> 40
EXHIBIT E
AGREEMENT BETWEEN THERATECH, ALTEA, AND NIMCO
This Agreement is made as of the 22nd day of February, 1996, (Effective
Date) by and between TheraTech, Inc. (THERATECH), a Delaware Corporation having
its principal offices at 417 Wakara Way, Salt Lake City, Utah, 84108, and both
Non-Invasive Monitoring Company, Inc. (NIMCO) and Altea Technologies, Inc.
(Altea), both Delaware Corporations having their registered offices at 2844
Jasmine Court, Atlanta, Georgia 30345 (each a "Party," collectively the
"Parties").
WHEREAS, ALTEA is the owner of and has rights to certain MONITORING
TECHNOLOGY and DELIVERY TECHNOLOGY (as defined hereinafter),
WHEREAS, NIMCO is the owner of and has rights to certain MONITORING
TECHNOLOGY (as defined hereinafter),
WHEREAS, NIMCO and ALTEA may enter into a licensing agreement for such
MONITORING TECHNOLOGY with SpectRx, Inc., (SRX),
WHEREAS, THERATECH is in the business of pharmaceutical drug delivery,
including transdermal drug delivery,
WHEREAS, THERATECH and ALTEA wish to enter into an agreement
("Agreement") whereby ALTEA will offer DELIVERY TECHNOLOGY to THERATECH and
THERATECH may choose to license such.
NOW THEREFORE, in consideration of the mutual promises contained herein
and other good and valuable consideration, receipt of which is hereby
acknowledged, the Parties agree to be bound by the following terms and
conditions:
1. Definitions
1.1 "TECHNOLOGY" means technology (including uses,
applications and products) relating to transdermal/intradermal transport,
migration, and/or movement of substances utilizing microporation, ultrasound,
chemical and physical enhancers, and heat, including but not limited to optical,
mechanical, hydraulic, pneumatic, thermal, chemical, electrical, and/or
ultrasound mediated or assisted permeation, poration and/or migration, but shall
not include technology meeting the terms of this definition which is in the
public domain and/or belongs to third parties.
1.2 "DELIVERY TECHNOLOGY" means TECHNOLOGY that is useful in
transdermal/intradermal delivery of substances into a living organism including,
but not limited to, human beings for drug substances (but not tattoos), which
ALTEA owns with the right to license pursuant to this Agreement.
Exhibit E-1
<PAGE> 41
1.3 "MONITORING TECHNOLOGY" means TECHNOLOGY that is useful in
transdermal/intradermal monitoring, detection, sampling, measuring, and/or
qualification of substances from within a living organism ("ANALYTES"),
including but not limited to human beings.
2. Offer
2.1 (a) ALTEA'S rights to DELIVERY TECHNOLOGY shall be offered
to THERATECH on a worldwide basis prior to being offered to third parties or
prior to commercialization by ALTEA. Such offer of rights and subsequent license
agreement will include diligence criteria for development and commercialization
of such DELIVERY TECHNOLOGY. If applicable to a particular DELIVERY TECHNOLOGY,
and if NIMCO and ALTEA so license MONITORING TECHNOLOGY to SRX, THERATECH shall
agree to work in collaboration with SRX, upon commercially reasonable terms on a
"closed loop" insulin delivery/glucose monitoring system if such DELIVERY
TECHNOLOGY and the MONITORING TECHNOLOGY so licensed to SRX make such "closed
loop" system technically feasible within five years of a license agreement
between THERATECH and ALTEA.
(b) (i) THERATECH wishes to license such
DELIVERY TECHNOLOGY, THERATECH shall so notify ALTEA within 30 days after
ALTEA's offer and ALTEA and THERATECH shall negotiate in good faith the terms
for such a license agreement, and if the essential terms of such agreement are
not agreed upon within 90 days after the initial offer by ALTEA, and if the
final agreement is not concluded within 180 days after the initial offer by
THERATECH, or
(ii) THERATECH declines the offer or does
not notify ALTEA of its interest pursuant to Section 2.1(b)(i) above, to
negotiate such terms and license agreement for DELIVERY TECHNOLOGY within 30
days after ALTEA's offer.
then ALTEA shall have no further obligation
to THERATECH or its Affiliates with respect
to such DELIVERY TECHNOLOGY, except as
provided in Section 2.2 below.
2.2 If after THERATECH has turned down such DELIVERY
TECHNOLOGY, ALTEA makes material improvements or enhancements or new inventions
to such DELIVERY TECHNOLOGY (as encompassed in new disclosures, patent
applications, or patents) and the DELIVERY TECHNOLOGY that was previously
offered and was subsequently turned down by THERATECH has not yet been licensed
to (or has not become the subject of contractual negotiations as expressed in
written draft of basic terms and conditions by ALTEA with) third parties, then
ALTEA shall re-offer such DELIVERY TECHNOLOGY, including such improvements and
enhancements thereto, to THERATECH pursuant to Section 2.1 above. This re-offer
of rights described in this Section 2.2 shall only be required to be made one
time by ALTEA to THERATECH; after that, ALTEA shall be free of any obligation to
offer such existing or future DELIVERY TECHNOLOGY or improvements or
enhancements thereto to THERATECH, and ALTEA may offer such DELIVERY TECHNOLOGY
to third parties and/or develop it itself at its sole option.
Exhibit E-2
<PAGE> 42
2.3 MONITORING TECHNOLOGY is excluded from this offer to THERATECH.
THERATECH has no claim to MONITORING TECHNOLOGY, although THERATECH may enter
into collaborative and/or commercial agreements with NIMCO or ALTEA and their
subcontractors as relates to THERATECH's chemical enhancer systems in
conjunction with MONITORING TECHNOLOGY.
2.4 Pursuant to Section 2.1 above, the Parties acknowledge that
rights to U.S. Patent 5,445,611 were offered to THERATECH and subsequently
declined by THERATECH in 1994, with the understanding as described in Section
2.1 above. THERATECH is aware of the claim Massachusetts Institute of
Technology, Robert Langer, Joseph Kost, and Ben Gurion University have raised
against NIMCO and U.S. Patent No. 5,458,140 on MONITORING TECHNOLOGY. Although
NIMCO and ALTEA vigorously deny such claims, they make no warranty that the
above-mentioned parties will not raise other claims of ownership to U.S. Patent
5,445,611, and if THERATECH so licenses such patent #5,445,611, THERATECH shall
assume full responsibility and cost of defending such patent and defending and
indemnifying NIMCO and ALTEA and their officers, directors, employees,
successors, permitted assignees, Affiliates, and agents from any Losses arising
from such claims.
3. Term
3.1 This Agreement shall be in effect from the Effective Date
until the last to expire of patents to which ALTEA has rights containing a claim
not adjudicated invalid by a competent court or administrative body that covers
a use, application, or product of DELIVERY TECHNOLOGY, unless terminated earlier
pursuant to Section 3.2 or 3.3.
3.2 If THERATECH has not licensed such DELIVERY TECHNOLOGY as
offered by ALTEA by December 1, 2003, this Agreement shall terminate and ALTEA
shall have no further obligations to THERATECH.
3.3 Either Party may terminate this Agreement for material
breach by the other Party, provided a written notice of default has been given
to the Party in default, and the default is not cured within a 90 day period If
the default is cured within such notice period, the notice shall become null and
void and of no further effect.
4. Dispute Resolution. In the event the Parties have a dispute or claim
of any kind arising under this Agreement that they are unable to resolve through
direct communication, such dispute shall be resolved through arbitration
pursuant to the commercial rules of the American Arbitration Association with
one arbitrator chosen by ALTEA, one arbitrator chosen by THERATECH, and the
third arbitrator chosen by the proceeding first two arbitrators, such
arbitration to take place in Salt Lake City, Utah, unless agreed upon otherwise.
5. General
5.1 Choice of Law. This Agreement is acknowledged to have been
made in and shall be construed in accordance with the laws of the state of
Delaware, United States of America.
Exhibit E-3
<PAGE> 43
5.2 Force Majeure. If either Party is prevented from
complying, either totally or in part, with any of the terms or provisions of
this Agreement by reason of force majeure, including, but not limited to fire,
flood, earthquake, explosion, storm, strike, lockout or other labor trouble,
riot, war, rebellion, accident, acts of God and/or any other cause or externally
induced casualty beyond its reasonable control, whether similar to the foregoing
matters or not, then, upon written notice by the Party liable to perform to the
other Party, the requirements of this Agreement or such of its provisions as may
be affected, and to the extent so affected, shall be suspended during the period
of such disability; provided that the Party asserting force majeure shall bear
the burden of establishing the existence of such force majeure by clear and
convincing evidence; and provided further, that the Party prevented from
complying shall use its best efforts to remove such disability within thirty
(30) days, and shall continue performance with the utmost dispatch whenever such
causes are removed, and shall notify the other Party of the event not more than
five (5) working days from the time of the event. When such circumstances arise,
the Parties shall discuss what, if any, modification of the terms of this
Agreement may be required in order to arrive at an equitable solution.
Notwithstanding the foregoing, in the event that a material event of force
majeure shall continue for a period of longer than six (6) months, then the
Party unaffected by such event may terminate this Agreement by not less than
ninety (90) days written notice of termination to the other Party.
5.3 Assignments and Inurement. Neither Party shall grant
transfer, convey or otherwise assign any of its rights or delegate any of its
obligation as relates to this Agreement without the prior written consent of the
other, such consent not to be unreasonably withheld. This Agreement shall be
binding upon and inure to the benefit of the successors and permitted assign of
the Parties hereto. Notwithstanding the foregoing, either Party shall be
permitted to perform the Agreement in whole or in part through its Affiliates
(i.e., an entity of which that Party has, directly or indirectly, at least fifty
(50) percent ownership of or the power to direct the voting activities of 50% or
more of the voting stock of such entity), provided that such Party shall be
responsible and liable for performance by that Affiliate.
5.4 Entire Agreement. This Agreement supersedes all prior
agreements between the Parties with respect to the subject matter hereof and
constitutes the entire agreement between the Parties with respect to the subject
matter hereof, and shall not be modified, amended or terminated except as
provided or except by another agreement in writing executed by the Parties
hereto.
5.5 Notices. Any notices required or permitted to be given
hereunder shall be in writing in the English language and shall be delivered in
person or by Federal Express (or other reputable express courier service
documenting proof of receipt) or by telecopy confirmed by a documented proof of
receipt as above, to the addresses set forth below. The Parties may change the
address at which notice is to be given by giving notice to the other Party as
herein provided. All notices shall be deemed effective upon the courier
confirmed receipt by the Party to who it is addressed or upon delivery in
person.
Exhibit E-4
<PAGE> 44
If to THERATECH:
President
TheraTech, Inc.
417 Wakara Way
Salt Lake City, UT 84108
Phone: (801) 588-6200
Fax: (801) 583-0050
with a copy to:
Chief Financial Officer
TheraTech, Inc.
417 Wakara Way
Salt Lake City, UT 84108
Phone: (801) 588-6200
Fax: (801) 583-0050
If to NIMCO:
Dr. Deborah A. Eppstein
Non-Invasive Monitoring Company, Inc.
1675 Emigration Canyon Road
Salt Lake City, UT 84108
Phone: (801) 582-1317
Fax: (801) 582-1317
If to ALTEA:
Dr. Deborah A. Eppstein
Altea Technologies, Inc.
1675 Emigration Canyon Road
Salt Lake City, UT 84108
Phone: (801) 582-1317
Fax: (801) 582-1317
with a copy to:
Jonathan A. Eppstein
Altea Technologies, Inc.
2844 Jasmine Court
Atlanta, Georgia 30345
Phone: (770) 908-1981
Fax: (770) 908-1981
Exhibit E-5
<PAGE> 45
IN WITNESS WHEREOF, the Parties have hereunto signed this Agreement
with the Effective Date hereto before referenced to:
TheraTech, Inc. Altea Technologies, Inc.
/s/ Dinesh C. Patel /s/ Deborah A. Eppstein
- ---------------------------------- ---------------------------------------
Dinesh C. Patel Deborah A. Eppstein
President and CEO President and CEO
Non-Invasive Monitoring Company, Inc.
/s/ Deborah A. Eppstein
---------------------------------------
Deborah A. Eppstein
President and CEO
Exhibit E-6
<PAGE> 46
APPENDIX 2
PATENT RIGHTS
(AS LIMITED TO THE FIELD AND EXCLUDING DELIVERY APPLICATIONS)
1. New International (PCT) Application, filed August 29, 1996, TNW File
#T4345, entitled "Microporation of Human Skin for Drug Delivery and Monitoring
Applications"
2. United States Patent No. 5,458,140 issued October 17, 1995, entitled
"Enhancement of Transdermal Monitoring Applications with Ultrasound and Chemical
Enhancers" and any reissuances Thereof
3. Divisional Application, Serial No. 08/465,874, filed June 6, 1995
and any patent issuances or reissuances Thereof, TNW File #1214DIV
4. United States Patent CIP Application, Serial No. 08/520,547, filed
August 29, 1995, TNW File #T1214CIP
5. Application relating to Optical Poration filed in the United States
Patent Office on October 30, 1995, TNW File #T3491
6. Application relating to Mechanical Poration, TNW File #T3621
Appendix 2-7
<PAGE> 1
EXHIBIT 10.20
PATENT LICENSE AGREEMENT
THIS Sixteen (16) Page AGREEMENT ("AGREEMENT") is made by and between
the BOARD OF REGENTS ("BOARD") of THE UNIVERSITY OF TEXAS SYSTEM ("SYSTEM"), an
agency of the State of Texas, whose address is 201 West 7th Street, Austin Texas
78701, THE UNIVERSITY OF TEXAS M.D. ANDERSON CANCER CENTER ("MDA"), a component
Institution of the SYSTEM and SpectRx, a Norcross, Georgia corporation having a
principal place of business located at 6025 A Unity Drive, Norcross, GA 30071
("LICENSEE").
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
RECITALS Page 2
I. EFFECTIVE DATE Page 2
II. DEFINITIONS Page 2
III. LICENSE Page 4
IV. CONSIDERATION, PAYMENTS, AND REPORTS Page 5
V. SPONSORED RESEARCH Page 8
VI. INFRINGEMENT BY THIRD PARTIES Page 9
VII. PATENT MARKING Page 9
VIII. INDEMNIFICATION Page 9
IX. USE OF BOARD AND COMPONENTS NAME Page 10
X. CONFIDENTIAL INFORMATION Page 10
XI. ASSIGNMENT Page 10
XII. TERMS AND TERMINATION Page 11
XIII. WARRANTY: SUPERIOR-RIGHTS Page 12
XIV. GENERAL Page 13
SIGNATURES Page 15
</TABLE>
<PAGE> 2
RECITALS
A. BOARD owns certain PATENT RIGHTS related to LICENSED SUBJECT
MATTER, which were developed at MDA, a component institution
of SYSTEM.
B. BOARD desires to have the LICENSED SUBJECT MATTER developed in
the LICENSED FIELD and used for the benefit of LICENSEE, the
inventor, BOARD, and the public as outlined in the
Intellectual Property Policy promulgated by the BOARD.
C. LICENSEE wishes to obtain a license from BOARD to practice
LICENSED SUBJECT MATTER.
NOW, THEREFORE, in consideration of the mutual covenants and premises
herein contained, the parties hereto agree as follows:
I. EFFECTIVE DATE
1.1 This AGREEMENT shall be effective as of March 12, 1996 subject
to approval by BOARD ("EFFECTIVE DATE").
II. DEFINITIONS
As used in this AGREEMENT, the following terms shall have the meanings
indicated:
2.1 AFFILIATE shall mean any business entity more than 50% owned
by LICENSEE, any business entity which owns more than 50% of
LICENSEE, or any business entity that is more than 50% owned
by a business entity that owns more than 50% of LICENSEE.
2.2 LICENSED FIELD shall mean Optical Measurement of Bilirubin in
Human Tissue within the LICENSED SUBJECT MATTER.
2.3 LICENSED PRODUCTS shall mean any product or service SOLD by
LICENSEE comprising LICENSED SUBJECT MATTER pursuant to this
AGREEMENT.
2.4 LICENSED SUBJECT MATTER shall mean PATENT RIGHTS.
2.5 LICENSED TERRITORY shall mean the United States in which
LICENSED PRODUCTS are sold by LICENSEE.
2.6 NET SALES shall mean the gross revenues received by LICENSEE
from the SALE of LICENSED PRODUCTS less sales and/or use taxes
actually paid, import and/or
<PAGE> 3
export duties actually paid, outbound transportation prepaid
or allowed, and amounts allowed or credited due to returns
(not to exceed the original billing or invoice amount).
2.7 PATENT RIGHTS shall only mean any and all of BOARD'S rights
in information or discoveries claimed in U.S. Patent No.
5,353,790 issued and entitled "Methods and Apparatus for
Optical Measurement of Bilirubin in Tissue" and all
divisionals, continuations, continuations-in-part, reissues,
reexaminations or extensions thereof.
2.8 SALE or SOLD shall mean the transfer or disposition of a
LICENSED PRODUCT for value to a third party other than
LICENSEE or an AFFILIATE.
III. LICENSE
3.1 BOARD hereby grants to LICENSEE a royalty-bearing, exclusive
license under LICENSED SUBJECT MATTER to manufacture, have
manufactured, use and/or sell LICENSED PRODUCTS within
LICENSED TERRITORY for use within LICENSED FIELD and, subject
to Paragraph 4.5 herein, shall extend to BOARD's undivided
interest in any LICENSED SUBJECT MATTER developed during the
term of this AGREEMENT and jointly owned by BOARD and
LICENSEE. This grant shall be subject to Paragraph 14.2 and
14.3, hereinbelow, the payment by LICENSEE to BOARD of all
consideration as provided in Paragraph 4.2 of this AGREEMENT,
(as well as the timely payment of all amounts due under any
Sponsored Research Agreement between MDA and LICENSEE in
effect during the term of this AGREEMENT) and shall be further
subject to rights retained by BOARD and MDA to:
(a) Publish the general scientific findings from research
related to LICENSED SUBJECT MATTER. In the event that
MDA wishes to publish, MDA shall notify LICENSEE of
its desire to publish at least (30) days in advance
of publication and shall furnish to LICENSEE a
written description of the subject matter of the
publication in order to permit LICENSEE to review and
comment thereon; and
(b) Subject to the provisions of ARTICLE XI herein below,
use any information contained in LICENSED SUBJECT
MATTER for research, teaching, patient care, and
other educationally-related purposes.
3.2 LICENSEE shall have the right to extend the license granted
herein to any AFFILIATE provided that such AFFILIATE consents
to be bound by this AGREEMENT to the same extent as LICENSEE.
-2-
<PAGE> 4
3.3 Subject to the Paragraph 3.4 herein below, LICENSEE shall have
the right to grant sublicenses under LICENSED SUBJECT MATTER
consistent with the terms of this AGREEMENT provided that
LICENSEE shall be responsible for its sublicensees relevant to
this AGREEMENT, and for using its best reasonable efforts to
diligently collect all amounts due LICENSEE from subicensees.
In the event a sublicensee pursuant hereto becomes bankrupt,
insolvent or is placed in the hands of a receiver or trustee,
LICENSEE, to the extent allowed under applicable law and in a
timely manner, agrees to use its best reasonable efforts to
collect any and all consideration owed to LICENSEE and to have
the sublicense agreement confirmed or rejected by a court of
proper jurisdiction.
3.4 LICENSEE agrees to either.
(a) deliver to BOARD for BOARD'S approval a true and
correct copy of any sublicense granted by LICENSEE,
and any modification or termination thereof, within
thirty (30) days after execution, modification, or
termination; and upon termination of this AGREEMENT,
any and all sublicenses granted by LICENSEE and
approved by BOARD shall be assigned to BOARD; or
(b) deliver to BOARD for BOARD'S Information a true and
correct copy of each sublicense granted by LICENSEE,
and any modification or termination thereof, within
thirty (30) days after execution, modification, or
termination; and upon termination of this AGREEMENT,
any and all existing sublicenses granted by LICENSEE
and not approved by BOARD shall be terminated, unless
otherwise agreed to in writing by BOARD.
IV. CONSIDERATION, PAYMENTS AND REPORTS
4.1 In consideration of rights granted by BOARD to LICENSEE under
this AGREEMENT, LICENSEE agrees to pay MDA the following:
(a) [*] for all out-of-pocket expenses incurred by MDA
through [*] in filing, prosecuting, enforcing and
maintaining PATENT RIGHTS licensed hereunder. SPECTRX
will pay all future patent maintenance expenses for
so long as, and in such countries as, this AGREEMENT
remains in effect. One half of these total patent
expenses [*] will be due upon execution, and the
other half will be due at the time of the first FDA
510K filing. MDA will invoice LICENSEE upon approval
of this AGREEMENT by BOARD, and upon a
quarterly basis thereafter beginning [*] for
expenses incurred by MDA after [*] and the amounts
invoiced will be due and payable by LICENSEE within
thirty (30) days thereafter; and
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
-3-
<PAGE> 5
(b) A non-refundable license documentation fee to be made
in staged payments in the total amount of $50,000.00,
which shall not reduce the amount of any other
payment provided for in this ARTICLE IV, and which
shall be due and payable within thirty (30) days when
invoiced by MDA as follows:
(i) [*] upon execution of this Agreement by
BOARD;
(ii) [*] upon the completion by LICENSEE of data
collection, analysis, and review of the
feasibility studies, but no later than sixty
(60) days following the entry of the last
patient in the clinical study;
(iii) [*] upon the first FDA 510K filing; and
(iv) [*] upon first FDA 510K approval.
(c) A running royalty equal to [*] of LICENSEE'S NET
SALES of LICENSED PRODUCTS in LICENSED TERRITORY and
[*] of LICENSEE'S NET SALES of LICENSED PRODUCTS
outside of LICENSED TERRITORY as long as there are no
competing products outside of LICENSED TERRITORY
(with minimum annual royalties of [*], and [*] of all
consideration other than Research and Development
("R&D") money received by LICENSEE from any
sublicensee pursuant to Paragraphs 3.3 and 3.4 herein
above, including but not limited to royalties,
up-front payments, marketing, distribution,
franchise, option, license, or documentation fees,
bonus and milestone payments and equity securities,
payable within thirty (30) days after March 31, June
30, September 30, and December 31, at which time
LICENSEE shall also deliver to BOARD and MDA a true
and accurate report, giving such particulars of the
business conducted by LICENSEE and its sublicensee,
if any exist, during the preceding three (3) calendar
months under this AGREEMENT as are pertinent to an
account for payments hereunder. Such report shall
include at least (a) the quantities of LICENSED
PRODUCTS that it has produced; (b) the total SALES,
(c) the calculation of royalties thereon; and (d) the
total royalties so computed and due BOARD. In the
event that there are competing products outside of
LICENSED TERRITORY, then no royalty will be due
related to that specific territory. Simultaneously
with the delivery of each such report, LICENSEE shall
pay to BOARD the amount, if any, due for the period
of such report. The requirement to pay minimum annual
royalties shall commence upon FDA final approval of
the LICENSED PRODUCTS. A pro rata portion of the
annual minimum royalties shall be payable in respect
of any partial period not constituting a full year.
Should LICENSEE be obligated to pay running royalties
to third parties to avoid infringing such third
parties' patent rights which dominate BOARD'S PATENT
RIGHTS, LICENSEE may reduce the running royalty due
MDA by such running royalties to such third parties,
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
-4-
<PAGE> 6
provided, however, the running royalty due MDA shall
in no case be less than one-half the rates stated
herein above.
4.2 During the Term of this AGREEMENT and for one (1) year
thereafter, LICENSEE shall keep complete and accurate records
of its and its sublicensees' SALES and NET SALES of LICENSED
PRODUCTS to enable the royalties payable hereunder to be
determined. LICENSEE shall permit BOARD or its
representatives, at BOARD'S expense, to periodically examine
after reasonable written notice to LICENSEE its books,
ledgers, and records during regular business hours for the
purpose of and to the extent necessary to verify any report
required under this AGREEMENT. In the event that the amounts
due to BOARD are determined to have been underpaid in an
amount equal to or greater than five percent (5%) of the total
amount due during the period of time so examined, LICENSEE
shall pay the cost of such examination, and accrued interest
at prime rate plus 10% (ten percent).
4.3 Upon the request of BOARD or MDA but not more often than once
per calendar year, LICENSEE shall deliver to BOARD and MDA a
written report as to LICENSEE'S efforts and accomplishments
during the preceding year in commercializing LICENSED SUBJECT
MATTER in the LICENSED TERRITORY and LICENSEE'S
commercialization plans for the upcoming year. Such report
will be deemed for all purposes to be confidential information
governed by Article XI hereof.
4.4 All amounts payable hereunder by LICENSEE shall be payable in
United States funds without deductions for taxes, assessments,
fees, or charges of any kind. Checks shall be made payable to
The University of Texas M. D. Anderson Cancer Center and
mailed by U.S. Mail to Box 297402, Houston, Texas 77297
Attention: Manager, Sponsored Programs.
4.5 No payments due or royalty rates under this AGREEMENT shall be
reduced as the result of co-ownership of LICENSED SUBJECT
MATTER by BOARD and another party, including LICENSEE.
V. SPONSORED RESEARCH
If LICENSEE desires to fund sponsored research, within LICENSED SUBJECT
MATTER and particularly where LICENSEE receives money for sponsored research
payments pursuant to a sublicense, LICENSEE shall notify MDA in writing of all
opportunities to conduct such sponsored research (including clinical trials, if
applicable), shall solicit research and/or clinical proposals from MDA for such
purpose, and shall give good faith consideration to funding such proposals at
MDA.
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VI. INFRINGEMENT BY THIRD PARTIES
6.1 LICENSEE shall have the obligation of enforcing at its expense
any patent exclusively licensed hereunder against infringement
by third parties and shall be entitled to retain recovery from
such enforcement. LICENSEE shall pay MDA a royalty on any
monetary recovery, net of LICENSEE'S direct out-of-pocket
expenses from such enforcement not otherwise paid to third
parties, to the extent that such monetary recovery by LICENSEE
is held to be damages or a reasonable royalty in lieu thereof.
In the event that LICENSEE does not file suit against a
substantial infringer of such patents within six (6) months of
knowledge thereof, then BOARD shall have the right to enforce
any patent licensed hereunder on behalf of itself and LICENSEE
(MDA retaining all recoveries from such enforcement) and/or
reduce the license granted hereunder to non-exclusive.
6.2 In any suit or dispute involving a third party infringer, the
parties shall cooperate fully, and upon the request and at the
expense of the party bringing suit, the other party shall make
available to the party bringing suit at reasonable times and
under appropriate conditions all relevant personnel, records,
papers, information, samples, specimens, and the like which
are in its possession.
VII. PATENT MARKING
7.1 LICENSEE agrees that all packaging containing individual
LICENSED PRODUCT(S), and documentation therefor, sold by
LICENSEE, AFFILIATE, and sublicensees of LICENSEE will be
marked permanently and legibly with the number of the
applicable patent(s) licensed hereunder in accordance with
each country's patent laws, including Title 35, United States
Code.
VIII. INDEMNIFICATION
8.1 LICENSEE shall hold harmless and indemnify BOARD, SYSTEM, MDA,
its Regents, officers, employees, students, and agents from
and against any claims, demand, or causes of action
whatsoever, costs of suit and reasonable attorney's fees
including without limitation those costs arising on account of
any injury or death of persons or damage to property caused
by, or arising out of, or resulting from, the exercise or
practice of the license granted hereunder by LICENSEE or its
officers, employees, agents or representatives.
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IX. USE OF BOARD AND COMPONENTS NAME
9.1 LICENSEE shall not use the name of (or the name of any
employee of ) MDA, SYSTEM or BOARD without the advance,
express written consent of BOARD secured through:
The University of Texas
M. D. Anderson Cancer Center
Office of Public Affairs
1515 Holcombe Boulevard
Box 229
Houston, Texas 77030
ATTENTION: Stephen C. Stuyck
X. CONFIDENTIAL INFORMATION
10.1 BOARD and LICENSEE each agree that all information contained
in documents marked "confidential" which are forwarded to one
by the other shall be received in strict confidence, used only
for the purposes of this AGREEMENT, and not disclosed by the
recipient party (except as required by law or court order),
its agents or employees without the prior written consent of
the other party, unless such information (a) was in the public
domain at the time of disclosure, (b) later became part of the
public domain through no act or omission of the recipient
party, its employees, agents, successors or assigns, (c) was
lawfully disclosed to the recipient party by a third party
having the right to disclose it, (d) was already known by the
recipient party at the time of disclosure, (e) was
independently developed or (f) is required to be submitted to
a government agency pursuant to any preexisting obligation.
10.2 Each party's obligation of confidence hereunder shall be
fulfilled by using at least the same degree of care with the
other party's confidential information as it uses to protect
its own confidential information. This obligation shall exist
while this AGREEMENT is in force and for a period of three (3)
years thereafter.
XI. ASSIGNMENT
11.1 Except to effect the sale and transfer of all or substantially
all of LICENSEE'S assets to a third party, this AGREEMENT may
not be assigned by LICENSEE without the prior written consent
of BOARD.
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XII. TERMS AND TERMINATION
12.1 The term of this AGREEMENT shall extend from the Effective
Date set forth hereinabove to the full end of the term or
terms for which PATENT RIGHTS have not expired or been
declared invalid by a court of final jurisdiction.
12.2 BOARD shall have the right at any time after one (1) year from
the EFFECTIVE DATE of this AGREEMENT to terminate the license
granted herein if LICENSEE, within ninety days after written
notice from BOARD of such intended termination, fails to
provide written evidence satisfactory to BOARD that LICENSEE
has commercialized or is actively and effectively attempting
to commercialize an invention licensed hereunder within such
jurisdiction. Accurate, written evidence provided by LICENSEE
to BOARD within said ninety (90) day period that LICENSEE has
an effective, ongoing and active research, development,
manufacturing, marketing, sales and/or licensing program, as
appropriate, directed toward obtaining regulatory approval
and/or production and/or sale of LICENSED PRODUCTS
incorporating PATENT RIGHTS shall be deemed satisfactory
evidence.
12.3 Subject to any rights herein which survive termination, this
AGREEMENT will earlier terminate in its entirety:
(a) automatically if LICENSEE shall become bankrupt or
insolvent and/or if the business of LICENSEE shall be
placed in the hands of a receiver or trustee, whether
by voluntary act of LICENSEE or otherwise; or
(b) (i) upon thirty (30) days written notice by BOARD if
LICENSEE shall breach or default on the payment
obligations of ARTICLE IV, or use of name obligations
of ARTICLE X; or (ii) upon ninety (90) days written
notice by BOARD if LICENSEE shall breach or default
on any other obligation under this AGREEMENT;
provided, however, LICENSEE may avoid such
termination if before the end of such thirty (30) or
ninety (90) day period if LICENSEE provides notice
and accurate, written evidence satisfactory to BOARD
that such breach has been cured or that LICENSEE has
commenced all reasonable action to cure as soon as
possible and the manner of such cure; or
(c) at any time by mutual written agreement between
LICENSEE and BOARD, or without cause upon one hundred
eighty (180) days written notice by LICENSEE to
BOARD, subject to any rights herein which survive
termination.
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<PAGE> 10
12.4 Upon termination of this AGREEMENT for any cause:
(a) nothing herein shall be construed to release either
party of any obligation matured prior to the
effective date of such termination.
(b) LICENSEE and the BOARD covenant and agree to be bound
by the provisions of ARTICLES IX, X AND XI of this
AGREEMENT.
(c) LICENSEE (and its SUBLICENSEES) may, after the
effective date of such termination, sell all LICENSED
PRODUCTS and parts therefore that it may have on hand
at the date of termination, provided that LICENSEE
pays the earned royalty thereon and any other amounts
due pursuant to ARTICLE IV of this AGREEMENT.
XIII. WARRANTY: SUPERIOR-RIGHTS
13.1 Except for the rights, if any, of the Government of the United
States as set forth herein below, BOARD represents and
warrants its belief that it is the owner of the entire right,
title, and interest in and to LICENSED SUBJECT MATTER, and
that it has the sole right to grant licenses thereunder, and
that it has not knowingly granted licenses thereunder to any
other entity that would restrict rights granted hereunder
except as stated herein.
13.2 LICENSEE understands that the LICENSED SUBJECT MATTER may have
been developed under a funding agreement with the Government
of the United States of America and, if so, that the
Government may have certain rights relative thereto. This
AGREEMENT is explicitly made subject to the Government's
rights under any such agreement and any applicable law or
regulation, including P.L. 96-517 as amended by P.L. 98-620.
To the extent that there is a conflict between any such
agreement, applicable law or regulation and this AGREEMENT,
the terms of such Government agreement, applicable law or
regulation shall prevail.
13.3 LICENSEE understands and agrees that BOARD, by this AGREEMENT,
makes no representation as to the operability or fitness for
any use, safety, efficacy, approvability by regulatory
authorities, time and cost of development, patentability,
and/or breadth of the LICENSED SUBJECT MATTER. BOARD, by this
AGREEMENT, makes no representation as to whether there are any
patents now held, or which will be held, by others or by BOARD
in the LICENSED FIELD, nor does BOARD make any representation
that the inventions contained in PATENT RIGHTS do not infringe
any other patents now held or that will be held by others or
by BOARD.
13.4 LICENSEE, by execution hereof, acknowledges, covenants and
agrees that LICENSEE has not been induced in anyway by BOARD,
SYSTEM, MDA or
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employees thereof to enter into this Agreement, and further
agrees that LICENSEE has conducted sufficient due diligence
with respect to all items and issues pertaining to Article XIV
herein and all other matters pertaining to this Agreement and
agrees to accept all risks inherent herein.
XIV. GENERAL
14.1 This AGREEMENT constitutes the entire and only AGREEMENT
between the parties for LICENSED SUBJECT MATTER and all other
prior negotiations, representations, agreements and
understandings are superseded hereby. No agreements altering
or supplementing the terms hereof may be made except by means
of a written document signed by the duly authorized
representatives of the parties.
14.2 Any notice required by this AGREEMENT shall be given by
prepaid, first class, certified mail, return receipt
requested, and addressed in the case of BOARD to:
BOARD OF REGENTS
The University of Texas System
201 West Seventh Street
Austin, Texas 78701
ATTENTION: Office of General
Counsel
with copy to: The University of Texas
M.D. Anderson Cancer Center
Office of Technology Development
1020 Holcombe Boulevard, Suite 1405
Houston, Texas 77030
ATTENTION: William J. Doty
or in the case of LICENSEE to: SPECTRX, INC.
6025 A Unity Drive
Norcross, Georgia 30071
ATTENTION: Mark A. Samuels
or such other address as may be given from time to time under the terms of this
notice provision.
14.3 Each party hereto covenants and agrees to comply with all
applicable federal, state and local laws and regulations in
connection with its activities pursuant to this AGREEMENT.
14.4 This AGREEMENT shall be construed and enforced in accordance
with the laws of the United States of America and of the State
of Texas.
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<PAGE> 12
14.5 Failure of any party hereto to enforce a right under this
AGREEMENT shall not act as a waiver of that right or the
ability to later assert that right relative to the particular
situation involved.
14.6 Headings included herein are for convenience only and shall
not be used to construe this AGREEMENT.
14.7 If any provision of this AGREEMENT shall be found by a court
to be void, invalid or unenforceable, the same shall be
reformed to comply with applicable law or stricken if not so
conformable, so as not to affect the validity or
enforceability of this AGREEMENT.
14.8 Upon the request of LICENSEE, LICENSOR shall reasonably assist
LICENSEE in recording this Agreement in the records of the
U.S. Patent and Trademark Office at LICENSEE'S expense.
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IN WITNESS WHEREOF, parties hereto have caused their duly authorized
representatives to execute this AGREEMENT.
THE UNIVERSITY OF TEXAS BOARD OF REGENTS OF THE
M.D. ANDERSON CANCER CENTER UNIVERSITY OF TEXAS SYSTEM
By: /s/David J. Bachrach By: /s/Ray Farabee
------------------------------------- ----------------------------------
David J. Bachrach Ray Farabee
Executive Vice President Vice Chancellor and
for Administration and Finance General Counsel
APPROVED AS TO CONTENT: APPROVED AS TO FORM:
By: /s/William J. Doty By: /s/Dudley R. Dobie, Jr.
------------------------------------- ----------------------------------
William J. Doty Dudley R. Dobie, Jr.
Director, Technology Development Manager, Intellectual Property
SPECTRX, INC.
By: /s/Mark A. Samuels
-------------------------------------
Mark A. Samuels
President and CEO
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EXHIBIT 1
[*]
[*]
[*]
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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<PAGE> 1
EXHIBIT 10.21
PURCHASING AND LICENSING AGREEMENT
THIS PURCHASING AND LICENSING AGREEMENT ("Agreement") is made and
entered into as of this 19th day of June, 1996 by and between HEALTHDYNE
TECHNOLOGIES, INC., a Georgia corporation ("Healthdyne"), and SPECTRX, INC., a
Georgia corporation ("SpectRx"), with reference to the following:
R E C I T A L S:
A. SpectRx has developed technology applicable to non-invasive
bilirubin testing and has entered into a license for certain additional
technology applicable to the instrument which will be utilized for non-invasive
bilirubin testing. SpectRx is the sole and exclusive owner of two patents and a
Patent Cooperation Treaty ("PCT") application in respect of such technology, as
more specifically defined below. SpectRx has also signed a Product License
Agreement with the University of Texas M.D. Anderson Cancer Center and related
parties (herein defined as the "MD Anderson License"). Such Patent License
Agreement has been signed by authorized representatives of the University of
Texas M.D. Anderson Cancer Center and the Board of Regents of the University of
Texas System and is awaiting final approval by the Board of Regents in August of
1996. A true and correct copy of such Patent License Agreement as executed by
SpectRx, M.D. Anderson and the Board of Regents of the University of Texas
System has been previously delivered from SpectRx to Healthdyne. Subject to the
final approval of the Board of Regents, SpectRx desires to license or
sublicense, as the case may be, all such technology to Healthdyne in accordance
with the terms and conditions set forth herein.
B. Healthdyne manufactures and markets medical equipment and desires to
license or sublicense, as the case may be, SpectRx technology from SpectRx in
accordance with the terms and conditions set forth herein.
C. Healthdyne also desires to purchase from SpectRx certain items
utilizing the SpectRx technology for the use and/or resale by Healthdyne.
D. SpectRx desires to manufacture and sell such items to Healthdyne
pursuant to the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, Healthdyne and SpectRx hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms, whether
used in the singular or the plural, shall have the following meaning:
1.1 Accessory means items manufactured by SpectRx which would
be considered accessory to and not necessary for the operation of the Instrument
or the Disposable. Initial product specifications for Accessories are set forth
on Exhibit A. Final product specifications for Accessories shall be mutually
agreed upon by the parties prior to commercial introduction.
<PAGE> 2
1.2 Affiliate means any company, corporation, or business ("Company")
in which:
(a) the party owns or controls, directly or indirectly, 50% or
more of the voting stock of that Company;
(b) the party owns or controls, directly or indirectly,
sufficient voting stock in that Company to elect a majority of the directors of
that Company;
(c) that Company owns or controls, directly or indirectly, 50%
or more of the voting stock of the party;
(d) that Company owns or controls, directly or indirectly,
sufficient voting stock in the party to elect a majority of the directors of the
party;
(e) an organization owns or controls, directly or indirectly,
50% or more of the voting stock of the party and that Company; or
(f) an organization owns or controls, directly or indirectly,
Sufficient voting stock in the party and that Company to elect a majority of
the directors of the party and that Company.
1.3 Average Selling Price means the average of the Net Selling Price
for a particular product in a calendar quarter.
1.4 Change In Control means changes in the ownership of a corporation,
changes in the effective control of a corporation and changes in ownership of a
substantial portion of a corporation's assets all as defined, discussed and
illustrated in Section 280G of the Internal Revenue Code and the duly
promulgated Treasury Regulations thereunder, and the disposition of a
substantial portion of the corporation's assets as set forth below.
A disposition of a substantial portion of a corporations assets occurs
on the date that the corporation transfers assets by sale, distribution to
shareholders, assignment to creditors, foreclosure or otherwise, in a
transaction or transactions not in the ordinary course of the corporation's
business (or has made such transfers during the twelve (12) month period ending
on the date of the most recent such transfer of assets) that have a total fair
market value equal to or more than one-half of the total fair market value of
all of the assets of the corporation as of the date immediately prior to the
first of such transfer or transfers. The transfer of assets by a corporation is
not treated as a disposition of a substantial portion of the corporation s
assets if the assets are transferred to an entity, fifty percent (50%) or more
of the total value or voting power of which is owned, directly or indirectly, by
the corporation.
1.5 Disposable Cost means the cost for direct materials and direct
labor per generally accepted accounting principles ("GAAP") or the landed cost
from an outside supplier in the event SpectRx utilizes a contract manufacturer.
In the event SpectRx utilizes an outside supplier as a
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<PAGE> 3
contract manufacturer, Healthdyne shall approve the form and substance of the
agreement and any modifications thereto, which approval shall not be
unreasonably withheld.
1.6 Instrument means an instrument for non-invasive bilirubin
measurement with required [*] utilizing the Disposable to measure bilirubin
levels. The initial product specifications for the Instruments are set forth on
Exhibit A. Final product specifications for the Instrument shall be mutually
agreed upon by the parties prior to commercial introduction.
1.7 Healthdyne Improvements shall have the meaning set forth in
Section 10.
1.8 Healthdyne Subsidiary means any majority-owned subsidiary of
Healthdyne or any of Healthdyne's wholly owned subsidiaries.
1.9 Gross Margin means gross margin as defined by GAAP.
1.10 Improvement means any invention, modification, adaptation or
change relating to SpectRx Technology, but in no event shall include
improvements to Healthdyne Technology.
1.11 Licensed Products shall mean the Instruments, Disposables and
Accessories.
1.12 Licensed Trademark means the SpectRx Products designation set
forth on Exhibit B to this Agreement.
1.13 Healthdyne Technology means technical information, inventions,
products, components, concepts, trade secrets, know-how, techniques, designs,
processes, communications, protocols, software, whether patentable or not,
patent applications, Healthdyne Improvements, copyright applications, patent
rights of any kind and copyrights and all other intellectual property rights
relating to Healthdyne's business other than SpectRx Technology.
1.14 SpectRx Technology means technical information, inventions,
products, components, concepts, trade secrets, know-how, techniques, designs,
processes, communications, protocols, Software, whether patentable or not,
patent applications, copyright applications, the Patent Rights, and copyrights
and all other intellectual property rights relating to SpectRx proprietary
technology and related proprietary documentation.
1.15 Net Selling Price means the total sales revenue for the product in
question excluding charges for returns, outbound prepaid or allowed
transportation charges, sales taxes, tariffs or duties directly imposed with
reference to particular sales or similar items. In the event a Party leases,
licenses or permits the use of a Licensed Product without effecting a sale
thereof (except for demo loaners and end user evaluation samples), the Net
Selling Price therefor shall be deemed to be the Average Selling Price of such
Licensed Product for the relevant calendar quarter. In the event a Party sells a
Licensed Product through an Affiliate, the Net Selling Price for that sale shall
be the Net Selling Price for the first sale to a customer which is not an
Affiliate of a Party. Net Selling Price shall only include one sale per Licensed
Product.
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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1.16 Party means Healthdyne or SpectRx; "Parties" means Healthdyne and
SpectRx.
1.17 Patent Rights shall mean any U.S. and Canadian patents filed by
SpectRx relating to the SpectRx Technology which are necessary, used or useful
for the manufacture, sale or use of Licensed Products, the inventions described
and claimed therein, and any divisions, patents of addition, continuations,
continuations-in-part, extensions, patents and patent applications
corresponding thereto; which will be automatically incorporated in and added to
this Agreement and shall be periodically added to Exhibit C attached to this
Agreement and made a part thereof. Patent Rights shall also be defined to
include the patent rights licensed by SpectRx pursuant to the M.D. Anderson
License.
1.18 Purchase Orders shall have the meaning set forth in Section 4.1
hereof.
1.19 Royalty shall mean a percentage of the Net Selling Price for the
Licensed Product in question.
1.20 Software means any and all computer/instrument software and/or
firmware developed by or acquired by SpectRx that is used or useful in
connection with SpectRx Technology.
1.21 Disposable means disposable probes, tips or other devices
for calibration, cross-contamination prevention, or other purposes as agreed to
by the p which when used with the Instrument measure bilirubin levels. Initial
product specifications for the Disposable are set forth on Exhibit A. Final
product specifications for the Disposable shall be mutually agreed upon by the
parties prior to commercial introduction.
1.22 Territory shall mean the United States and Canada.
1.23 M.D. Anderson License has the meaning assigned to it in the
recitals hereto.
1.24 Cost of Goods Sold means cost of goods sold as defined by GAAP.
2. Licenses Granted.
2.1 Licenses Granted to Licensee. Subject to the terms and conditions
set forth herein, SpectRx grants to Healthdyne an exclusive and a
non-transferable (except as set forth herein) license or sublicense, as the case
may be, within the Territory to SpectRx Technology for the following
applications:
(i) to use and sell Instruments; Healthdyne and SpectRx shall
each execute the Sub-license Agreement attached hereto as Exhibit D-1 for the
portion of the SpectRx Technology licensed from M.D. Anderson relating to the
Instrument within ten (10) days of the approval of the Board of Regents. In the
event of a conflict between the terms of this Agreement and the Sub-License
Agreement, the terms of this Agreement shall control. Each party shall use
reasonable business efforts to obtain the approval of the Board of Regents to
the Successor Letter Agreement
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<PAGE> 5
attached hereto as Exhibit D-2; except as specifically set forth in Section 6.1
hereof, neither the execution, delivery and performance of the Sub-license
Agreement between SpectRx and Healthdyne nor the Successor Letter Agreement will
require Healthdyne to pay any additional fees, royalties, payments or the like.
Healthdyne's sole payment obligation for the Instrument shall be as set forth in
Section 6.1. SpectRx shall use its best efforts to obtain the approval of the
Board of Regents to the M.D. Anderson License and the Successor Letter Agreement
as set forth herein on or before August 30, 1996; failure to obtain approval for
any reason within such time period shall be grounds for Healthdyne to terminate
this Agreement immediately upon the giving of written notice from Healthdyne to
SpectRx. Within thirty (30) days of receipt of such notice of termination,
SpectRx shall return all license fees paid to SpectRx by Healthdyne.
(ii) to use and sell Disposables and
Accessories; and
(iii) to make Instruments, Accessories and/or
Disposables in the event that SpectRx, following the first thirty (30) days
after commercial release of the Instrument, Disposable or Accessory, as the case
may be, is unable to meet the requirements of Subsections (A) or (B) of this
Section 2.1(iii) within the immediately succeeding two (2) calendar months
following the calendar month which is the subject of written notice from
Healthdyne that SpectRx failed to meet the requirements of Subsections (A) or
(B) of this Section 2.1(iii) or in the event that the United States Food and
Drug Administration ("FDA") enjoins SpectRx from distributing into interstate
commerce Instruments, Accessories and/or Disposables pursuant to the Federal
Food, Drug and Cosmetic Act, as amended ("FDA Injunction"). Healthdyne shall
notify SpectRx of an FDA Injunction or SpectRx's failure to meet the
requirements of Subsections (A) or (B) within ten (10) days of the end of the
calendar month which is the subject of the notice. in the event of an FDA
Injunction, the license to make Licensed Products shall be deemed granted
immediately upon receipt of the notice.
In the event Healthdyne becomes licensed to make
Instruments, Disposables or Accessories, as the case may be, as set forth above,
it shall be entitled to utilize the documentation as set forth in Section 16.15
and SpectRx shall provide Healthdyne with access to SpectRx tooling to permit
the manufacture of such Licensed Product(s) in a timely manner. In the event
such tooling is in the possession of a third party, SpectRx shall cause such
third party to supply Healthdyne with access to such tooling. In the event such
tooling is in the possession of SpectRx, SpectRx shall provide such tooling to
Healthdyne; provided, however, Healthdyne shall give SpectRx reasonable access
to such tooling to allow duplication of same. SpectRx may resume making Licensed
Products following Healthdyne's commencement of making a Licensed Product if
SpectRx demonstrates it can meet the requirements of Subsections (A) and (B) of
this Section 2.l(iii), and SpectRx reimburses Healthdyne for reasonable costs to
commence manufacturing [*] plus the cost of any enhanced or improved tooling
developed by Healthdyne to the extent such enhanced or improved tooling cost,
when added to Healthdyne's reasonable costs to commence manufacturing, would
[*]. In the event SpectRx resumes making the Product, all SpectRx tooling will
be returned promptly to SpectRx by Healthdyne. If such SpectRx tooling has been
altered or improved, such altered or improved tooling shall be returned to
SpectRx. In addition, all manufacturing know-how acquired by Healthdyne in
manufacturing the Licensed Products will be licensed to SpectRx on a
non-exclusive royalty-free basis in perpetuity. In the event Healthdyne has
made Instruments, Accessories, or Disposables, as
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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the case may be, for two (2) years, SpectRx will no longer have the right to
resume making such Licensed Products.
(A) [*] of all units of a Licensed Product
delivered in any one calendar month period must meet the
inspection and acceptance standards set forth in Section 8
hereof,
(B) in any one calendar month period,
SpectRx must deliver quantities representing [*] of all units
of a Licensed Product called for on purchase orders accepted
or required to be accepted by SpectRx under Section 4 hereof
Deliveries of replacement Licensed Products
shall be included within the calculation of (A) or (B) above
in the month in which such replacement Licensed Products are
delivered to Healthdyne. If SpectRx fails to meet (A) or (B)
above, and Healthdyne delivers notice of such failure pursuant
to this Section 2.1(iii), Healthdyne, at its option and
expense, may engage a consultant to review the circumstances
and suggest corrective action to be taken during the two (2)
month cure period specified above in order to assist in the
correction of the failures specified in the notice. Engagement
of the Consultant by Healthdyne or adoption of corrective
action suggested by the Consultant shall not extend or affect
in any manner the two (2) month cure period specified above.
The provisions of this Section 2.1(iii) are in addition to and
not in lieu of any other rights or remedies of Healthdyne in
this Agreement (or otherwise in law or in equity) to require
Licensed Products to meet final product specifications and to
be delivered in a timely manner.
2.2 OEM Licenses. Notwithstanding anything to the contrary set
forth herein, Healthdyne may (i) grant sub-licenses to one or more third parties
to manufacture Instruments in the event a manufacturing license is granted in
accordance with Section 2.1(iii), and (ii) may grant non-exclusive sub-licenses
to use and sell Licensed Products to one or more third parties (but not the
manufacture of such Licensed Products unless such manufacture is pursuant to a
manufacturing license granted in accordance with Section 2.1(iii)) in such third
party's name, or such third party's name in conjunction with Healthdyne's name
provided such third party is a hospital, or a home care dealer or distributor
who, in the absence of the sub-license, would be considered an end user within
Healthdyne's normal channels of distribution ("Private Label Dealer").
Healthdyne covenants that no more than [*] of its net sales revenue for Licensed
Products shall be sold to Private Label Dealers.
2.3 Other Sub-Licenses. Except for sub-licenses and licenses
consistent with Section 2.2 or assignments consistent with Section 16.2,
Healthdyne may only sublicense SpectRx Technology with SpectRx's written
consent, which shall not be unreasonably withheld.
2.4 Reservation of Rights. This Agreement does not grant,
license or permit (either expressly or by implication) Healthdyne to transfer,
assign, sell, give, license, sub-license or in any way permit the use of any of
the SpectRx Technology by or to any person, including any Affiliate of
Healthdyne, other than as, and to the extent, expressly provided for herein.
Healthdyne shall not
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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use the SpectRx Technology for any purpose or purposes other than those
expressly permitted under the license grants provided for in Section 2.1 hereof,
and subject to the limitations, and terms and conditions, thereof. The licenses
granted to Healthdyne provided for herein grants unto Healthdyne, subject to the
terms and conditions hereof, the right to use the SpectRx Technology to use and
sell the Licensed Products, and under certain defined circumstances to make
certain Licensed Products only, and only within the Territory, and, except for
the right to receive royalties on sale of Licensed Products sold outside the
Territory under the circumstances set forth in Section 14.5, nothing contained
herein or elsewhere shall be construed to permit the use by Healthdyne of the
SpectRx Technology to use or sell, or make or have made products other than the
Licensed Products, or to use or sell Licensed Products outside of the Territory.
3. Commercialization Efforts and License Fees.
3.1 Commercialization Efforts. Each party agrees to utilize reasonable
business efforts to progress through the milestones toward commercialization of
the Licensed Products, as specifically set forth in Exhibit E. Once
commercialized, Healthdyne shall promote and support the Licensed Products at an
effort level consistent with Healthdyne's sales support, customer service and
technical support levels with respect to Healthdyne's other products. Healthdyne
covenants that it will only sell Disposables which have been manufactured in
accordance with the terms of this Agreement. Healthdyne shall submit a marketing
plan in respect of the Licensed Products to SpectRx in respect of each calendar
year no later than thirty (30) days prior to the commencement of such year. Such
plan shall include, without limitation, plans to undertake clinical studies,
advertisements in journals and other publications and other typical marketing
communications as may be reasonably necessary to promote sales of the Licensed
Products.
3.2 License Fees. Healthdyne agrees to pay license fees for the
Disposable based upon achievement of certain milestones set forth in Exhibit E.
If all milestones are attained, the total license fees will amount to [*]. The
parties agree that [*] of such license fees have been paid by Healthdyne to
SpectRx. Each such milestone payment shall be due and payable in advance upon
the completion of the previous milestone as set forth in Exhibit E. SpectRx will
give Healthdyne no less than ten (10) days written notice of a meeting at which
it will review with Healthdyne its completion of a milestone as set forth on
Exhibit E. Healthdyne shall, within ten (10) business days of the meeting set
forth in the notice, pay SpectRx with respect to the following milestone or give
SpectRx written notice its intent to arbitrate. Notwithstanding the above, the
milestone for the Delivery of the Pre-Production Unit shall only be payable upon
the satisfactory completion of the milestone.
4. Purchase and Distribution of Licensed Products.
4.1 Purchase Orders. During the term of this Agreement and in
accordance with its provisions, SpectRx agrees to sell and Healthdyne agrees to
purchase the Instruments, Disposables and Accessories, in accordance with the
terms of this Agreement. The purchase and sale of the products between the
Parties shall be made by means of purchase orders placed by Healthdyne or its
designee to SpectRx ("Purchase Orders"). Purchase Orders and change orders may
be placed by telex or facsimile. A Purchase Order may provide for delivery of
the products for a period of up to
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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one hundred eighty (180) days following termination of this Agreement in order
to complete the inventory of Licensed Products necessary to complete purchase
orders for Licensed Products outstanding at the time of termination and all
terms and conditions of this Agreement shall govern. Any Purchase Order issued
for the products hereunder shall be non-cancelable after the expiration of
fifteen (15) days from the acceptance of the Purchase Order, and Healthdyne
thereafter shall be responsible for taking deliveries of and paying for all
products set forth on such Purchase Order.
4.2 Acceptance. Purchase Orders and change orders issued by
Healthdyne shall be deemed to be offers to purchase Licensed Products on the
terms and conditions of this Agreement subject to acceptance by telex or
facsimile within five (5) working days after receipt of Healthdyne's Purchase
Orders. Acceptance of receipt and acceptance by SpectRx may be placed by telex
or facsimile.
4.3 Contents. All Purchase Orders for the products submitted
by Healthdyne shall state the following: (i) price, (ii) the quantities ordered,
(iii) the requested delivery dates, (iv) destination, (v) requested method of
shipment, and (vi) model or number of the products in accordance with the terms
and conditions hereof Healthdyne shall use its form of Purchase Order attached
hereto as Exhibit F to place Purchase Orders and emergency orders referred to in
Section 4.6 below, provided that, in the event of a conflict between the form of
the Purchase Order and this Agreement, the terms and conditions of this
Agreement shall prevail.
4.4 Rolling Forecasts. On or before the fifth (5th) day of
each calendar quarter commencing with the second quarter following
commercialization of a Licensed Product, Healthdyne agrees to submit to SpectRx
a non-binding forecast of its anticipated product purchases for the following
six (6) calendar months. The quantity of Licensed Products contained in a
particular calendar quarter may not vary by more than twenty percent (20%) from
the previous forecast for such calendar quarter.
4.5 Purchase Orders Quantities. Healthdyne will issue a
Purchase Order consistent with subsection 4.3 at least thirty (30) days prior to
the scheduled delivery date. SpectRx shall be required to accept Purchase Orders
calling for delivery of Licensed Products which are within [*] of the quantities
forecasted for such Licensed Products in the most recent forecast as set forth
in Section 4.4. Failure to accept Purchase Orders greater than [*] of the most
recent forecast or less than [*] of the most recent forecast shall not be
grounds for Healthdyne to notify SpectRx of its failure to deliver Licensed
Products as set forth in Section 2.1(iii) hereof.
4.6 Emergency Orders. The rolling forecasts and Purchase
Orders submitted by Healthdyne under subsections 4.4 and 4.5 above shall not
prevent Healthdyne from placing additional orders or emergency orders for units
of the products for delivery in less than thirty (30) days. SpectRx agrees to
use reasonable business efforts (at an effort level equivalent to SpectRx's
efforts with respect to its other customers) to deliver such units of products
on the requested schedule. Failure to deliver quantities of products on or
before the date specified in the Emergency Purchase Order shall not be grounds
for Healthdyne to notify SpectRx of its failure to deliver Licensed Products as
set forth in Section 2.1(iii).
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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5. Minimum Purchases.
5.1 Instruments and Disposables. In order to maintain the exclusivity
provisions in Section 2.1 hereof, Healthdyne will purchase from SpectRx (or pay
a Royalty for equivalent number of sales of Licensed Products in the event
Healthdyne is making Licensed Products pursuant to Section 2.1(iii)) during the
term of this Agreement the minimum number of Instruments and Disposable units
set forth on Exhibit G. The sole remedy of SpectRx for the failure of Healthdyne
to meet minimum unit purchases for any period shall be to convert the license
granted hereunder for the remainder of the term of the License Agreement to a
non-exclusive license. Such conversion shall be effective upon the giving
forty-five (45) days prior written notice to Healthdyne following the end of any
minimum period hereunder. If during the forty-five (45) day notice period
Healthdyne makes up the previous minimum short fall, then Healthdyne's rights
remain exclusive. Licensed Products purchased during such period to make up the
shortfall will not be counted for purposes of the then current period in respect
of the minimum purchase required therefor. If Healthdyne's rights under this
Agreement become non-exclusive, Healthdyne thereafter shall not be required to
make minimum purchases.
6. Prices, Royalties and Payment.
6.1 Instrument Price. SpectRx's price to Healthdyne for the Instrument
(excluding Disposables) delivered in accordance with this Agreement shall be [*]
each. In addition, Healthdyne agrees to pay [*] of the Royalty due and payable
to M.D. Anderson, [*] of the Net Selling Price for the Instrument all as set
forth in the Sub-license Agreement set forth in Exhibit D-1 hereto. All prices
are F.O.B. SpectRx's shipping dock. Should SpectRx's or Healthdyne's respective
Gross Margin for the sale of Instruments ever fall below [*] for [*] consecutive
quarters, then Healthdyne and SpectRx will renegotiate transfer pricing for the
Instrument in good faith. If SpectRx's or Healthdyne's Gross Margin for the sale
of Instruments ever exceed [*] for [*] consecutive quarters, then Healthdyne and
SpectRx will renegotiate transfer pricing for the Instrument in good faith. In
the event that Healthdyne becomes entitled to make the Instruments, SpectRx will
receive a Royalty equal to the difference between the [*] then in effect and
Healthdyne's [*] for manufacturing the Instrument. In the event that the
difference between the transfer price then in effect and Healthdyne's Cost of
Goods Sold is a negative number (i.e. Healthdyne's Cost of Goods Sold exceed the
then existing transfer price), there will be no amount payable to SpectRx. [*]
following Healthdyne's commencement of making a Licensed Product, SpectRx's
total compensation will be revised to a [*] Royalty on Healthdyne's Net Selling
Price. [*] following Healthdyne's commencement of making a Licensed Product,
SpectRx's total compensation will be reduced to a [*] Royalty on Healthdyne's
Net Selling Price. [*] following Healthdyne's commencement of making a Licensed
Product and thereafter for the remaining term of the Agreement, SpectRx's total
compensation will be reduced to a [*] royalty on Healthdyne's Net Selling Price.
6.2 Disposable and Accessory Pricing. Healthdyne shall pay
SpectRx SpectRx's Disposable Cost for manufacturing the Disposable or Accessory
in question. SpectRx and Healthdyne agree to split equally the available margin
for Disposables and Accessories manufactured by SpectRx where the margin is
defined as the difference between (i) Healthdyne's Average Selling
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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Price, and (ii) the sum of (a) SpectRx's Disposable Costs to manufacture the
Disposables or Accessory in question and (b) [*] of Healthdyne's Average Selling
Price for Disposables and Accessories. Healthdyne agrees to use reasonable
business efforts (an effort level equivalent to Healthdyne's efforts with
respect to its own products) to maximize the amounts to be split from
Disposables and Accessories. SpectRx agrees to use reasonable business efforts
(at an effort level equivalent to SpectRx's efforts with respect to its other
products) to minimize its Disposable Costs. Should SpectRx's Disposable Cost for
the Disposable ever [*], the Parties will renegotiate pricing in good faith.
Margins and Average Selling Price shall be calculated for each calendar quarter.
In the event Healthdyne becomes entitled to make any of the Disposables or
Accessories for use with Instruments, Healthdyne shall pay to SpectRx a Royalty
equal to [*] between (i) Healthdyne's Average Selling Price and (ii) the sum of
(a) Healthdyne's Disposable Cost to produce the Disposable or Accessory in
question and (b) [*] of Healthdyne's Average selling price for Disposables and
Accessories. In the event that the difference as calculated above is a negative
number, no amounts will be paid to SpectRx hereunder.
6.3 Audit Rights. SpectRx shall have the right to verify, at
its expense and not more frequently than twice per year and upon not less than
thirty (30) days' prior written notice to Healthdyne, the accuracy of the
accounting reports and Royalty payments provided by Healthdyne hereunder,
through inspection of Healthdyne's pertinent records and books of accounts
maintained in the ordinary course of business. Such audit shall be conducted by
a certified public accountant (the "CPA") chosen by SpectRx in its reasonable
discretion, and which CPA is reasonably acceptable to Healthdyne. If the CPA
determines that Healthdyne has overpaid SpectRx, SpectRx will promptly repay
Healthdyne. If the CPA determines that Healthdyne has underpaid SpectRx,
Healthdyne shall have sixty (60) days from receipt of notice of the alleged
underpayment to investigate and review the alleged underpayment. If Healthdyne
concurs that there has been an underpayment, Healthdyne shall promptly pay
SpectRx the amount of any such underpayment. In such event, SpectRx shall pay
all costs, expenses and fees of the CPA unless (i) Healthdyne has underpaid
SpectRx, and (ii) the amount of such underpayment exceeds five percent (5%) of
the amount actually due to SpectRx for the period audited, in which event the
CPA's costs, fees and expenses shall be paid by Healthdyne. If Healthdyne does
not concur with the CPA's determination, the matter will be sent to binding
arbitration in accordance with the rules set forth as Exhibit H, provided,
however, the arbitrator shall be a CPA from an agreed upon national accounting
firm which is not affiliated with either party and is reasonably satisfactory to
each party. Each party shall pay its own costs in arbitration.
Healthdyne shall have the right to verify, at its expense and
not more frequently than twice per year and upon not less than thirty (30) days
prior written notice to SpectRx, the accuracy of the accounting records reported
to Healthdyne by SpectRx hereunder, through inspection of SpectRx's pertinent
records and books of accounts (including but not limited to product costs)
maintained in the ordinary course of business. Such audit shall be conducted by
a certified public accountant (the "CPA") chosen by Healthdyne in its reasonable
discretion, and which CPA is reasonably acceptable to SpectRx. If the CPA
determines that Healthdyne has underpaid SpectRx, Healthdyne will promptly pay
SpectRx such amount. If the CPA determines that Healthdyne has overpaid SpectRx,
SpectRx shall have sixty (60) days from receipt of notice of the alleged
overpayment to investigate and review the alleged overpayment. If SpectRx
concurs that there has
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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been an overpayment, SpectRx shall promptly pay Healthdyne the amount of any
such overpayment. In such event, Healthdyne shall pay all costs, expenses and
fees of the CPA unless (i) Healthdyne has overpaid SpectRx, and (ii) the amount
of such overpayment exceeds five percent (5%) of the amount actually due to
SpectRx for the period audited, in which event the CPA's costs, fees and
expenses shall be paid by SpectRx. If SpectRx does not concur with the CPA's
determination, the matter will be sent to binding arbitration in accordance with
the rules set forth as Exhibit H; provided, however, the arbitrator shall be a
CPA from an agreed upon national accounting firm which is not affiliated with
either party and is reasonably satisfactory to each party. Each party shall pay
its own costs in arbitration.
6.4 Currency Basis. Prices for the products sold to Healthdyne shall be
in U.S. Dollars.
6.5 F.O.B. Point. Title to and risk of loss of the products shall pass
to Healthdyne, F.O.B. SpectRx's United States shipping dock.
6.6 Payment. Payment by Healthdyne to SpectRx for the transfer price
for Instruments shall be made thirty (30) days following receipt of delivery by
Healthdyne. Payment by Healthdyne to SpectRx for margin split amounts due for
Disposables and Accessories under 6.2 hereof shall be payable within forty-five
(45) days of the end of each calendar quarter. Any Royalty payable under 6.1 or
6.2 shall be payable within forty-five (45) days of the end of each calendar
quarter together with a report providing in reasonable detail the basis for
calculating the royalty.
6.7 Instrument Only Business. In the event the marketplace for sales of
Instruments and Disposables becomes predominantly for the sale of Instruments
only, the Parties agree to meet and negotiate in good faith to revise the
pricing under this Section 6.
6.8 Covenant as to Pricing. In determining the Net Selling Price for
each Licensed Product, Healthdyne covenants and agrees to not disadvantage or
understate the Net Selling Price to the advantage of Healthdyne relative to the
sale of its other products.
7. Delivery.
7.1 Transportation. The method of transportation and carrier selected
shall be as specified by Healthdyne in its Purchase Orders. Unless otherwise
agreed, after delivery of the products to the F.O.B. point, all transportation
charges, including insurance, shall be paid by Healthdyne.
7.2 Packaging. SpectRx shall package Licensed Products for shipment and
ship Licensed Products in accordance with standards mutually agreed upon by the
parties and other required international regulatory standards. Each shipment
shall include a packing list containing: (i) Purchase Order number, (ii) model
number of the products, (iii) quantity, (iv) serial number or date code of
shipped products, and (v) the results of applicable quality assurance and other
tests performed with respect to the products being shipped.
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7.3 Delivery. SpectRx shall use reasonable business efforts (at an
effort level consistent with its efforts with respects to its other customers)
to assure that it fills all Purchase Orders by delivery dates and in quantities
specified by Healthdyne in its Purchase Orders.
8. Inspection and Acceptance.
8.1 SpectRx Inspection. SpectRx shall be an FDA registered
manufacturing facility and shall follow good manufacturing practices established
by the FDA and provide and maintain an inspection procedure and quality
assurance program for the products sold by SpectRx to Healthdyne hereunder and
its production processes. Complete records of all inspection and quality
assurance work done by SpectRx shall be made available to Healthdyne upon its
request at reasonable times during the term of this Agreement. Healthdyne shall
have the right to audit SpectRx's manufacturing facilities upon reasonable
notice to determine whether SpectRx is following good manufacturing practices.
8.2 Healthdyne Inspection.
8.2.1 Prior to commercial introduction of Licensed Products, the
parties shall mutually agree on Healthdyne's criteria for acceptance testing
("Acceptance Test"). All products ordered by Healthdyne under this Agreement may
be subject to statistical lot sampling inspection or 100% testing to
Healthdyne's Acceptance Test at Healthdyne's receiving facility. In order to
invoke Section 2.I(iii) hereof, Healthdyne must 100% inspect the units involved
in such shipments. Any of the products or lots of products ("Lot") which
materially fall to meet the mutually agreed upon final product specifications
following the Acceptance Test may be rejected by Healthdyne and returned to
SpectRx for replacement. Prior to returning any products to SpectRx, Healthdyne
shall notify SpectRx by facsimile or telex that Healthdyne has rejected the
products, inclusive of the reason or basis of such rejection. Within three (3)
working days of the receipt of the non-conforming notification, SpectRx will
issue a "Return to Vendor" ("RTV") number to Healthdyne by facsimile or telex,
which RTV number will be Healthdyne's authorization to return the products. In
Healthdyne's sole discretion, it may allow SpectRx to enter on Healthdyne's
premises to repair products otherwise subject to replacement under the
provisions of this Section 8.2.
8.2.2 Healthdyne shall promptly notify SpectRx of any incoming
failure. Except for products repaired pursuant to Section 8.2.1, Products which
do not conform to the final product specifications shall be returned by
Healthdyne to SpectRx freight collect and insured for full replacement value.
Within twenty (20) days after the date of receipt of the nonconforming products
by SpectRx, replacement product will be shipped to Healthdyne at SpectRx's
expense. Should SpectRx fail to replace rejected products by shipping conforming
products to Healthdyne within twenty (20) days of its receipt of the
nonconforming products, Healthdyne shall have the option, in addition to any
other remedies available to it in law or equity, to cancel without cost or
liability the purchase of such products and receive, at Healthdyne's option, a
credit or rebate if payment has been made. Healthdyne shall pay freight charges,
insurance and other customary charges for transportation for improperly rejected
products.
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8.2.3 All costs to replace or repair including transportation with
respect to the defective products shall be the sole responsibility of SpectRx.
8.2.4 If Healthdyne attempts to correct deficiencies to the
products purchased under this Agreement without prior authorization from
SpectRx, then SpectRx shall have no further obligations with respect to such
products.
8.3 Nonconforming Acceptance. Healthdyne may choose to accept
the products which fail to conform in a minor aspect to the specifications
established by this Agreement without prejudice to its right to reject
nonconforming items in the future. If Healthdyne so chooses, Healthdyne will
notify SpectRx of its intent to accept nonconforming items. However, SpectRx
accepts no responsibility for the nonconforming aspects of the items accepted by
Healthdyne.
9. Confidentiality; Exclusive Rights; Exclusive Option and Right of First
Refusal.
9.1 Confidentiality. The parties agree that the terms and conditions of
that certain Confidentiality Agreement between the parties dated February 22,
1995 are superseded by the following confidentiality provisions:
(a) Each party agrees to keep the Trade Secrets and Confidential
Information of the other party confidential. For purposes of this Agreement,
"Trade Secrets" means information including, but not limited to, technical or
nontechnical data, formulas, patterns, compilations, programs, devices, methods,
techniques, drawings, processes, financial data, financial plans, product plans
or fists of actual or potential customers or suppliers which (1) derives
economic value, actual or potential, from not being generally known to, and not
being readily ascertainable by proper means by other persons who can obtain
economic value from its disclosure or use; and (2) is the subject of efforts
that are reasonable under the circumstances to maintain its secrecy.
"Confidential Information" means data and information relating to the business
of a party (which does not rise to the level of Trade Secret) which is or has
been disclosed to the other party or of which the other party became aware as a
consequence of or through its relationship with the disclosing party and which
has value to the disclosing party and is not generally known to the disclosing
party's competitors. Trade Secrets and Confidential Information will not include
any data or information that is already known to a party at the time of
disclosure to such party, or which (i) has become generally known to the public
through no wrongful act of such party; (ii) has been rightfully received by such
party from a third party without restriction on disclosure and without breach of
an obligation of confidentiality running either directly or indirectly to the
other party; (iii) has been approved for release and released to the general
public by written authorization of the other party; (iv) has been disclosed
pursuant to a requirement of a governmental agency or of law without similar
restrictions or other protections against public disclosure, or has been
required to be disclosed by operation of law; provided, however, that a party
must first have given written notice of such required disclosure to the other
party, used reasonable business efforts to obtain a protective order requiring
that the Trade Secret or Confidential Information so disclosed be used only for
the purposes for which disclosure is required, and taken reasonable steps to
allow the other party to seek to protect the confidentiality of the information
required to be disclosed; (v) is independently developed by a party without use,
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directly or indirectly, of the Trade Secret or Confidential Information; or (vi)
is furnished to a non-Affiliated third party by the other party without
restrictions on the third party's right to disclose the information. The
provisions of this Agreement restricting the use of Trade Secrets shall survive
termination of this Agreement for so long as is permitted by the Georgia Trade
Secrets Act of 1990, O.C.G.A. Section 10-1-760-10-767. The provisions of this
Agreement restricting the use of Confidential Information shall survive for a
period of three (3) years following termination or expiration of this Agreement.
(b) Disclosure may be made by Healthdyne to governmental agencies to
the extent required or desirable to obtain regulatory approval for Licensed
Products and to nonclinical and clinical investigators and consultants where
necessary or desirable for their information to the extent normal and usual in
the custom of the trade and under a secrecy agreement with provisions as to
confidentiality essentially the same as those in this Agreement.
9.2 Exclusive Option. SpectRx hereby grants to Healthdyne the exclusive
option to acquire an exclusive license for the United States and Canada, on
substantially the same terms and conditions as are set out in this Purchasing
and License Agreement, to any new technology and intellectual property (other
than the SpectRx Technology and any Improvement thereto) for which SpectRx has
right and authority to grant licenses that may be conceived, invented, reduced
to practice, or otherwise come into existence subsequent to the date of this
Agreement by SpectRx for such other devices as may be directly or indirectly
competitive with the Licensed Products manufactured using the SpectRx Technology
(hereinafter referred to as the "Area Device"), provided that Healthdyne agrees
to reimburse SpectRx for [*] to develop and commercialize an Area Device.
Payment of [*] shall be in lieu of any license fees, and the parties agree that
"substantially the same terms and conditions" as used in the preceding sentence
shall not include license fees or the like.
9.3 Right of First Refusal. With respect to the option granted in
Section 9.2, Healthdyne shall have a three (3) month period after notification
by SpectRx in which to exercise in writing its option to obtain such license.
Such notification shall include a detailed description of the new technology,
the design of the proposed Area Device, and any prototype in existence together
with the projected costs of development and manufacture of the Area Devices and
the schedule for commercialization. If Healthdyne falls to exercise its option,
SpectRx may license such development to any third party on terms no more
favorable than those offered to Healthdyne. If SpectRx proposes to offer more
favorable terms to a third party, then Healthdyne shall be notified of the more
favorable terms and shall have a thirty (30) day period to accept the new terms
after which period SpectRx may enter into a license with a third party. For the
purposes of clarity, SpectRx may only enter into a license with a third party
for any technology relative to the Area Device after Healthdyne has had the
opportunity to accept the license on equivalent or better terms.
9.4 Exclusive Rights. During the term of any exclusive license granted
under the terms of this Agreement, SpectRx agrees that as part of the exclusive
license granted hereby, it will not market or sell within the Territory any Area
Devices without first complying with the provisions of Section 9.2 and 9.3
hereof in respect thereof.
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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10. Proprietary Rights.
10.1 If, during the term of this Agreement, either party shall discover
or invent an improvement (hereinafter called the "Improvement") to the SpectRx
Technology, such party agrees to promptly disclose to the other party and
furnish to the other party all information pertaining thereto, including
blueprints, sketches, drawings, designs, computer programs, and other data.
Healthdyne and SpectRx shall, to the best of their ability, cause its
employees to disclose only to Healthdyne and SpectRx, respectively, any
Improvement made or developed by them or any of them during the term of this
Agreement, and Healthdyne and SpectRx each agree to inform the other party
promptly of any such Improvement of which it becomes aware within a reasonable
time. Title to any such Improvement shall as it relates to the SpectRx
Technology shall reside with SpectRx. During the term of this Agreement,
Healthdyne may use such Improvements as are discovered or invented by SpectRx
only in conjunction with the SpectRx Technology and only for the purposes
contemplated by this Agreement and such discovery or invention shall be deemed
to be part of the licensed subject matter for all purposes of this Agreement.
Notwithstanding the foregoing, an Improvement made by Healthdyne which
also has application to Healthdyne Technology shall be owned by Healthdyne as it
relates to Healthdyne Technology ("Healthdyne Improvement"). In such case, both
parties shall be entitled to utilize such enhancement or revisions in connection
with Licensed Products (and, in the case of Healthdyne, with its other products)
without the payment of any additional Royalty, provided however that SpectRx
shall not make any commercial use thereof in the United States and Canada during
the term of this Agreement.
In the event an Improvement increases the cost for direct materials and
direct labor per GAAP ("Direct Cost") for manufacturing the Instrument, SpectRx
may increase the transfer pricing in Section 6.1 by the amount of such increase
in the Direct Cost provided Healthdyne approves in writing the incorporation of
such Improvement into the Instrument. Healthdyne shall also approve
incorporation of an Improvement to a Disposable or an Accessory.
10.2 Further Action. Healthdyne and SpectRx each agree that it shall
promptly notify the other of any Improvement, invention or other improvement in
which such party has involvement and which relates to this Agreement and fully
disclose such Improvement, invention or other improvement to the other party.
Each party agrees that it shall take all actions and execute all documents, as
the other party may reasonably . request, to effectuate the acknowledgment of
any party's ownership or exclusive license under this Section 10.
11. Warranty.
11.1 SpectRx Warranty.
11.1.1 SpectRx warrants that the Instruments supplied by SpectRx
to Healthdyne to be under normal use and care free for a period of the longer of
[*] after shipment to
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Healthdyne or [*] from sale to the end-user from any defect in workmanship or
material and to materially conform with the mutually agreed upon final product
specifications. All replacement costs under this Warranty shall be borne by
SpectRx. Units returned to SpectRx for warranty repairs shall be shipped to
SpectRx freight collect according to SpectRx's instruction. Within twenty (20)
days of the receipt of Instruments, SpectRx shall replace or repair such units
and shall ship them to Healthdyne's designated return destination freight
prepaid. The foregoing warranties extend to the products returned by
Healthdyne's customers.
11.1.2 SpectRx warrants that for a period that an Accessory is
warranted by a manufacturer other than SpectRx, the Accessories supplied by
SpectRx to Healthdyne hereunder will be, under normal use and care, free from
any defect in workmanship or material and to be in conformity with the
manufacturer's specifications. All replacement costs under this Warranty shall
be borne by SpectRx. Units returned to SpectRx for warranty repairs shall be
shipped to SpectRx or the manufacturer freight collect according to SpectRx's
instruction. Within twenty (20) days of the receipt of the returned Accessories,
SpectRx shall replace or repair such units and shall ship them to Healthdyne's
designated return destination freight prepaid. The foregoing warranties extend
to the products returned by Healthdyne's customers. Accessories manufactured by
SpectRx shall have the same warranty as the Instrument.
11.1.3 SpectRx warrants that for a period of the lesser of [*]
from SpectRx to Healthdyne of a Disposable (single patient use only) supplied by
SpectRx to Healthdyne hereunder will be, under normal use and care, and only
upon first use free from any defect in workmanship or material and to materially
conform with the mutually agreed upon n product specifications. SpectRx shall
bear all replacement costs under this Warranty. Healthdyne shall ship units
returned to SpectRx for warranty repairs to SpectRx freight collect according to
SpectRx's instruction. Within ten (10) days of the receipt of the Disposable,
SpectRx shall replace or repair such units and shall ship them to Healthdyne's
designated return destination freight prepaid. The foregoing warranties extend
to the products returned by Healthdyne's customers.
11.2 Limitation of Liability. EXCEPT FOR THE EXPRESS WARRANTIES SET
FORTH ABOVE, SPECTRX GRANTS NO WARRANTIES, EITHER EXPRESS OR IMPLIED, ON THE
LICENSED PRODUCTS, INCLUDING ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL EITHER PARTY BE RESPONSIBLE
FOR CONSEQUENTIAL, INCIDENTAL, SPECIAL DAMAGES, LOSS OF PROFIT, SUFFERED BY THE
OTHER PARTY IN CONNECTION WITH THIS AGREEMENT.
12. Infringement.
12.1 Third Party Infringement of Patent Rights. In the event that
Healthdyne believes a third party to be infringing one or more of the Patent
Rights or Healthdyne's exclusive license granted hereunder ("License Rights"),
Healthdyne shall bring such infringement to the attention of SpectRx. If SpectRx
does not institute infringement proceedings against such third party within
ninety (90) days after written notice from Healthdyne that such third party
appears to be
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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infringing one or more of the Patent Rights or License Rights, Healthdyne shall
have the right to take whatever steps in its own and sole discretion it shall
deem advisable, including but not limited to, settlement or the filing of suit
for damages, or to enjoin such sales or offers for sale by such third party. In
the event that Healthdyne exercises its discretion to bring an infringement
action, SpectRx shall perform all acts which may become necessary or desirable
to vest in Healthdyne the right to institute any such suit and shall, upon
reasonable notice, cooperate and, to the extent deemed necessary or desirable by
Healthdyne and at Healthdyne's expense, participate in any suit to enjoin such
infringement and to collect, for the benefit of Healthdyne, damages, profits and
awards of any nature recoverable for such infringement. In the event the third
party infringer is a licensee of SpectRx, SpectRx agrees to take all actions
reasonably requested by Healthdyne to require such licensee to cease such
infringement and recoup damages, profits and awards of any nature recoverable
for such infringement; such action by SpectRx may include, but is not limited
to, termination of the license of the infringing licensee. The costs and
expenses of such suit or settlement shall be borne by the party hereto bringing
the suit. Recovery of damages in any such suit or settlement any third party
shall first be applied to reimburse the party brining the suit for its
reasonable attorneys' fees, costs plus other out-of-pocket costs or expenses
incurred in connection with such suit or settlement. Any excess recovered
damages shall be applied one-half to SpectRx and one-half to Healthdyne.
12.2 Patent Rights Allegedly Infringe Rights of Third Party. In the
event a third party alleges that the SpectRx Technology infringes upon
intellectual property rights of another entity in the United States or Canada,
the party learning of such alleged infringement shall notify the other party. In
accordance with the provisions hereinafter provided, SpectRx will settle or
defend all proceedings, threats of proceedings or claims against SpectRx,
Healthdyne or its customers for infringement or alleged infringement by the
SpectRx Technology furnished by SpectRx to Healthdyne under this Agreement of
patents, copyrights, or similar intellectual property rights of any third party
in the United States or Canada. Healthdyne agrees to give SpectRx necessary
assistance where practical, to modify the SpectRx Technology to make Licensed
Products non-infringing or, where practical, to obtain licenses under such
patents, copyrights or similar intellectual property rights. SpectRx may, at its
sole discretion, modify the SpectRx Technology to make it non-infringing
provided the Licensed Product so modified meets final product specifications for
the Licensed Product. In all other instances, the parties agree to consult with
one another concerning the defense or settlement of any and all proceedings,
threats of proceedings or claims against SpectRx or Healthdyne hereunder, and
Healthdyne shall have the right to obtain independent counsel to represent its
interests in the proceedings, threats of proceedings or claims; such counsel
shall be provided full access to all documents and meetings and be allowed to
participate in the proceedings or claims to the extent permitted by the court.
Both parties shall be required to approve and execute any settlement of the
proceedings, threats of proceedings or claims. Healthdyne and SpectRx each agree
to pay one-half of any (i) defense costs incurred by either party (including
reasonable attorney's fees) in defending any proceedings, threats or claims, and
(ii) damages, settlement payments, ongoing royalties, license fees or the like
payable to a third party by either party to allow the continued manufacture, use
and sale of the Licensed Products. In the event either Healthdyne or SpectRx is
enjoined from further sale of a Licensed Product hereunder during the first two
(2) years of commercialization of Licensed Products, SpectRx will pay Healthdyne
one-half of all License Fees paid by Healthdyne to SpectRx hereunder.
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<PAGE> 18
12.3 Regulatory Compliance.
Healthdyne shall be solely responsible for identifying and obtaining,
at its sole cost and expense, all FDA and United States or Canadian safety
agency required approvals and any other agency or regulatory approvals which are
required for Healthdyne's use or sale of the Licensed Products in the United
States or Canada. SpectRx will reasonably cooperate with Healthdyne by providing
at no charge to Healthdyne any SpectRx engineering data that is reasonably
required to obtain the regulatory approvals, including but not limited to 510(k)
application materials submitted by SpectRx for its own products that incorporate
SpectRx Technology. Other than as stated above, SpectRx will not, however, be
required to produce any new data or reformat or otherwise republish any existing
data. Disclosure by Healthdyne of any such data shall be subject to the
confidentiality provisions of Section 9.
13. Incident Reporting.
13.1 SpectRx Reporting. SpectRx represents and warrants that all
products manufactured and sold to Healthdyne pursuant to this Agreement shall be
manufactured in conformance with all applicable requirements of the FDA and in
accordance with all United States federal, state and local statues, ordinances
and regulations, including, but not limited to, the Federal Food, Drug and
Cosmetic Act (21 U.S.C. 301 et seq.).
13.2 Recall. If for any reason (i) the FDA mandates a recall of
Licensed Product(s), or (ii) the parties agree that a recall of Licensed
Product(s) is (are) necessary, Healthdyne agrees that it shall as expediently as
possible issue a recall notice to all its customers recalling the Licensed
Products in question. Provided that the products meet the final product
specifications, SpectRx's responsibilities under the recall shall be to repair
or replace the part that causes the recall free of charge. In respect of a
recalled Licensed Product, if the Licensed Products fail to meet materially
final product specifications, then SpectRx shall repair and/or replace the
Licensed Product in question free of charge and pay all freight or shipping
charges involved with such recall. In the event of any recall of any Licensed
Product which does not arise from the incorporation of SpectRx Technology into
such Licensed Products, the parties shall cooperate to the extent reasonably
necessary to conduct such recall in accordance with Healthdyne's policies and
procedures.
14. Term and Termination.
14.1 Term. This Agreement shall become effective as of the effective
date first set forth above, and shall remain in effect for the longer of [*] or
the last to expire patent contained in the Patent Rights. At Healthdyne's
option, Healthdyne may give SpectRx notice of its intent to renew at least
ninety (90) days prior to the end of the initial term or any renewal term, as
the case may be, for additional fifteen year terms.
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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<PAGE> 19
14.2 Termination.
14.2.1 The default by one Party of a material obligation of such
Party under this Agreement shall entitle the other Party to give the Party in
default written notice describing such default and requiring it to remedy such
default. If such default is not reasonably remedied within ninety (90) days
after the date of such notice, the notifying Party shall be entitled to
terminate this Agreement by a written notice to the defaulting Party.
14.2.2 Either Party may terminate this Agreement after the filing
against the other Party by any third party of a petition in bankruptcy (which
petition remains undismissed for forty-five (45) days), or upon or after any
adjudication that the other Party is insolvent, or upon or after the filing by
the other Party of any petition or answer seeking reorganization, readjustment
or arrangement of the business of the other Party under any law relating to
bankruptcy or insolvency, or upon or after the appointment of a receiver for all
or substantially all of the property of the other Party of any assignment or
attempted assignment for the benefit of creditors, or upon or after the
institution of any proceedings for the liquidation or winding up of the other
Party's business.
14.3 Rights Upon Termination. In the event of any valid termination of
this Agreement by SpectRx under Section 14.2 hereof, all of Healthdyne's rights
under this Agreement shall be terminated. In the event of any valid termination
of this Agreement by Healthdyne under Section 14.2 hereof, Healthdyne, at its
option, may abandon all use of SpectRx Technology or continue use of its rights
in this Agreement by making, using and selling Licensed Products and the
provisions of Sections 2.2, 5.1, 6 and 16.15 shall continue to apply. In the
event of any termination, all requirements under Sections 9.1, 10, 11, 12, and
13 shall remain in effect. No termination shall impact SpectRx's rights to
collect for accrued royalties and payment for ordered and delivered product.
14.4 Not For Cause Termination. Healthdyne may terminate with or
without cause at any time during the term of this Agreement upon thirty (30)
days prior written notice to SpectRx. If Healthdyne terminates this Agreement
prior to the first sale of a Licensed Product, then all of Healthdyne's rights
under this Agreement with respect to the Licensed Product shall be terminated.
If subsequent to such termination by Healthdyne, SpectRx either licenses or
sells the SpectRx Technology or commercializes the SpectRx Technology or
Licensed Products, then any fees actually paid by Healthdyne to SpectRx that had
not been refunded to Healthdyne shall be paid to Healthdyne, as when sums become
available to SpectRx in the form of license fees, royalties on product-related
payments from third parties, or revenue from commercialization by SpectRx.
14.5 Liquidated Damages. In the event that the Milestone on Exhibit E
entitled "Acceptance by Healthdyne of Quantities Delivered Pursuant to First
Purchase Order" does not occur on or before [*] (the "Milestone Deadline") for
any reason whatsoever (other than the failure of Healthdyne to submit a purchase
order on a timely basis in order to prevent SpectRx from meeting such
milestone), Healthdyne shall have the right to assume the Commercialization
Efforts with respect to the Licensed Products as set forth in Section 3.1 and on
Exhibit E. In such event (i) SpectRx shall immediately supply Healthdyne with
all SpectRx Technology and documentation with respect to the
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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<PAGE> 20
Licensed Products as such documentation is described in Section 16.15, (ii)
SpectRx shall be deemed to have granted to Healthdyne, in addition to the
licenses set forth in Section 2.1(i) and (ii), the license set forth in Section
2.1(iii) to make Licensed Products once it completes the Commercialization
Efforts, (iii) all further License Fees from Healthdyne to SpectRx shall cease,
and (iv) SpectRx shall compensate Healthdyne by paying the Liquidated Damages
(as defined herein) in the manner provided for herein below. Notwithstanding the
assumption of the Commercialization Efforts by Healthdyne, and except as
expressly provided for in this Section 14.5, all other terms and conditions of
this Agreement shall remain in effect as provided for in this Agreement.
Although Healthdyne shall have the right to make Licensed Products pursuant to
subclause (ii) above, SpectRx shall have the right to resume making Licensed
Products in lieu of Healthdyne pursuant to the terms and conditions of Section
2.1 hereof "Liquidated Damages", as used herein, shall mean [*] Healthdyne's
actual costs in commercializing the Licensed Products incurred from the
Milestones Deadline until the time of the first commercial sale of a Licensed
Product in the Territory, although such Liquidated Damages shall in no event in
the aggregate [*]. The sum of "Healthdyne's actual costs in commercializing the
Licensed Products", as used in the preceding sentence to compute Liquidated
Damages, will be reduced by the amount of any unpaid License Fees which would
have otherwise been due to SpectRx by Healthdyne. The parties agree that
Healthdyne shall offset any amounts due to SpectRx from Healthdyne as such
amounts become due and payable to pay the Liquidated Damages (except that if
SpectRx is selling the Licensed Products to Healthdyne, Healthdyne may not
offset against or otherwise reduce or be excused from paying that portion of the
purchase price constituting the Disposable Cost thereof). All remaining
Liquidated Damages shall be paid by SpectRx solely in the form of a ten percent
(10%) royalty payable quarterly on the Average Selling Price for all SpectRx
sales of Licensed Products outside the Territory.
15. Dispute. In the event of a dispute hereunder, the Parties agree to
submit the matter to binding arbitration by one Party giving the other Party
notice of the intent to arbitrate. The arbitration shall be conducted in
accordance with the rules and procedures set forth as Exhibit H hereto, provided
each Party shall select one arbitrator who is an expert in the subject matter
area in dispute within ten (10) days of the receipt of the notice of arbitration
and the two arbitrators chosen by the Parties shall select a third within ten
(10) days of being selected.
16. Miscellaneous.
16.1 Marking. Healthdyne agrees to mark each Licensed Product
manufactured or sold by it in accordance with the Statutes of the United States
relating to the marking of patented articles. SpectRx will, from time to time,
update its patent numbers for Healthdyne as patents issue. Healthdyne shall
include the SpectRx Licensed Trademark on the Licensed Products when
Healthdyne's Licensed Trademark is utilized. The Licensed Trademark shall be
used to signify that the Licensed Product was developed by SpectRx and shall be
no less than thirty percent (30%) of the size of Healthdyne's Licensed
Trademark.
16.2 Assignability--Healthdyne. Except as set forth in Sections
2.2 and 2.3 hereof or in connection with a Change In Control of Healthdyne or
the sale of all or substantially all of the assets of a product line, Healthdyne
may not assign, transfer or sublicense any of the rights or obli-
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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<PAGE> 21
gations under this Agreement without the prior written consent of SpectRx, which
consent shall not be unreasonably withheld. Notwithstanding the foregoing,
Healthdyne may assign its rights to receive any revenue or payments due
hereunder. For purposes of this Section 16.2, a product line shall be defined,
at a minimum, as phototherapy devices and devices for the diagnosis and
treatment of neonatal jaundice.
16.3 Assignability--SpectRx. Except in connection with a Change in
Control of SpectRx or the sale of all or substantially all of the assets of a
product line, SpectRx may not assign this Agreement without the prior written
consent of Healthdyne, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing, SpectRx may assign its rights to receive any
revenue or payments due hereunder. For purposes of this Section 16.3, a product
fine shall be defined, at a minimum, as phototherapy devices and devices for the
diagnosis and treatment of neonatal jaundice.
16.4 Successors and Assigns. This Agreement will inure to the benefit
of and bind SpectRx's and Healthdyne's successors and assigns.
16.5 Failure to Enforce. The failure of either Party to enforce at any
time or for any period of time the provisions of this Agreement shall not be
construed to be a waiver of such provisions or of the right of such Party to
enforce each and every such provision.
16.6 Governing Law. This Agreement shall be governed by and construed
according to the laws of the State of Georgia, U.S.A.
16.7 Severability. In the event that any of the provisions of this
Agreement shall be held by a court or other tribunal of competent jurisdiction
to be unenforceable, such provisions shall be deleted from this Agreement and
the remaining portions of this Agreement shall remain in full force and effect,
except where the economic equity of both parties hereto is materially affected
by such unenforceability.
16.8 Notice. Except as either Party may hereafter notify the other with
respect to itself, the addresses of the Parties for all purposes of this
Agreement shall be:
SpectRx: SpectRx Inc.,
6025A Unity Drive
Norcross, Georgia 30071
Attention: Mark A. Samuels
Healthdyne: Healthdyne Technologies, Inc.
1255 Kennestone Circle
Marietta, Georgia 30066
Attention: President and General Counsel
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<PAGE> 22
All notices and communications pursuant to this Agreement shall be addressed as
set forth above and shall be delivered to the Party for whom intended by hand or
by postage prepaid, first class, registered or certified mad, return receipt
requested. Such notices and recommendations shall be deemed to have been given
and delivered as of the date of receipt.
16.9 Force Majeure. Except with respect to the Liquidated Damages set
forth in Section 14.5, neither Party shall be liable to the other Party hereto
for any loss, injury delay, damages or other casualties suffered or incurred by
such other Party due to strikes, riots, storms, fires, acts of God, or war or
any other cause beyond the reasonable control of either Party.
16.10 Headings. Headings to paragraphs and sections of this Agreement
are to facilitate reference only, do not form a part of this Agreement and shall
not in any way affect the interpretation hereof.
16.11 Survival From This Agreement. The rights and obligations of the
parties hereto under Articles 9, 10, 11, 12, and 13 of this Agreement shall
survive and continue after any expiration or termination of this Agreement and
shall bind the Parties and their representatives, successors, heirs and
assignees.
16.12 Exhibits. All exhibits and attachments to which this Agreement
refers are hereby incorporated into and made a part of this Agreement.
16.13 Entire Agreement. This Agreement constitutes the entire agreement
between Healthdyne and SpectRx, and there are no other understandings,
agreements or representations, express or implied, written or oral, not
specified herein. The letter agreement dated April 18, 1995 between the parties
is hereby superseded and terminated. This Agreement may only be amended by
express written agreement and signed by authorized representatives of both
Parties.
16.14 Publicity.
(i) A copy of all public announcements and press releases which
either Party intends to release or make shall be provided to the other Party
prior to being released or made. Any public announcement or news release that
names, refers to or in any way identifies both Parties shall be approved by both
Parties prior to being released or made. Each party shall respond to a request
for approval within three (3) working days or receipt of the copy and the
approval of each Party will not be unreasonably withheld.
(ii) Except as set forth herein, the Parties shall not use each
other's name in any advertising material without the prior written consent of
the other Party, which consent may not be unreasonably withheld.
16.15 Documentation. Immediately upon FDA clearance of a Licensed
Product SpectRx shall provide Healthdyne with all SpectRx Technology and
documentation with respect to the Licensed Product, including, but not limited
to, any and all models, photographs, drawings,
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<PAGE> 23
calculations, specifications, test results, hardware, software, and operation
instructions together with any and all other documentation which may be used or
useful in the manufacture of the Instruments, Disposables and Accessories for
the Licensed Products sufficient in all respect to allow the manufacture of such
Licensed Products in the event Healthdyne becomes entitled to do so in
accordance with the terms and conditions of this Agreement. The Parties agree
that this provision is necessary in order for Healthdyne to assume making
Licensed Products in accordance with provisions set forth in this Agreement in a
manner which will allow Healthdyne to meet product demand and Healthdyne's
quality standards. SpectRx shall update such documentation from time to time and
upon written request from Healthdyne to assure that all such documentation is
current and meets the requirements of this Section 16.15.
16.16 Offset. Healthdyne shall have the right to offset from any
amounts due to SpectRx hereunder any amounts due and payable from SpectRx to
Healthdyne whether arising under this Agreement or the Convertible Note executed
by SpectRx on the date hereof.
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<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date forth above.
HEALTHDYNE TECHNOLOGIES, INC.
By: /s/ Craig B. Reynolds
--------------------------------------
Craig B. Reynolds, President and
Chief Executive Officer
SPECTRX, INC.
By: /s/ Mark A. Samuels
--------------------------------------
Mark A. Samuels, President
Chief Executive Officer
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<PAGE> 25
EXHIBIT A
<PAGE> 26
- --------------------------------------------------------------------------------
"BILI-TEST"PRELIMINARY PRODUCT REQUIREMENTS DOCUMENT
(PRD)
- --------------------------------------------------------------------------------
This document describes application, market, intended use, end user,
(and predicate device) for serum chemistry with regard to bili-test.
Following are the device related product requirements, based on inputs
from various sources (see customer market research reports).
1.0 ASSUMPTIONS
1.01 Overall starting point, or reference, for the physical concept
shall be per the first version of physical model developed by
SpectRx, Healthdyne Technologies and Inno in terms of looks,
shape, aesthetics or eye appeal, ergonomics, human
engineering, size volume and physical characteristics. (See
attached.)
(See attached Inno industrial design).
1.02 Exact dimensions and weight will be finalized after finalizing
specifications.
1.03 HDTC, mutually agreed by SpectRx, Inc. has ultimate right to
make any. changes to these requirements.
1.04 Schedule, cost specifications, quality or quantity goals may
change by mutual agreement of SpectRx and HDTC.
1.05 All other HDTC/SpectRx contractual agreements are met,
including ISO, FDA, other requirements.
1.06 Bili-test system has four components:
1). Hand held device
2). [*]
3). [*]
4). Mateable to a ("Hertz) holster/printer later
1.07 End user, RN, Nursing Assistant, RRT
3). Neonatologist
4). Pediatrician
5). Homecare phototherapy service
1.08 Printer to be available after launch of product
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
<PAGE> 27
2.0 FUNCTIONS AND FEATURES
2.01 Non-invasively read and display result in units of mg/dl of
total serum bilirubin.
2.02 [*] with a standard error of TBD.
2.03 Optical radiation output will not cause retinal burn. Device
shall not exceed the optical radiation Threshold Limit Values
(TLV's) as determined by the American Conference of
Governmental Industrial Hygenists for light, near infrared
radiation or UV radiation.
2.04 Two second total measurement time measured from when trigger
is engaged until reading is displayed.
2.05 User calibration at power up. Calibration good for 5 (maybe 3)
applications after which device requires another calibration
and a replacement of disposable tip.
2.06 [*], including calibration. Automatic time-out between
measurements 2 minutes.
2.07 Does not require any input such as age, etc. of patient before
displaying a reading.
2.08 Simple, easy to follow user prompts and messages.
2.09 Battery backed up, time, date and last reading by primary
battery.
1). Battery life between charges [*] tests/shift.
2). Low battery LCD icon.
3). When battery is at lowest device activation level,
the device will not take a measurement, will emit the
invalid tone, and will display three dashes.
4). Last reading maintained until device is turned off
or recalibrated.
2.10 Field upgradeable and serviceable by trained technicians or
hospital bio-meds, and trained personnel.
1). Connectors
2). Battery
3). E-prom
4). Light source
2.11 Failure rate of less than [*].
1). FMECA
2). MTBF
3). Hazards analysis
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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<PAGE> 28
2.12 Mean time to troubleshoot and repair in field to be less than
30 minutes, without factory intervention.
2.13 [*]
2.14 Have built in error messages, test point, diagnostic features
for minimal downtime in troubleshooting device failures, using
off-the-shelf test fixtures.
2.15 Can be used by end user with no special training required.
2.16 Operator and service manual.
1). Operator's manual by HDTC
2). Service manual by SpectRx
3.0 HAND HELD DEVICE PHYSICAL
3.1 GENERAL
3.1.1 Must meet FDA/EMC tests for Attachment A.
3.1.2 It will be a hand-held device, easily packaged and
transportable using off-the-shelf and easily available
packaging materials.
3.1.3 User grip is intuitive and comfortable.
3.1.4 Per physical concept defined by HDTC/SpectRx/Inno.(see
attached)
3.1.5 Resistant to scratches and normal abuse including during
transport.
3.1.6 Cleanable by specified, off-the-shelf available agents, not
prone for infection hazards. Low stain risk. Smooth surface to
reduce harboring of bacteria.
1). [*]
3.2 PORTS
3.2.1 [*] conforming to [*] in accordance with Attachment A.
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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<PAGE> 29
3.3 INPUTS
3.3.1 ELECTRICAL/POWER INPUT
3.3.1.1 Input voltage through a minimum of 2 pins
through housing from associated charger.
3.3.1.2 Limit switch at disposable interface as unit
triggers only with disposable in place.
3.3.1.3 Deleted
3.3.1.4 Meet UL, CSA, CE and International symbol
and color standards.
3.3.2 TERMINAL INPUT
3.3.2.1 Use standard, off-the-shelf, IRDA output
port.
3.3.2.2 Bi-directional communication with IRDA
compatible terminals.
3.3.3 KEYPAD INPUT
3.3.3.1 Two "soft" keys per concept, linked to
display prompts.
1). First soft key for working and/or
calibrating the device.
2). Second soft key for triggering the
device.
3.3.4 DATA INPUT
3.3.4.1 Ability to accept data such as date(mm/dd or
dd/nun), with 12 hours or 24 hour time
(extra LED or with graphics display).
3.3.4.2 Data entry using 2 keys located inside
battery housing.
3.4 OUTPUTS
3.4.1 DATA OUTPUT
3.3.4.1 Output results with relevant, associated
information via onboard display and/or
annunciator, or via external IRDA compatible
printers or terminal.
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<PAGE> 30
3.4.2 DISPLAY OUTPUT
3.4.2.1 High contrast, back-lit LCD(TBD), size
comparable to current concept. Three digit
display desired (XX.X) with one ready icon
and one low-battery indication icon
(consistent with agreed-upon power budget).
Time and date always visible.
3.4.3 ANNUNCIATORS, ADVISORIES & WARNINGS
3.4.3.1 Audible annunciator with two distinct
levels, one for valid, other for invalid
entered, detected, displayed or transferred
data.
3.4.3.2 Display indicates when calibration is
required.
3.4.3.3 Display indicates when trigger sequence is
ready.
3.4.3.4 Display indicates standby mode.
3.4.3.5 Display indicates when batteries are low and
unit requires a charge.
3.4.3.6 Display indicates invalid reading by
returning three dashes (---).
3.5. BULB/LIGHT SOURCE
3.5.1 Ideally, does not require periodic
replacement of light source.
3.5.2 If it has to have bulbs replaced
periodically:
a). [*] per bulb, whichever provides
longer usage (Based on source
analysis).
b). Easy to access and replace bulb
assembly by end user.
c). No special tools, techniques, or
skills needed to replace bulb.
d). Spare bulb socket desired.
e). May have up to maximum of three
bulbs/cartridge.
f). Maximum of $50/cartridge.
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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<PAGE> 31
4.0 CHARGE BASE PHYSICAL
4.1 GENERAL
4.1.1 It must meet all FDA requirements (per
Attachment A).
4.1.2 It will be able to be mounted on a wall, or
on a counter.
4.1.3 It will be manufactured with off-the-shelf
and easily available packaging materials.
4.1.4 Per physical concept defined by
HDTC/SpectRx/Inno.
4.1.5 Resistant to scratches and normal abuse
including during transport.
4.1.6 Cleanable by specified, off-the-shelf
agents, not prone to infection hazards (per
3.1.6).
4.1.7 Wall bracket to allow mounting to accompany
base.
4.2 INPUTS
4.2.1 ELECTRICAL/POWER INPUT
4.2.1.1 Input voltage externally adjustable from
87-250 Vac. 50/60 Hz.
4.2.1.2 Meet specifications with voltage
fluctuations +/- 10% of set voltage.
4.2.1.3 Fast blow, commonly available, externally
accessible, replaceable fuse, with slot for
spare fuse in holder.
4.2.1.4 Sufficient heat dissipation to allow one to
touch any outside part after 24 hours of
continuous use.
4.2.1.5 Meet CSA, IEC 601 safety standard, and
international symbol and color requirement.
4.2.1.6 Transformer for unit to be placed on a wall
at socket.
4.2.1.7 Monitors four charging pins to determine
when hand held is fully charged.
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<PAGE> 32
4.2.2 SOFT KEY INPUT
4.2.2.1 Soft key push-button toggle switch to select
fast-charge or normal charge.
4.3 OUTPUT
4.3.1.1 Output TBD+/- TBD (per battery selection)
VCD voltage into four charging pins on hand
held unit.
4.3.2 DISPLAY OUTPUT
4.3.2.1 LED icon indicates electrical
contact, comparable to current
concept.
4.3.2.2 LED icon indicates if hand held is
currently under charge.
4.3.2.3 LED icon indicates if hand held is
currently under fast charge.
5.0 PRINTER
5.01 [*]
5.02 [*]
5.03 Resolution will be legible at 3 feet with 20/20 vision.
5.04 Dimensions (TBD)
a). weight (TBD)
b). height (TBD)
c). length (TBD)
5.05 Battery life - no less than ____________ (TBD)
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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<PAGE> 33
6.0 DISPOSABLE CALIBRATION TIP PHYSICAL
6.1 GENERAL
6.1.1 It will meet as many of the HDTC Industrial
guideline requirements as possible. (See
Attachment A)
6.1.2 It will be a [*] and transportable using
off-the-shelf and easily available packaging
materials.
6.1.3 The [*] that also serves to protect the patient [*]
from debris.
6.1.4 User grip and device attachment is intuitive and
comfortable.
6.1.5 Per physical concept defined by HDTC/SpectRx/Inno.
6.1.6 Resistant to scratches and normal abuse including
during transport.
7.0 ENVIRONMENTAL CONDITIONS
7.1 Operate within specifications between [*]. Be undamaged and
fully operational after storage at [*]. Must not fail in such
a way as to be a hazard to users.
7.2 Operate within specifications between [*], w/o condensation.
Not be damaged by storage at a non-condensing [*] for a
duration of at least 24 hours.
7.3 No effect of altitude.
7.4 No effect of extraneous light.
7.5 Meet FCC, FDA, EC standards for Electromagnetic compatibility
(EMC).
7.6 Meet [*] standards for Electrostatic Discharge Immunity
standards. Will not be permanently damaged by discharge of up
to +/- 15kV. and discharges of 10kV or less will cause only
transient effects. In no case may internal stored data be lost
or corrupted, or incorrect measurement results be displayed or
stored.
7.7 Meet [*], second edition standards for Electromagnetic
Interference Immunity (EMI); Operate within specifications
when exposed to field strengths of 10 V/m at frequencies from
[*], from I meter.
7.8 Meet following Class B Electromagnetic Emissions standards.
[*]
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
-8-
<PAGE> 34
7.9 Meet Electrical Fast Transient Burst standards in accordance
[*]; instrument will not be permanently damaged after being
exposed to fast transient bursts of [*] to the mains
connections and [*] for interconnecting lines greater than [*]
meters. In no case will the device lose or corrupt data, or
display incorrect results.
7.10 Meet [*] standard for electrical surges; instrument will not
be permanently damaged after being exposed to differential
surges of [*], or common mode surges of [*], to the mains
connection. In no case will the device lose or corrupt stored
data, or display incorrect results.
8.0 SHOCK, VIBRATION & DROP
(In no case will the device lose or corrupt stored data, or
display incorrect results).
8.1 Be able to meet all specifications after subjected to shock
levels in accordance to Healthdyne Technologies Product
Environmental Testing Procedure, [*].
8.2 Be able to meet all specifications after subjected to random
vibration in accordance with Healthdyne Technologies Product
Environment Testing Procedure, [*].
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
-9-
<PAGE> 35
ATTACHMENT A
1. It will meet the following technical and environmental requirements and
standards specified by the Food and Drug Administration (FDA), we well
as the following internal engineering and quality standards specified
by Healthdyne Technologies:
a. FDA environmental test requirements and test protocols
specified by domestic and international standards contained
within the Reviewer Guidance for Premarket Notification
Submissions, November 1993.
b. FDA firmware and software test methods and documentation
requirements specified with the Reviewer Guidance for Computer
Controlled Medical Devices.
c. FDA Biological Evaluation of Medical Devices, ISO 10993
Part-1.
d. Healthdyne Technologies, Product Environmental Testing
Procedure, EOP 9001 4.4.106.
e. American National Standards, Safe Current Limits for
Elctro-Medical Apparatus, ANSI/AAMI, ESI-1095.
f. Canadian Standards Association, Medical Electrical Equipment-
Part 1; General Requirements for Safety - 2. Collateral
Standard: Electromagnetic Compatibility-Requirements and Test.
[*]
g. [*], Medical Electrical Equipment, Part 1; General
Requirements for Safety, 2nd Edition.
h. [*] standards for products with LED devices or revisions
(possible rev. March 1, 1996.)
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
<PAGE> 36
EXHIBIT B
<PAGE> 37
LOGO
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<PAGE> 38
EXHIBIT C
<PAGE> 39
[UNIVERSITY OF TEXAS
Letterhead]
April 12, 1996
VIA AIRBORNE
Keith D. Ignotz
Chief Operating Officer
SpectRx
6025A Unity Drive
Norcross, Georgia 30071
RE: Patent and Technology License Agreement
"Optical Measurement of Bilirubin in Human Tissue", UTSC:254
Steven Jacques, et al, Principal Investigator
Dear Keith:
Enclosed is one fully executed original counterpart of the subject
agreement for your files.
Best regards,
/s/ Carla
------------------------------
Carla for Karen V. Francis
Licensing Specialist
KVF/cjs
Enclosure
cc: Steven Jacques, Ph.D., Box 017 (w/enclosure)
<PAGE> 40
PATENT LICENSE AGREEMENT
THIS Sixteen (16) Page AGREEMENT ("AGREEMENT") is made by and between
the BOARD OF REGENTS ("BOARD") of THE UNIVERSITY OF TEXAS SYSTEM ("SYSTEM"), an
agency of the State of Texas, whose address is 201 West 7th Street, Austin Texas
78701, THE UNIVERSITY OF TEXAS M.D. ANDERSON CANCER CENTER ("MDA"), a component
Institution of the SYSTEM and SpectRx, a Norcross, Georgia corporation having a
principal place of business located at 6025 A Unity Drive, Norcross, GA 30071
("LICENSEE").
TABLE OF CONTENTS
<TABLE>
<S> <C>
RECITALS Page 2
I. EFFECTIVE DATE Page 2
II. DEFINITIONS Page 2
III. LICENSE Page 4
IV. CONSIDERATION, PAYMENTS, AND REPORTS Page 5
V. SPONSORED RESEARCH Page 8
VI. INFRINGEMENT BY THIRD PARTIES Page 9
VII. PATENT MARKING Page 9
VIII. INDEMNIFICATION Page 9
IX. USE OF BOARD AND COMPONENTS NAME Page 10
X. CONFIDENTIAL INFORMATION Page 10
XI. ASSIGNMENT Page 10
XII. TERMS AND TERMINATION Page 11
XIII. WARRANTY: SUPERIOR-RIGHTS Page 12
XIV. GENERAL Page 13
SIGNATURES Page 15
</TABLE>
<PAGE> 41
RECITALS
A. BOARD owns certain PATENT RIGHTS related to LICENSED SUBJECT
MATTER, which were developed at MDA, a component institution
of SYSTEM.
B. BOARD desires to have the LICENSED SUBJECT MATTER developed in
the LICENSED FIELD and used for the benefit of LICENSEE, the
inventor, BOARD, and the public as outlined in the
Intellectual Property Policy promulgated by the BOARD.
C. LICENSEE wishes to obtain a license from BOARD to practice
LICENSED SUBJECT MATTER.
NOW, THEREFORE, in consideration of the mutual covenants and premises
herein contained, the parties hereto agree as follows:
I. EFFECTIVE DATE
1.1 This AGREEMENT shall be effective as of March 12, 1996 subject
to approval by BOARD ("EFFECTIVE DATE").
II. DEFINITIONS
As used in this AGREEMENT, the following terms shall have the meanings
indicated:
2.1 AFFILIATE shall mean any business entity more than 50% owned
by LICENSEE, any business entity which owns more than 50% of
LICENSEE, or any business entity that is more than 50% owned
by a business entity that owns more than 50% of LICENSEE.
2.2 LICENSED FIELD shall mean Optical Measurement of Bilirubin in
Human Tissue within the LICENSED SUBJECT MATTER.
2.3 LICENSED PRODUCTS shall mean any product or service SOLD by
LICENSEE comprising LICENSED SUBJECT MATTER pursuant to this
AGREEMENT.
2.4 LICENSED SUBJECT MATTER shall mean PATENT RIGHTS.
2.5 LICENSED TERRITORY shall mean the United States in which
LICENSED PRODUCTS are sold by LICENSEE.
2.6 NET SALES shall mean the gross revenues received by LICENSEE
from the SALE of LICENSED PRODUCTS less sales and/or use taxes
actually paid, import and/or
<PAGE> 42
export duties actually paid, outbound transportation prepaid
or allowed, and amounts allowed or credited due to returns
(not to exceed the original billing or invoice amount).
2.7 PATENT RIGHTS shall only mean any and all of BOARD'S rights in
information or discoveries claimed in U.S. Patent No.
5,353,790 issued and entitled "Methods and Apparatus for
Optical Measurement of Bilirubin in Tissue" and all
divisionals, continuations, continuations-in-part, reissues,
reexaminations or extensions thereof.
2.8 SALE or SOLD shall mean the transfer or disposition of a
LICENSED PRODUCT for value to a third party other than
LICENSEE or an AFFILIATE.
III. LICENSE
3.1 BOARD hereby grants to LICENSEE a royalty-bearing, exclusive
license under LICENSED SUBJECT MATTER to manufacture, have
manufactured, use and/or sell LICENSED PRODUCTS within
LICENSED TERRITORY for use within LICENSED FIELD and, subject
to Paragraph 4.5 herein, shall extend to BOARD's undivided
interest in any LICENSED SUBJECT MATTER developed during the
term of this AGREEMENT and jointly owned by BOARD and
LICENSEE. This grant shall be subject to Paragraph 14.2 and
14.3, hereinbelow, the payment by LICENSEE to BOARD of all
consideration as provided in Paragraph 4.2 of this AGREEMENT,
(as well as the timely payment of all amounts due under any
Sponsored Research Agreement between MDA and LICENSEE in
effect during the term of this AGREEMENT) and shall be further
subject to rights retained by BOARD and MDA to:
(a) Publish the general scientific findings from research
related to LICENSED SUBJECT MATTER. In the event that
MDA wishes to publish, MDA shall notify LICENSEE of
its desire to publish at least (30) days in advance
of publication and shall furnish to LICENSEE a
written description of the subject matter of the
publication in order to permit LICENSEE to review and
comment thereon; and
(b) Subject to the provisions of ARTICLE XI herein below,
use any information contained in LICENSED SUBJECT
MATTER for research, teaching, patient care, and
other educationally-related purposes.
3.2 LICENSEE shall have the right to extend the license granted
herein to any AFFILIATE provided that such AFFILIATE consents
to be bound by this AGREEMENT to the same extent as LICENSEE.
-2-
<PAGE> 43
3.3 Subject to the Paragraph 3.4 herein below, LICENSEE shall have
the right to grant sublicenses under LICENSED SUBJECT MATTER
consistent with the terms of this AGREEMENT provided that
LICENSEE shall be responsible for its sublicensees relevant to
this AGREEMENT, and for using its best reasonable efforts to
diligently collect all amounts due LICENSEE from subicensees.
In the event a sublicensee pursuant hereto becomes bankrupt,
insolvent or is placed in the hands of a receiver or trustee,
LICENSEE, to the extent allowed under applicable law and in a
timely manner, agrees to use its best reasonable efforts to
collect any and all consideration owed to LICENSEE and to have
the sublicense agreement confirmed or rejected by a court of
proper jurisdiction.
3.4 LICENSEE agrees to either.
(a) deliver to BOARD for BOARD'S approval a true and
correct copy of any sublicense granted by LICENSEE,
and any modification or termination thereof, within
thirty (30) days after execution, modification, or
termination; and upon termination of this AGREEMENT,
any and all sublicenses granted by LICENSEE and
approved by BOARD shall be assigned to BOARD; or
(b) deliver to BOARD for BOARD'S Information a true and
correct copy of each sublicense granted by LICENSEE,
and any modification or termination thereof, within
thirty (30) days after execution, modification, or
termination; and upon termination of this AGREEMENT,
any and all existing sublicenses granted by LICENSEE
and not approved by BOARD shall be terminated, unless
otherwise agreed to in writing by BOARD.
IV. CONSIDERATION, PAYMENTS AND REPORTS
4.1 In consideration of rights granted by BOARD to LICENSEE under
this AGREEMENT, LICENSEE agrees to pay MDA the following:
(a) [*] for all out-of-pocket expenses incurred by MDA
through [*] in filing, prosecuting, enforcing and
maintaining PATENT RIGHTS licensed hereunder. SPECTRX
will pay all future patent maintenance expenses for
so long as, and in such countries as, this AGREEMENT
remains in effect. One half of these total patent
expenses [*] will be due upon execution, and the
other half will be due at the time of the first FDA
510K filing. MDA will invoice LICENSEE upon approval
of this AGREEMENT by BOARD, and upon a quarterly
basis thereafter beginning [*] for expenses incurred
by MDA after [*] and the amounts invoiced will be due
and payable by LICENSEE within thirty (30) days
thereafter; and
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
-3-
<PAGE> 44
(b) A non-refundable license documentation fee to be made
in staged payments in the total amount of $50,000.00,
which shall not reduce the amount of any other
payment provided for in this ARTICLE IV, and which
shall be due and payable within thirty (30) days when
invoiced by MDA as follows:
(i) [*] upon execution of this Agreement by
BOARD;
(ii) [*] upon the completion by LICENSEE of data
collection, analysis, and review of the
feasibility studies, but no later than sixty
(60) days following the entry of the last
patient in the clinical study;
(iii) [*] upon the first FDA 510K filing; and
(iv) [*] upon first FDA 510K approval.
(c) A running royalty equal to [*] of LICENSEE'S NET
SALES of LICENSED PRODUCTS in LICENSED TERRITORY and
[*] of LICENSEE'S NET SALES of LICENSED PRODUCTS
outside of LICENSED TERRITORY as long as there are no
competing products outside of LICENSED TERRITORY
(with minimum annual royalties of [*]), and [*] of
all consideration other than Research and Development
("R&D") money received by LICENSEE from any
sublicensee pursuant to Paragraphs 3.3 and 3.4 herein
above, including but not limited to royalties,
up-front payments, marketing, distribution,
franchise, option, license, or documentation fees,
bonus and milestone payments and equity securities,
payable within thirty (30) days after March 31, June
30, September 30, and December 31, at which time
LICENSEE shall also deliver to BOARD and MDA a true
and accurate report, giving such particulars of the
business conducted by LICENSEE and its sublicensee,
if any exist, during the preceding three (3) calendar
months under this AGREEMENT as are pertinent to an
account for payments hereunder. Such report shall
include at least (a) the quantities of LICENSED
PRODUCTS that it has produced; (b) the total SALES,
(c) the calculation of royalties thereon; and (d) the
total royalties so computed and due BOARD. In the
event that there are competing products outside of
LICENSED TERRITORY, then no royalty will be due
related to that specific territory. Simultaneously
with the delivery of each such report, LICENSEE shall
pay to BOARD the amount, if any, due for the period
of such report. The requirement to pay minimum annual
royalties shall commence upon FDA final approval of
the LICENSED PRODUCTS. A pro rata portion of the
annual minimum royalties shall be payable in respect
of any partial period not constituting a full year.
Should LICENSEE be obligated to pay running royalties
to third parties to avoid infringing such third
parties' patent rights which dominate BOARD'S PATENT
RIGHTS, LICENSEE may reduce the running royalty due
MDA by such running royalties to such third parties,
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
-4-
<PAGE> 45
provided, however, the running royalty due MDA shall
in no case be less than one-half the rates stated
herein above.
4.2 During the Term of this AGREEMENT and for one (1) year
thereafter, LICENSEE shall keep complete and accurate records
of its and its sublicensees' SALES and NET SALES of LICENSED
PRODUCTS to enable the royalties payable hereunder to be
determined. LICENSEE shall permit BOARD or its
representatives, at BOARD'S expense, to periodically examine
after reasonable written notice to LICENSEE its books,
ledgers, and records during regular business hours for the
purpose of and to the extent necessary to verify any report
required under this AGREEMENT. In the event that the amounts
due to BOARD are determined to have been underpaid in an
amount equal to or greater than five percent (5%) of the total
amount due during the period of time so examined, LICENSEE
shall pay the cost of such examination, and accrued interest
at prime rate plus 10% (ten percent).
4.3 Upon the request of BOARD or MDA but not more often than once
per calendar year, LICENSEE shall deliver to BOARD and MDA a
written report as to LICENSEE'S efforts and accomplishments
during the preceding year in commercializing LICENSED SUBJECT
MATTER in the LICENSED TERRITORY and LICENSEE'S
commercialization plans for the upcoming year. Such report
will be deemed for all purposes to be confidential information
governed by Article XI hereof.
4.4 All amounts payable hereunder by LICENSEE shall be payable in
United States funds without deductions for taxes, assessments,
fees, or charges of any kind. Checks shall be made payable to
The University of Texas M.D. Anderson Cancer Center and
mailed by U.S. Mail to Box 297402, Houston, Texas 77297
Attention: Manager, Sponsored Programs.
4.5 No payments due or royalty rates under this AGREEMENT shall be
reduced as the result of co-ownership of LICENSED SUBJECT
MATTER by BOARD and another party, including LICENSEE.
V. SPONSORED RESEARCH
If LICENSEE desires to fund sponsored research, within LICENSED SUBJECT
MATTER and particularly where LICENSEE receives money for sponsored research
payments pursuant to a sublicense, LICENSEE shall notify MDA in writing of all
opportunities to conduct such sponsored research (including clinical trials, if
applicable), shall solicit research and/or clinical proposals from MDA for such
purpose, and shall give good faith consideration to funding such proposals at
MDA.
-5-
<PAGE> 46
VI. INFRINGEMENT BY THIRD PARTIES
6.1 LICENSEE shall have the obligation of enforcing at its expense
any patent exclusively licensed hereunder against infringement
by third parties and shall be entitled to retain recovery from
such enforcement. LICENSEE shall pay MDA a royalty on any
monetary recovery, net of LICENSEE'S direct out-of-pocket
expenses from such enforcement not otherwise paid to third
parties, to the extent that such monetary recovery by LICENSEE
is held to be damages or a reasonable royalty in lieu thereof.
In the event that LICENSEE does not file suit against a
substantial infringer of such patents within six (6) months of
knowledge thereof, then BOARD shall have the right to enforce
any patent licensed hereunder on behalf of itself and LICENSEE
(MDA retaining all recoveries from such enforcement) and/or
reduce the license granted hereunder to non-exclusive.
6.2 In any suit or dispute involving a third party infringer, the
parties shall cooperate fully, and upon the request and at the
expense of the party bringing suit, the other party shall make
available to the party bringing suit at reasonable times and
under appropriate conditions all relevant personnel, records,
papers, information, samples, specimens, and the like which
are in its possession.
VII. PATENT MARKING
7.1 LICENSEE agrees that all packaging containing individual
LICENSED PRODUCT(S), and documentation therefor, sold by
LICENSEE, AFFILIATE, and sublicensees of LICENSEE will be
marked permanently and legibly with the number of the
applicable patent(s) licensed hereunder in accordance with
each country's patent laws, including Title 35, United States
Code.
VIII. INDEMNIFICATION
8.1 LICENSEE shall hold harmless and indemnify BOARD, SYSTEM, MDA,
its Regents, officers, employees, students, and agents from
and against any claims, demand, or causes of action
whatsoever, costs of suit and reasonable attorney's fees
including without limitation those costs arising on account of
any injury or death of persons or damage to property caused
by, or arising out of, or resulting from, the exercise or
practice of the license granted hereunder by LICENSEE or its
officers, employees, agents or representatives.
-6-
<PAGE> 47
IX. USE OF BOARD AND COMPONENTS NAME
9.1 LICENSEE shall not use the name of (or the name of any
employee of) MDA, SYSTEM or BOARD without the advance,
express written consent of BOARD secured through:
The University of Texas
M. D. Anderson Cancer Center
Office of Public Affairs
1515 Holcombe Boulevard
Box 229
Houston, Texas 77030
ATTENTION: Stephen C. Stuyck
X. CONFIDENTIAL INFORMATION
10.1 BOARD and LICENSEE each agree that all information contained
in documents marked "confidential" which are forwarded to one
by the other shall be received in strict confidence, used only
for the purposes of this AGREEMENT, and not disclosed by the
recipient party (except as required by law or court order),
its agents or employees without the prior written consent of
the other party, unless such information (a) was in the public
domain at the time of disclosure, (b) later became part of the
public domain through no act or omission of the recipient
party, its employees, agents, successors or assigns, (c) was
lawfully disclosed to the recipient party by a third party
having the right to disclose it, (d) was already known by the
recipient party at the time of disclosure, (e) was
independently developed or (f) is required to be submitted to
a government agency pursuant to any preexisting obligation.
10.2 Each party's obligation of confidence hereunder shall be
fulfilled by using at least the same degree of care with the
other party's confidential information as it uses to protect
its own confidential information. This obligation shall exist
while this AGREEMENT is in force and for a period of three (3)
years thereafter.
XI. ASSIGNMENT
11.1 Except to effect the sale and transfer of all or substantially
all of LICENSEE'S assets to a third party, this AGREEMENT may
not be assigned by LICENSEE without the prior written consent
of BOARD.
-7-
<PAGE> 48
XII. TERMS AND TERMINATION
12.1 The term of this AGREEMENT shall extend from the Effective
Date set forth hereinabove to the full end of the term or
terms for which PATENT RIGHTS have not expired or been
declared invalid by a court of final jurisdiction.
12.2 BOARD shall have the right at any time after one (1) year from
the EFFECTIVE DATE of this AGREEMENT to terminate the license
granted herein if LICENSEE, within ninety days after written
notice from BOARD of such intended termination, fails to
provide written evidence satisfactory to BOARD that LICENSEE
has commercialized or is actively and effectively attempting
to commercialize an invention licensed hereunder within such
jurisdiction. Accurate, written evidence provided by LICENSEE
to BOARD within said ninety (90) day period that LICENSEE has
an effective, ongoing and active research, development,
manufacturing, marketing, sales and/or licensing program, as
appropriate, directed toward obtaining regulatory approval
and/or production and/or sale of LICENSED PRODUCTS
incorporating PATENT RIGHTS shall be deemed satisfactory
evidence.
12.3 Subject to any rights herein which survive termination, this
AGREEMENT will earlier terminate in its entirety:
(a) automatically if LICENSEE shall become bankrupt or
insolvent and/or if the business of LICENSEE shall be
placed in the hands of a receiver or trustee, whether
by voluntary act of LICENSEE or otherwise; or
(b) (i) upon thirty (30) days written notice by BOARD if
LICENSEE shall breach or default on the payment
obligations of ARTICLE IV, or use of name obligations
of ARTICLE X; or (ii) upon ninety (90) days written
notice by BOARD if LICENSEE shall breach or default
on any other obligation under this AGREEMENT;
provided, however, LICENSEE may avoid such
termination if before the end of such thirty (30) or
ninety (90) day period if LICENSEE provides notice
and accurate, written evidence satisfactory to BOARD
that such breach has been cured or that LICENSEE has
commenced all reasonable action to cure as soon as
possible and the manner of such cure; or
(c) at any time by mutual written agreement between
LICENSEE and BOARD, or without cause upon one hundred
eighty (180) days written notice by LICENSEE to
BOARD, subject to any rights herein which survive
termination.
-8-
<PAGE> 49
12.4 Upon termination of this AGREEMENT for any cause:
(a) nothing herein shall be construed to release either
party of any obligation matured prior to the
effective date of such termination.
(b) LICENSEE and the BOARD covenant and agree to be bound
by the provisions of ARTICLES IX, X AND XI of this
AGREEMENT.
(c) LICENSEE (and its SUBLICENSEES) may, after the
effective date of such termination, sell all LICENSED
PRODUCTS and parts therefore that it may have on hand
at the date of termination, provided that LICENSEE
pays the earned royalty thereon and any other amounts
due pursuant to ARTICLE IV of this AGREEMENT.
XIII. WARRANTY: SUPERIOR-RIGHTS
13.1 Except for the rights, if any, of the Government of the United
States as set forth herein below, BOARD represents and
warrants its belief that it is the owner of the entire right,
title, and interest in and to LICENSED SUBJECT MATTER, and
that it has the sole right to grant licenses thereunder, and
that it has not knowingly granted licenses thereunder to any
other entity that would restrict rights granted hereunder
except as stated herein.
13.2 LICENSEE understands that the LICENSED SUBJECT MATTER may have
been developed under a funding agreement with the Government
of the United States of America and, if so, that the
Government may have certain rights relative thereto. This
AGREEMENT is explicitly made subject to the Government's
rights under any such agreement and any applicable law or
regulation, including P.L. 96-517 as amended by P.L. 98-620.
To the extent that there is a conflict between any such
agreement, applicable law or regulation and this AGREEMENT,
the terms of such Government agreement, applicable law or
regulation shall prevail.
13.3 LICENSEE understands and agrees that BOARD, by this AGREEMENT,
makes no representation as to the operability or fitness for
any use, safety, efficacy, approvability by regulatory
authorities, time and cost of development, patentability,
and/or breadth of the LICENSED SUBJECT MATTER. BOARD, by this
AGREEMENT, makes no representation as to whether there are any
patents now held, or which will be held, by others or by BOARD
in the LICENSED FIELD, nor does BOARD make any representation
that the inventions contained in PATENT RIGHTS do not infringe
any other patents now held or that will be held by others or
by BOARD.
13.4 LICENSEE, by execution hereof, acknowledges, covenants and
agrees that LICENSEE has not been induced in anyway by BOARD,
SYSTEM, MDA or
-9-
<PAGE> 50
employees thereof to enter into this Agreement, and further
agrees that LICENSEE has conducted sufficient due diligence
with respect to all items and issues pertaining to Article XIV
herein and all other matters pertaining to this Agreement and
agrees to accept all risks inherent herein.
XIV. GENERAL
14.1 This AGREEMENT constitutes the entire and only AGREEMENT
between the parties for LICENSED SUBJECT MATTER and all other
prior negotiations, representations, agreements and
understandings are superseded hereby. No agreements altering
or supplementing the terms hereof may be made except by means
of a written document signed by the duly authorized
representatives of the parties.
14.2 Any notice required by this AGREEMENT shall be given by
prepaid, first class, certified mail, return receipt
requested, and addressed in the case of BOARD to:
BOARD OF REGENTS
The University of Texas System
201 West Seventh Street
Austin, Texas 78701
ATTENTION: Office of General Counsel
with copy to: The University of Texas
M.D. Anderson Cancer Center
Office of Technology Development
1020 Holcombe Boulevard, Suite 1405
Houston, Texas 77030
ATTENTION: William J. Doty
or in the case of LICENSEE to: SPECTRX, INC.
6025 A Unity Drive
Norcross, Georgia 30071
ATTENTION: Mark A. Samuels
or such other address as may be given from time to time under the terms of this
notice provision.
14.3 Each party hereto covenants and agrees to comply with all
applicable federal, state and local laws and regulations in
connection with its activities pursuant to this AGREEMENT.
14.4 This AGREEMENT shall be construed and enforced in accordance
with the laws of the United States of America and of the State
of Texas.
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<PAGE> 51
14.5 Failure of any party hereto to enforce a right under this
AGREEMENT shall not act as a waiver of that right or the
ability to later assert that right relative to the particular
situation involved.
14.6 Headings included herein are for convenience only and shall
not be used to construe this AGREEMENT.
14.7 If any provision of this AGREEMENT shall be found by a court
to be void, invalid or unenforceable, the same shall be
reformed to comply with applicable law or stricken if not so
conformable, so as not to affect the validity or
enforceability of this AGREEMENT.
14.8 Upon the request of LICENSEE, LICENSOR shall reasonably assist
LICENSEE in recording this Agreement in the records of the
U.S. Patent and Trademark Office at LICENSEE'S expense.
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<PAGE> 52
IN WITNESS WHEREOF, parties hereto have caused their duly authorized
representatives to execute this AGREEMENT.
THE UNIVERSITY OF TEXAS BOARD OF REGENTS OF THE
M.D. ANDERSON CANCER CENTER UNIVERSITY OF TEXAS SYSTEM
By: /s/ David J. Bachrach By: /s/ Ray Farabee
------------------------------------ ------------------------------
David J. Bachrach Ray Farabee
Executive Vice President Vice Chancellor and
for Administration and Finance General Counsel
APPROVED AS TO CONTENT: APPROVED AS TO FORM:
By: /s/ William J. Doty By: /s/ Dudley R. Dobie, Jr.
------------------------------------ -------------------------------
William J. Doty Dudley R. Dobie, Jr.
Director, Technology Development Manager, Intellectual
Property
SPECTRX, INC.
By: /s/ Mark A. Samuels
--------------------------------------
Mark A. Samuels
President and CEO
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
-12-
<PAGE> 53
EXHIBIT 1
[*]
[*]
[*]
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
<PAGE> 54
EXHIBIT D
<PAGE> 55
EXHIBIT D-1
SUB-LICENSE AGREEMENT
This Sub-license Agreement is entered into by and between SpectRx, Inc.
("SpectRx") and Healthdyne Technologies, Inc. ("Healthdyne") dated this ____ day
of August, 1996.
W I T N E S S E T H:
WHEREAS, SpectRx has entered into a Product License Agreement with the
University of Texas M.D. Anderson Cancer Center and related parties dated
_______________ ("M.D. Anderson License");
WHEREAS, SpectRx desires to sub-license to Healthdyne and Healthdyne
desires to sub-license from SpectRx certain patents licensed under the M.D.
Anderson License;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, Healthdyne and SpectRx hereby agree as follows:
1. A true and correct copy of the M.D. Anderson License is attached
hereto as Exhibit A.
2. SpectRx hereby sub-licenses to Healthdyne within the Territory, and
Healthdyne hereby accepts the sublicense within the Territory, of the M.D.
Anderson License subject to the terms and conditions as agreed to in writing by
authorized representatives of the parties. The Territory shall be the United
States and Canada.
3. Healthdyne agrees to pay one-half of the royalty due and payable by
SpectRx to M.D. Anderson under the M.D. Anderson License, not to exceed One
Percent (1%) of the Net Selling Price for the Instrument. For purposes of this
Sub-License Agreement, Instrument means an instrument for non-invasive bilirubin
measurement with required software, optics, circuitry, charger base and
encasement. The initial product specifications for the Instrument is set forth
on Exhibit B. Net Selling Price means the total sales revenue for the Instrument
excluding charges for returns, outbound prepaid or allowed transportation
charges, sales taxes, tariffs or duties directly imposed with reference to
particular sales or similar items. Net Selling Price shall only include one sale
per Instrument.
4. The parties hereto agree to be bound by the Successor Letter
Agreement entered into between Healthdyne and the University of Texas M.D.
Anderson Cancer Center dated ___________.
5. Exhibit A and Exhibit B hereto are incorporated by reference.
<PAGE> 56
IN WITNESS WHEREOF, the parties hereto have caused their authorized
representatives to execute this Sub-License Agreement as of the day and year
first above written.
HEALTHDYNE TECHNOLOGIES, INC. SPECTRX, INC.
By: By:
---------------------------- --------------------------
Title: Title:
---------------------------- --------------------------
Date: Date:
---------------------------- --------------------------
-2-
<PAGE> 57
EXHIBIT D-2
[UNIVERSITY OF TEXAS
Letterhead]
June 17, 1996
VIA AIRBORNE
Keith D. Ignotz
Chief Operating Officer
SpectRx
6025A Unity Drive
Norcross, GA 30071
RE: Successor Letter Agreement between HealthDyne and SpectRx
Dear Keith:
Enclosed is one fully executed original of the subject agreement for
your files.
Best regards,
/s/ Carla Strobel
------------------------
Carla Strobel
Administrative Assistant
CS/cjs
Enclosure
cc: (with enclosure of executed original)
President and CEO
Healthdyne Technologies, Inc.
1255 Kennestone Circle
Marietta, GA 30066
<PAGE> 58
SUCCESSOR LETTER AGREEMENT
June 10, 1996
Healthdyne Technologies, Inc.
1255 Kennestone Circle
Marietta, Georgia 30066
Attention: Craig B. Reynolds
President and Chief Executive Officer
Re: PATENT AND TECHNOLOGY LICENSE AGREEMENT ("AGREEMENT"),
effective March 12,1996 by and between the BOARD OF REGENTS
("BOARD") of THE UNIVERSITY OF TEXAS SYSTEM ("SYSTEM"), THE
UNIVERSITY OF TEXAS M.D. ANDERSON CANCER CENTER (MDA"), and
SPECTRX, INC. ("LICENSEE")
Dear Mr. Reynolds:
This Successor Letter Agreement is written at your request in
connection with the contemplated sublicense agreement between LICENSEE and
Healthdyne Technologies, Inc. ("HEALTHDYNE").
BOARD, SYSTEM and MDA hereby agree that in the event that LICENSEE
enters into a written and fully executed sublicense agreement with HEALTHDYNE
pursuant to Articles 3.3 and 3.4(b) of the AGREEMENT, and, subsequent thereto
while such sublicense agreement is in effect, the AGREEMENT with LICENSEE is
terminated, HEALTHDYNE shall, at its sole option with written notice to MDA by
Certified Mail, Postage Prepaid, Return Receipt Requested at the address herein
below within ninety (90) days of said termination, have the right to succeed to
all of LICENSEE's rights and responsibilities under the AGREE provided, however,
that HEALTHDYNE shall not assume any liabilities of LICENSEE to BOARD, SYSTEM or
MDA accruing prior to, or as a result of, said termination of the AGREEMENT.
BOARD, SYSTEM and MDA confirm that: (i) the AGREEMENT with LICENSEE is
in full force and effect as of the date hereinabove; and (ii) they know of no
present facts or circumstances, which, with the passage of time or otherwise,
would cause the termination of the AGREEMENT.
-1-
<PAGE> 59
Successor Letter Agreement
June 10, 1996
Page 2
If this Successor Letter Agreement is acceptable to you, please sign
the three (3) originals in the space provided below and return two (2) of such
originals to me at the following address:
William J. Doty
Director, Technology Development
1020 Holcombe, Suite 1405
Houston, Texas 77030
Very truly yours,
/s/ William J. Doty
--------------------------------
William J. Doty
Director, Technology Development
IN WITNESS WHEREOF, parties hereto have caused their duly authorized
representatives to execute this AGREEMENT.
THE UNIVERSITY OF TEXAS BOARD OF REGENTS OF THE
M.D. ANDERSON CANCER CENTER UNIVERSITY OF TEXAS SYSTEM
By: /s/ David J. Bachrach By: /s/ Ray Farabee
----------------------------------- ------------------------------
David J. Bachrach Ray Farabee
Executive Vice President Vice Chancellor and
for Administration and Finance General Counsel
APPROVED AS TO FORM:
By: /s/ Dudley R. Doble, Jr.
------------------------------
Dudley R. Doble, Jr.
Manager, Intellectual
Property
HEALTHDYNE TECHNOLOGIES, INC.
By: /s/ Craig B. Reynolds
-----------------------------------
<PAGE> 60
EXHIBIT E
<TABLE>
<CAPTION>
ESTIMATED DOLLARS
DATE (IN THOUSANDS) MILESTONE
- ----------------- ------------- -------------------------------------------------------------------------
<S> <C> <C>
[*] Pre-Signing Payment
[*] Signing Definitive Agreements
[*] [*] Program Review
Clinical Instruments Available
[*] [*] Program Review
Miniature Photospectometer Board Functional Test
[*] [*] Program Review
[*] Signed and Board Approved M.D. Anderson License and Successor Letter
Agreement
[*] [*] Calibration Component and Enclosure Tooling.
Purchase Order Issued
Formal Documentation Released
[*] [*] Delivery of Pre-Production Unit
[*] [*] Pre-Production Unit Test Completed
[*] [*] Seven Pieces Manufacturing Pilot Run Units Delivered
[*] [*] Manufacture Pilot Run Test Complete
[*] [*] FDA Approval
[*] [*] Acceptance by Heathdyne of Quantities Delivered Pursuant to First
Purchase Order
[*] [*] First Anniversary of Acceptance by Healthdyne of First Purchase Order
Quantities Delivered by SpectRx
</TABLE>
* For each full month for which SpectRx has completed the "Acceptance by
Healthdyne of Quantities Delivered Pursuant to First Purchase Order"
milestone, [*] of this final milestone shall be prepaid. For example,
if the "Acceptance by Healthdyne of Quantities Delivered Pursuant to
First Purchase Order" milestone is completed on April 11, 1997, [*]
would be payable to SpectRx together with the [*] milestone payment
otherwise payable on that date, and [*] would be payable on the "First
Anniversary of Acceptance by Healthdyne of First Purchase Order
Quantities Delivered by SpectRx".
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
<PAGE> 61
EXHIBIT G
Healthdyne's minimum unit sales for Instruments and Disposables from SpectRx
will be:
<TABLE>
<S> <C>
Year 2 Following Commercialization: Year 1 Healthdyne actual Disposable [*]
Year 3 Following Commercialization: Year 2 Healthdyne actual Disposable [*] minimum.
Year 4 Following Commercialization: Year 3 Healthdyne actual Disposable [*] minimum.
Year 5 Following Commercialization: Year 4 Healthdyne actual Disposable [*] minimum.
Year 6 Following commercialization: No further purchase minimum.
and onward
</TABLE>
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
<PAGE> 62
EXHIBIT H
RULES FOR ARBITRATION
The Parties agree that any Arbitration will be binding and conducted
pursuant to the following terms and conditions:
1. The Arbitration Tribunal shall be formed in the following
manner:
(1) The Party desiring to submit a dispute to arbitration will
give the other Party notice to arbitrate by certified mail, which states therein
the name and address of its arbitrator (a citizen of the United States), the
subject of the dispute, and the proposed date of arbitration. The date when the
notification letter is sent will be the date of first notification.
(2) The other Party, within thirty (30) days after receipt of
the notice to arbitrate, will inform the party who sent the notice, by certified
mail, of the name and address of its arbitrator (a citizen of the United
States).
(3) If the Party who receives the notice to arbitrate does not
inform the Party who gave the notice of the name and address of its arbitrator
within the thirty (30) day period specified above, then the Party who gave
notice to arbitrate may request the President of the American Arbitration
Association to appoint an arbitrator for such other Party. This appointment must
be made within thirty (30) days after the end of the thirty (30) day period in
which each Party could appoint its own arbitrator.
(4) The American Arbitration Association will be asked to
appoint an impartial arbitrator within thirty (30) days after appointment of the
other two arbitrators who will act as Chairman of the Arbitration Tribunal. The
appointment of the impartial Chairman must be made within thirty (30) days after
application for the appointment is made.
2. Notwithstanding provisions of any rules herein adopted, it is agreed
that all arbitrators shall be independent impartial neutrals who explicitly
undertake to be bound by the ABA/AAA Code of Ethics in Commercial Disputes, for
neutrals, and who shall have no ex parte direct or indirect communications with
a party relating to the dispute or otherwise tending to bias or influence the
arbitrator.
3. No Party shall conduct any private interview with an arbitrator
nominee concerning their substantive views or the dispute. Any arbitrator
nominee who has been interviewed regarding their substantive views or the
dispute shall be disqualified.
4. Both Parties agree that prompt disposal of any dispute arising out
of or relating to this Agreement or activities governed by it is important and
necessary and thus, the resolution of any
<PAGE> 63
dispute shall be conducted expeditiously, and as soon as possible, but in no
event more than six (6) months from the date of first notification.
5. The Arbitration Tribunal will have its seat in Atlanta, Georgia,
United States of America. The Parties agree that each Arbitrator must commit in
their employment contract that they have adequate time for expeditiously
handling the dispute and that they will commit to giving this matter priority,
to the end that final disposition shall be accomplished not more than six (6)
months from the date of first notification.
6. The Chairman of the Tribunal is instructed, directed and commanded
to assume case management initiative and control of the dispute resolution
process and to initiate early scheduling of all events to assure that
disposition of the dispute is accomplished as expeditiously as practical but in
no event should final disposition be later than six (6) months from the date of
first notification. The Tribunal shall permit and Facilitate discovery as it
shall determine is appropriate under the circumstances, taking into account the
needs of the parties and the desirability of making discovery expeditious and
cost-effective. The Chairman may issue orders to protect the confidentiality of
proprietary information, trade secrets and other sensitive information disclosed
during discovery and may give general orders to the Parties regarding the
proceedings. The Chairman shall give active attention to the scope, form, likely
cost effectiveness and scheduling of all discovery, and shall issue orders
accordingly. The Chairman is instructed to attend key depositions, if any, so as
to expedite them and rule immediately on questions arising during the course of
the proceeding.
7. The Arbitration Tribunal is permitted and empowered to construe the
Agreement to arbitrate and determine the scope of its own jurisdiction.
8. Neither Party may seek a temporary restraining order, preliminary
injunctive or other extraordinary relief, either before or after the
arbitrator(s) are appointed and assume their responsibilities. Any preliminary
or extraordinary relief will be handled on an expedited basis by the Arbitration
Tribunal.
9. The Arbitration Tribunal will give the Parties an opportunity to
present their views at a hearing in Atlanta, Georgia. The hearing win be
conducted in accordance with the Rules of the American Arbitration Association
as at present in force. The English language shall be used throughout the
arbitration proceedings.
(1) The Arbitration Tribunal will render a written decision on
the dispute submitted to arbitration, which must be based on the terms and
conditions contained in this Agreement. If the Arbitration Tribunal cannot
decide a dispute without reference to provisions of substantive law, the
Arbitration Tribunal may refer to the substantive law of the State of Georgia,
U.S.A.
(2) The written decision will not specify reasons for the
decision, but will identify the arbitrators, describe the place and time of
decision, and describe the opportunity given to the Parties to present their
views.
-2-
<PAGE> 64
(3) The Arbitration Tribunal will render its decision not
later than thirty (30) days after the close of evidence. Each arbitrator's fee
will be reduced by ten percent (10%) for every five (5) day period in which a
decision has not been rendered past this thirty (30) day time period.
(4) The Arbitration Tribunal will have authority to decide all
disputes relating to the same subject.
10. The decision and award of a majority of the Arbitration Tribunal on
any dispute submitted to arbitration under this Agreement will be final and
binding on the Parties. In case the arbitrators are unable to reach a majority
decision, the final decision will be rendered by the Chairman. No appeal or
recourse to any court of law will be available to any Party after the
Arbitration Tribunal has reached its decision.
11. Judgment upon the award of the Arbitration Tribunal may be entered
in any court having jurisdiction, or application may be made to such court for a
judicial acceptance of the award and an order for enforcement, as the case may
be. Any Party who fails to comply with an arbitration award will reimburse the
other Party for all reasonable costs and expenses incurred in connection with
the enforcement of the award. The Parties acknowledge that this Agreement and
any award rendered pursuant to it shall be governed by the 1958 United Nations
Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
12. Each Party shall share equally in the costs incurred by the
Arbitration Tribunal to arbitrate any dispute, including but not limited to
arbitrators' fees, and costs and expenses directly related to the arbitration
proceedings; however, each Party shall bear its own costs to prepare and present
evidence to the Arbitration Tribunal, including but not limited to any expert
fees, or costs and expenses incurred to prepare each Party's case.
-3-
<PAGE> 1
EXHIBIT 10.22
RESEARCH SERVICES AGREEMENT
This Agreement is effective this 3rd day of September by and between
SpectRx Inc. ("COMPANY") having a place of business at 6025A Unity Drive,
Norcross, Georgia 30071, and the Sisters of Providence in Oregon doing business
as the Oregon Medical Laser Center, Providence St. Vincent Medical Center
("CENTER"), 9205 SW Barnes Rd., Portland, Oregon 97225.
PURPOSE: To provide a working relationship between the COMPANY and the CENTER on
a proprietary project of the COMPANY utilizing the expertise of Steven L.
Jacques representing the CENTER. The project is the development of a
non-invasive optical measurement system for monitoring hyperbilirubinemia in
neonates, as patented by Steven L. Jacques et al. (U.S. patent #5,353,790),
assigned to the University of Texas M. D. Anderson Cancer Center, and licensed
to the COMPANY.
1. Scope and Term of Services. CENTER shall, upon request by
COMPANY, provide the services specified in Exhibit A, Section
1. CENTER shall report progress regularly to the individual
specified in Exhibit A, Section 2. CENTER shall provide such
services during the period shown in Exhibit A, Section 3.
2. Payment. COMPANY shall pay CENTER as specified in Exhibit A,
Section 4. Payments to CENTER shall not be subject to income
or employment tax withholding and will be reported to the U.S.
Internal Revenue Service citing the tax identification number
of the CENTER (TIN #9930386906). COMPANY has no obligation to
reimburse CENTER for any expenses incurred by CENTER under
this Agreement unless specifically authorized in writing by
the COMPANY. CENTER hereby indemnifies COMPANY against any
obligation imposed on COMPANY to pay withholding taxes or
similar items or resulting from a court's or governmental
entity's determination that the CENTER is not an independent
contractor to the COMPANY.
3. Confidentiality. COMPANY and CENTER shall have signed an
"Exchange of Proprietary Information Agreement" which protects
both parties from unauthorized use or disclosure of
Proprietary Information. This Agreement is subject to that
Exchange of Proprietary Information Agreement.
4. Ownership of Inventions.
(a) Any invention, copyrightable material, technology,
know-how and related intellectual property rights
("Inventions") created during and directly related to
the scope of research services defined in Exhibit A
under this Agreement shall be owned by the COMPANY
and are hereby assigned to the COMPANY. CENTER shall
promptly disclose to COMPANY all Inventions which
CENTER may conceive or make while providing research
services as defined in Exhibit A. Any Inventions
which are copyrightable shall be considered "works
made for hire" as defined in the U.S. Copyright Act.
<PAGE> 2
(b) Whenever requested by COMPANY, CENTER shall execute
and deliver documents considered necessary by COMPANY
to apply for and maintain intellectual property
protection for the benefit of COMPANY in any country,
or to perfect COMPANY's ownership of and exclusive
right to Inventions. CENTER irrevocably appoints
COMPANY and its authorized agents as CENTER's
attorney-in-fact to execute and file any such
documents at COMPANY's expense as requested by
COMPANY in prosecuting or defending any litigation or
other proceeding involving any Invention in any
country.
(c) If the CENTER knowingly incorporates into any
invention any Proprietary Information or technology
owned by the COMPANY, the COMPANY shall have a
nonexclusive, royalty-free, perpetual, irrevocable,
worldwide license to make, have made, modify, use and
sell such item in connection with such Invention.
5. Conflicts of Interest. CENTER represents that this Agreement
does not conflict with any agreement or obligation binding on
CENTER. CENTER represents that CENTER is not presently
retained by any entity that designs, manufactures or sells
products competitive with COMPANY's present products or
proposed products disclosed to CENTER. CENTER shall not accept
such retention without COMPANY's approval while CENTER is
providing services to COMPANY. CENTER shall not design
products identical or substantially similar to those developed
under this Agreement for any third party while CENTER is
providing services to the COMPANY and for 12 months after
CENTER ceases to provide services to COMPANY.
6. Independent Contractor Relationship. The parties are
independent contractors and neither party is the agent of the
other for any purpose. Neither party has authority to assume
any obligation for the other or to make any representation on
behalf of the other.
7. Arbitration and Equitable Relief. Any dispute arising out of
this Agreement shall be settled by arbitration held in
Atlanta, GA, in accordance with the rules of the American
Arbitration Association. The arbitrator may grant injunctions
or other equitable relief. The arbitrator's decision shall be
final, conclusive and binding on the parties to the
arbitration. Judgment may be entered on the arbitrator's
decision in any court of competent jurisdiction. COMPANY and
CENTER shall each pay 50% of the costs of arbitration and
shall each separately pay its respective counsel fees and
expenses. CENTER agrees that it would be impossible or
inadequate to measure COMPANY's damages from CENTER's breach
of Sections 3, 4, or 5. Accordingly, if CENTER breaches
Sections 3, 4, or 5, COMPANY may, in addition to any other
right or remedy, obtain an injunction restraining such breach
or threatened breach and specific performance of such
provision, without delivery by COMPANY of a bond or other
security.
8. Miscellaneous. Any notice under this Agreement shall be in
writing and shall be deemed delivered 5 days after being
mailed to the other party at the address set forth at the end
of this Agreement or at such other address given pursuant to
this provision, and shall also be considered delivered upon
transmission by facsimile if a confirming letter is mailed on
-2-
<PAGE> 3
the same day. This Agreement is the entire agreement regarding
research services between the parties, in addition to the
accompanying Exchange of Proprietary Information Agreement.
This Agreement may be modified only by a subsequent written
instrument signed by COMPANY and CENTER. Sections 3, 4, 5, and
7 shall survive any termination of this Agreement or of
research services. CENTER may not subcontract any services to
be provided under this Agreement without COMPANY's prior
written consent. This Agreement shall bind and benefit the
heirs, legal representatives, successors and assigns of the
parties.
COMPANY CENTER
OMLC
SPECTRx, Inc. Providence St. Vincent Medical Center
Jonathan A. Eppstein, Representative Steven L. Jacques, Representative
By: /s/ Jonathan A. Eppstein By: /s/ Steven L. Jacques
----------------------------- -----------------------------
Title: Vice President of R&D Title: Senior Research Associate
Oregon Medical Laser Center
Date: September 5, 1996 Date: September 5, 1996
----------------------------- -----------------------------
Authorized Signator:
Stephen G. Franey
By: /s/ Stephen G. Franey
-----------------------------
Title: Regional Director of Education
and Research
Date: September 5, 1996
-----------------------------
<PAGE> 4
EXHIBIT A
1. SCOPE OF SERVICES
Development of system for optical monitoring of
hyperbilirubinemia in neonates, as licensed from the Univ. of
Texas M.D. Anderson Cancer Center. Discussion and analysis of
the clinical data collected with the prototype non-invasive
bilirubin measurement system. Analysis of design options
regarding the optical interface to the subject. Algorithm
development to improve the predictive accuracy of the system's
output as a measurement of bilirubin in the blood of the
subject. Specifically excluded from this Agreement are all
other forms of optical monitoring, spectroscopy, or imaging
and associated algorithms as they might be applied in areas
outside of optical monitoring of bilirubin as defined in the
license from the Univ. of Texas M.D. Anderson Cancer Center.
2. COMPANY REPRESENTATIVE RECEIVING REPORTS
Geoffery Berlin, Ph.D. Senior Analyst at SpectRx
3. TERM OF SERVICES
9-3-96 through 1-1-97
4. PAYMENT FOR SERVICES RENDERED
$125.00 per hour.
To be paid by check or money order made out to:
PROVIDENCE HEALTH SYSTEMS
with the following information on the check:
JACQUES DEVELOPMENTAL FUND, #RR2019
sent to the following mailing address:
Providence Health Systems
Regional Research Accounting
P.O. Box 13993
Portland, OR 97213
COMPANY CENTER
By: /s/ Jonathan A. Eppstein 9/5/96 By: /s/ Steven L. Jacques 9/5/96
----------------------------- -----------------------------
Jonathan A. Eppstein/date Steven L. Jacques/date
By: /s/ Stephen G. Franey 9/5/96
-----------------------------
Stephen G. Franey/date
<PAGE> 1
EXHIBIT 10.23
RESEARCH & DEVELOPMENT
AND
LICENSE AGREEMENT
BETWEEN
ABBOTT LABORATORIES
AND
SPECTRX, INC.
<PAGE> 2
TABLE OF CONTENTS
ABBOTT LABORATORIES
AND
SPECTRX, INC.
<TABLE>
<CAPTION>
TITLE PAGE NO.
- ----- --------
<S> <C> <C>
1. DEFINITIONS..................................................................................................1
2. RESEARCH AND DEVELOPMENT.....................................................................................9
2.1 Research Committee..................................................................................9
2.2 Research Program Plan..............................................................................10
2.3 Research Program Payments..........................................................................10
2.4 Research Program Milestones and Payments...........................................................11
2.5 Development of Initial System......................................................................12
3. ABBOTT DUE DILIGENCE........................................................................................13
3.1 Development Program................................................................................13
3.2 Development Program Milestone Due Diligence........................................................14
3.3 Marketing..........................................................................................15
3.4 Manufacturing......................................................................................16
4. LICENSE.....................................................................................................16
4.1 Grant..............................................................................................16
4.2 Stock Purchase; License Fees and Royalties.........................................................17
4.3 Credited Against Royalties.........................................................................21
4.4 Royalty Stacking...................................................................................21
4.5 Directly Competitive Product.......................................................................22
4.6 No Multiple Royalties..............................................................................24
4.7. Royalty Report.....................................................................................24
4.8 Royalty Payments...................................................................................24
4.9 Records and Audit..................................................................................25
4.10 Taxes..............................................................................................25
5. RIGHT OF FIRST NEGOTIATION FOR ADDITIONAL ANALYTES..........................................................26
5.1 Analytes List......................................................................................26
5.2 Right of First Negotiation.........................................................................26
5.3 Agreement Terms....................................................................................29
</TABLE>
-i-
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
TITLE PAGE NO.
- ----- --------
<S> <C> <C>
6. OWNERSHIP OF INTELLECTUAL PROPERTY..........................................................................29
6.1 SPECTRx Research Program Technology................................................................29
6.2 ABBOTT Research Program Technology and Derived Technology..........................................31
6.3 Joint Research Program Technology..................................................................33
6.4 ABBOTT Development Program Technology..............................................................35
7. DEVELOPMENT PROGRAM TECHNOLOGY GRANT BACKS..................................................................36
7.1 Prior to First Shipment Date.......................................................................36
7.2 After First Shipment Date..........................................................................36
8. PATENTS.....................................................................................................37
8.1 Patents Filing and Maintenance; Costs..............................................................37
8.2 Joint Patents Filing...............................................................................39
8.3 Discontinuance of Prosecution......................................................................39
8.4 Improvements.......................................................................................40
8.5 Infringement by Third Parties......................................................................41
8.6 Third Party Claims of Infringement Against ABBOTT..................................................42
9. REPRESENTATIONS AND WARRANTIES..............................................................................43
9.1 By SPECTRx.........................................................................................43
9.2 By ABBOTT..........................................................................................44
10. TERM AND TERMINATION........................................................................................45
10.1 Term...............................................................................................45
10.2 Early Termination..................................................................................45
10.3 Consequences of Expiration or Early Termination....................................................48
10.4 Survival...........................................................................................50
11. INDEMNIFICATION.............................................................................................51
11.1 By SPECTRx.........................................................................................51
11.2 By ABBOTT..........................................................................................51
11.3 Conditions.........................................................................................52
</TABLE>
-ii-
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
TITLE PAGE NO.
- ----- --------
<S> <C> <C>
12. LIMITATION OF LIABILITY AND REMEDIES........................................................................52
12.1 Liability Limitation...............................................................................52
12.2 Exclusive Remedies.................................................................................52
13. CONFIDENTIAL INFORMATION....................................................................................53
13.1 Due Care...........................................................................................53
13.2 Permitted Disclosures..............................................................................53
13.3 Publication........................................................................................54
13.4 Other Agreements...................................................................................54
14. MISCELLANEOUS...............................................................................................54
14.1 Force Majeure......................................................................................54
14.2 Notices............................................................................................55
14.3 Assignment.........................................................................................56
14.4 Successors and Assigns.............................................................................56
14.5 Alternative Dispute Resolution.....................................................................56
14.6 Publicity..........................................................................................56
14.7 Relationship of the Parties........................................................................57
14.8 Appendices.........................................................................................57
14.9 Headings; Number...................................................................................57
14.10 Waiver.............................................................................................58
14.11 Severability.......................................................................................58
14.12 Entire Agreement, Amendment........................................................................58
14.13 Applicable Law.....................................................................................58
</TABLE>
-iii-
<PAGE> 5
TABLE OF CONTENTS
(CONTINUED)
APPENDICES
EXHIBIT A
STOCK PURCHASE AGREEMENT
APPENDIX 1.20
LICENSED PATENTS
APPENDIX 1.25
PRIOR DISCLOSURES
APPENDIX 1.28
RESEARCH PROGRAM OUTLINE
APPENDIX 2.3
COST CATEGORIES R&D COSTS TO BE REIMBURSED SPECTRX, INC.
APPENDIX 2.4
MILESTONE CRITERIA
APPENDIX 4.2(C)
REGIONS AND DESIGNATED COUNTRIES
APPENDIX 14.5
ALTERNATIVE DISPUTE RESOLUTION
-iv-
<PAGE> 6
AGREEMENT
THIS AGREEMENT dated 10 October, 1996 ("Effective Date"), by and
between Abbott Laboratories, an Illinois corporation with principal offices at
100 Abbott Park Road, Abbott Park, Illinois 60064-3500 and its Affiliates
("ABBOTT") and SPECTRx, a Delaware corporation with principal offices at 6025A
Unity Drive, Norcross, Georgia 30071 ("SPECTRx").
RECITALS
WHEREAS, SPECTRx owns or has rights under the patents, patent
applications and invention disclosures listed in Appendix 1.20 of this Agreement
relating, respectively, to the use of [*] for the extraction of interstitial
fluid samples for diagnostic applications, including glucose monitoring;
WHEREAS, ABBOTT desires to obtain certain licenses under such patents,
patent applications and disclosures, and ABBOTT and SPECTRx desire to pursue a
research program to determine the feasibility of such technology in the area;
WHEREAS, if feasibility is proven, ABBOTT and SPECTRx desire that
ABBOTT pursue development and commercialization of a product based on such
technology;
NOW, THEREFORE, in consideration of the premises and the mutual
promises and covenants set forth below, ABBOTT and SPECTRx mutually agree as
follows:
1. DEFINITIONS
In addition to the terms defined in the provisions of the Agreement,
the following terms shall have the meaning ascribed below:
1.1 "Affiliate" means any entity which controls, is controlled by or is
under common control with another entity. An entity is deemed to be in control
of another entity (controlled entity)
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
<PAGE> 7
if the former owns directly or indirectly at least fifty percent (50%), or the
maximum percentage allowed by law in the country of the controlled entity, of
the outstanding voting equity of the controlled entity.
1.2 "Agreement" means this Agreement, as may be amended, including all
Appendices and Exhibits attached hereto.
1.3 "Analyte" means an individual compound, protein or substance which
is the target of quantitative or qualitative measurement for medical diagnostic
purposes.
1.4 "Average Market Share" means for a country, a fraction, the
numerator of which shall be the total retail sales (in the local currency) of
all Directly Competitive Products or Licensed Product as the case may be in such
country in a calendar quarter and the denominator of which shall be the sum of
total retail sales of all Directly Competitive Products plus the total retail
sales of all Licensed Products in such country, all as measured by IMS Americas,
Inc. or such other recognized industry source as may be reasonably agreed to by
the parties.
1.5 "CDA" means the Confidential Disclosure Agreement entered into by
ABBOTT and SPECTRx and dated December 13, 1995.
1.6 "Confidential Information" means information disclosed in writing
by one party to the other pursuant to this Agreement or the CDA and identified
as "CONFIDENTIAL" or "PROPRIETARY" as well as information disclosed orally to
the extent such oral disclosure is identified as "CONFIDENTIAL" at the time of
disclosure and is summarized in writing which is provided to the other party
within thirty (30) days after oral disclosure. "Confidential Information" does
not include any of such information which:
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(A) is known to the receiving party before receipt thereof
under this Agreement or the CDA, or is independently developed by the receiving
party without recourse to the other party's Confidential Information, both as
evidenced by the receiving party's written records which are contemporaneous to
the claimed event;
(B) is disclosed to the receiving party without restriction
after full execution of this Agreement by a Third Party having a legal right to
make such disclosure; or
(C) is or becomes part of the public domain through no breach
of this Agreement.
1.7 "Derived Technology" means any invention, development, know-how or
discovery, excluding [*] Technology and [*], derived from or directly based upon
Prior Disclosures and invented solely by ABBOTT employees, agents or contractors
which was made more than [*] before the information in Prior Disclosures from
which it is derived or on which it is based became part of the public domain
without any breach by ABBOTT of its confidential obligations to SPECTRx; and
which was made within [*] after the Effective Date.
1.8 "[*] Technology" means technology for [*].
1.9 "[*]" means use of the technology claimed in the Licensed Patents,
Know-How and/or Derived Technology to [*].
1.10 "Development Program" means that work to be carried out by ABBOTT
specifically to develop a Licensed Product for commercialization, which program
shall commence upon the date of ABBOTT's Development Program Notification to
SPECTRx in accordance with Section 2.5 and shall end on the First Shipment Date.
1.11 "Directly Competitive Products" means all medical devices,
instruments and associated disposables within the Field which incorporate [*]
means to perforate the stratum corneum for the
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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purpose of sampling interstitial fluid for glucose monitoring, excluding those
[*], and which over the preceding two calendar quarters have maintained an
Average Market Share within the country in question of [*]. Directly Competitive
Products shall not include any product which during such calendar quarters in
that country is the subject of a pending infringement action by either SPECTRx
or ABBOTT. Directly Competitive Products shall only include products which in a
given country, either would [*] which was presented to the relevant [*]. For
purposes of this Section, "significant claim" means a claim encompassing a core
function of such products (e.g., method for extracting interstitial fluid).
1.12 "Disposables" means a single or multiple use detector which is
sold by ABBOTT or its sublicensees with labeling or instructions identifying it
for use with Product, which is used for any measurement of glucose utilizing
such Product,[*].
1.13 "Exclusive License" means a license whereby the receiving party's
rights shall be sole and exclusive and shall operate to exclude all others
including, but not limited to, the grantor.
1.14 "FDA" means the United States Food and Drug Administration or any
successor entity thereto.
1.15 "Field" means the use of [*] for the extraction of interstitial
fluid samples for glucose monitoring.
1.16 "First Shipment Date" means the date of the first shipment of
Product, other than Product used for clinical studies, after receipt of
regulatory approval in a country and which is sold by ABBOTT or its sublicensees
to a Third Party.
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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1.17 "510K Filing" means a premarket notification submission filed with
the FDA requesting clearance to commercially distribute a medical device for
human use in the United States based on substantial equivalence to a device
currently in commercial distribution.
1.18 "Improvements" means any and all developments, improvements,
inventions or discoveries relating to the Licensed Patents or Know-How, [*],
with the right to sublicense, by SPECTRx, during the term of this Agreement and
shall include, but not be limited to, developments intended to enhance the
safety and efficacy of the Product.
1.19 "Know-How" means that proprietary technology, know-how and/or
trade secrets of SPECTRx (or licensed to SPECTRx with the right to sublicense)
in the Field relating to the Product or the Licensed Patents including, but not
limited to, manufacturing or production techniques, formulations, methods,
products and processes.
1.20 "Licensed Patents" means all patents and patent applications that
cover inventions useful within the Field, but excluding Delivery Applications,
conceived and/or reduced to practice by SPECTRx, its employees, agents or
contractors or acquired by SPECTRx with the right to sublicense, whether prior
to or after the Effective Date, including, but not limited to, (A) the patents
and patent applications set forth in Appendix 1.20 (excluding Delivery
Applications) and any patents or patent applications covering inventions within
the Field subsequently developed or acquired by SPECTRx prior to the First
Shipment Date, including, but not limited to, those arising from the SPECTRx
Research Program Technology as set forth in Section 6.1(A) and (B)(i), the Joint
Research Program Technology as set forth in Section 6.3, and the Improvements as
set forth in Section 8.4; (B) all patents arising from such applications
identified in (A); (C) any foreign counterparts of the patents or patent
applications described in (A) or (B); (D) any divisions, continuations, and
continuations-in-
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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part, extensions, renewals, re-examinations or reissues of the patents or patent
applications identified in (A) or (B), or (C).
1.21 "Licensed Product" means the (i) Product and (ii) Disposables.
1.22 "[*]" means use of technology which would [*] in interstitial
fluid using technology described in the Licensed Patents to which SPECTRx has
rights with the right to sublicense and then would [*], as to which ABBOTT has,
or in the future obtains, rights for such [*].
1.23 (A) "Net Sales" means the gross sales of the Licensed Product
shipped and billed to a Third Party by ABBOTT and its sublicensees in the
Territory, less reasonable and appropriate:
(i) allowances and adjustments separately and actually
credited or payable including, but not limited to, credit for damaged, outdated
and returned Products or Disposables;
(ii) trade discounts earned or granted;
(iii) cash discounts actually allowed;
(iv) transportation charges (including, but not limited to,
insurance costs), handling charges, sales taxes, excise taxes and duties, and
other similar charges invoiced to customers or a reasonable factor for any such
charges if such charges are absorbed by ABBOTT and included in the Licensed
Product's selling price, but not itemized on the invoice, which factor shall not
exceed five percent (5%) of the selling price;
(v) wholesaler chargebacks; and
(vi) rebates earned or granted and any prorated management
fees which are required by buying groups and similar organizations.
(B) If a Product or Licensed Product is sold in combination with
another product, other than a Disposable, for a single price ("Combination
Product"), the Net Sales with respect to a
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treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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Combination Product means the gross sales of the Combination Product billed to a
Third Party by ABBOTT and its sublicensees in the Territory less the adjustments
referred to in Sections 1.23(A)(i)-(vi), multiplied by a fraction, the numerator
of which shall be the per unit current net selling price of the Product or
Licensed Product as sold separately in a country and the denominator of which
shall be the sum of the current net selling price(s) in such country of each of
the products having significant independent utility in the Combination Product
including the Product or Licensed Product. If there is no established net or
other selling price at the time in question for the Licensed Product, Product or
the product(s) included in the Combination Product, then ABBOTT's standard
factory cost of the Product or Licensed Product and other products shall be used
to determine the above fraction.
(C) Net Sales shall be calculated in accordance with ABBOTT's
standard internal policies and procedures in compliance with generally accepted
accounting principles consistently applied.
1.24 "PMA" means an application other than a 510K filed with the FDA
for approval by such agency of the commercial distribution of a medical device
for human use in the United States, whether such application is designated as a
Pre-Marketing Approval, or by another name.
1.25 "Prior Disclosures" means the invention disclosures, other
Confidential Information, patent application drafts and patent applications
which SPECTRx disclosed to ABBOTT under the CDA and which are listed in Appendix
1.25.
1.26 "Product" means a product in the Field whose manufacture, use or
sale would, but for the licenses granted under Section 4.1 of this Agreement,
infringe a Valid Claim of a patent within the Licensed Patents or as to which
ABBOTT is otherwise required to pay royalties hereunder.
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1.27 "Regulatory Filing" means an application filed with a governmental
entity for approval by that entity in a country of the sale of a medical device
for human use in such country including, but not limited to, a PMA or a 510K in
the United States.
1.28 "Research Program" means the joint research to be carried out by
ABBOTT and SPECTRx to determine the feasibility of the Product ("Phase 1") [*]
("Phase 1a") and of [*] ("Phase 1b"); and the milestones to be met by SPECTRx as
outlined in Appendix 2.4, which program shall commence on the Effective Date and
shall end on the date of ABBOTT's Development Program Notification to SPECTRx in
accordance with Section 2.5, as the Research Program is more particularly
described in Appendix 1.28.
1.29 "Research Program Technology" means all inventions, developments,
know-how, or discoveries, whether or not patentable, which are conceived and/or
reduced to practice during the course of work under the Research Program as
described in Appendix 1.28.
1.30 [*]
1.31 "Territory" means the entire world.
1.32 "Third Party" means any individual, corporation, partnership,
trust or other business organization or entity, and any other recognized
organization other than the parties hereto and their Affiliates or sublicensees.
1.33 "Valid Claim" means any claim of a pending patent application
which has received its notice of allowance or any claim of an issued and
unexpired patent which has not been held unenforceable, unpatentable nor invalid
by a decision of a court or governmental agency of competent jurisdiction,
unappealable or unappealed within the time allowed for appeal, nor has been
admitted by the holder of the patent to be invalid or unenforceable through
reissue, disclaimer or otherwise.
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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2. RESEARCH AND DEVELOPMENT
2.1 Research Committee. ABBOTT and SPECTRx shall each designate two (2)
representatives to serve on a research committee to direct and coordinate the
Phase 1 work under the Research Program (the "Research Committee"). The Research
Committee shall be responsible for designating all Research Program tasks to be
carried out by SPECTRx or ABBOTT (the "Research Program Plan") as initially set
forth in Appendix 1.28 and for preparation of a budget on a quarterly basis
covering tasks assigned to SPECTRx under the Research Program Plan. ABBOTT or
SPECTRx may designate substitute representatives to the Research Committee by
written notice from one party to the other.
2.2 Research Program Plan. SPECTRx and ABBOTT shall carry out the
Research Program in accordance with the Research Program Plan as developed and
approved by the Research Committee. The Research Program Plan as well as
Appendix 1.20 (Licensed Patents) shall be updated quarterly by the Research
Committee. SPECTRx shall submit to ABBOTT a quarterly status report summarizing
the completion or degree of completion of each SPECTRx task or milestone in the
Research Program Plan. During the period of time covered by the Research Program
Plan, the Research Committee shall meet at least once each calendar quarter at
times and places mutually agreed upon to discuss the status of the Research
Program Plan and the underlying research. Each party shall diligently undertake,
pursue and support all research activities required to complete the Research
Program as set forth in the Research Plan which shall be directed towards the
completion of Phase 1a and 1b milestones in a timely manner; provided, however,
the Research Program may be terminated by mutual agreement of the parties.
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2.3 Research Program Payments. During the Research Program, ABBOTT
shall be responsible for SPECTRx's actual costs for the cost categories set
forth in Appendix 2.3 incurred for completion of tasks under Phases 1a and 1b of
the Research Program as set forth in the Research Program Plan. Such payments
shall be made in accordance with the quarterly budget as approved by the
Research Committee in accordance with Section 2.1 and shall be paid to SPECTRx
in advance of such quarter. Any budget revisions or variance shall be subject to
the review and approval of the Research Committee. Any funds not expended by
SPECTRx in one quarter shall be credited to the subsequent quarter. If SPECTRx
receives notification of termination of this Agreement from ABBOTT or delivers
such notice to ABBOTT in accordance with Section 10.2 prior to the completion of
the Research Program, then SPECTRx shall immediately commence a wind down in
good faith of its research tasks under the Research Program Plan, shall
immediately terminate or notice termination, as permitted, of any obligations
which incur costs under the Research Program Plan, shall not enter into any new
financial commitments regarding the Research Program and shall take all
reasonable steps to minimize any existing and/or continuing costs under the
Research Program Plan which cannot be immediately terminated. SPECTRx shall
reimburse ABBOTT for all advance payments made to SPECTRx which are in excess of
the actual costs of the Research Program as of the date of termination less any
contractual obligations of the Research Program which by their terms are
noncancelable and thus extend beyond the termination date and other similar
costs which cannot be reasonably avoided.
2.4 Research Program Milestones and Payments. SPECTRx shall be entitled
to receive two milestone payments of [*] each upon successful completion of the
Phase 1a and 1b milestones in accordance with the milestone criteria set forth
in Appendix 2.4. Such payments shall be made within
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treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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thirty (30) days after successful completion of each milestone. If one or both
milestones has not been completed, and ABBOTT terminates this Agreement in
accordance with Section 10.2, then ABBOTT shall not be obligated to make the
milestone payment for any milestone that is not met by SPECTRx by the date of
termination. However, if one or both milestones have not been completed and
ABBOTT notifies SPECTRx as set forth in Section 2.5, then ABBOTT shall make such
milestone payment(s) within sixty (60) days of such Development Program
Notification. If SPECTRx has not successfully completed the Phase 1a milestone
in accordance with the milestone criteria set forth in Appendix 2.4 within [*],
then ABBOTT may terminate this Agreement, provided that ABBOTT has not delivered
the Development Program Notice set forth in Section 2.5, and such termination by
ABBOTT shall be considered a termination under Section 10.2(C)(i).
2.5 Development of Initial System.
(A) At any time prior to forty-five (45) days after the
completion of the Phase 1b milestone (in accordance with Appendix 2.4), but in
no event later than [*], ABBOTT may notify SPECTRx in writing if ABBOTT
determines to commence the Development Program ("Development Program
Notification"). If ABBOTT has not delivered to SPECTRx the Development Program
Notification within such period, then this Agreement shall immediately terminate
upon written notice from one party to the other; provided, however, that if the
Phase 1b milestone has not been completed, then SPECTRx shall not be entitled to
the licenses under Section 6.2(C).
(B) If ABBOTT commences the Development Program, then ABBOTT
intends to utilize the Licensed Patents and Know-How during the Development
Program [*] for a [*] ("Initial System"). SPECTRx acknowledges that the practice
of the Licensed Patents and Know-How with regard to the Initial System does not
preclude ABBOTT's other development activities necessary to
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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compete in the glucose market including, but not limited to, the development of
enhancements to ABBOTT's invasive glucose testing products, use of other
technologies in the Initial System which ABBOTT determines in its sole
discretion is necessary for a commercially viable Product, the development of
improvements to the Initial System for inclusion as part of a [*]. If ABBOTT
determines at any point after commencing the Development Program not to practice
the Licensed Patents and Know-How with regard to the Initial System, ABBOTT
shall promptly notify SPECTRx in writing and this Agreement will terminate
immediately unless otherwise agreed by the parties. Such termination shall be
subject to the applicable provisions of Section 10.3 and Section 10.4.
3. ABBOTT DUE DILIGENCE
3.1 Development Program
(A) Upon delivery of the Development Program Notification to
SPECTRx set forth in Section 2.5, ABBOTT shall diligently undertake and pursue
all development activities reasonably required in order to submit Regulatory
Filings to obtain governmental approvals to market the Product in the United
States, major European Union countries, Japan and in the other countries of the
Territory, and in order to obtain approvals, all in accordance with ABBOTT's
historical practice. All such development activity shall be at ABBOTT's expense
and shall be undertaken in accordance with ABBOTT's normal procedures for
evaluating development projects and the exercise of its reasonable business
judgment, consistent with the custom and practice in the industry, and ABBOTT's
historical practice in filing of Regulatory Filings, conduct and completion of
clinical trials, demonstration of clinical efficacy and commercial feasibility,
and obtaining of regulatory approvals.
(B) Any delays in, or failure to complete the Development
Program (i) due to the intentional or negligent acts of SPECTRx except
activities directed or required by ABBOTT or the
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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Research Committee; or (ii) because the Product is either determined not to have
been shown to be safe or efficacious, or it is determined that additional
material, data, or information is needed to determine safety or efficacy; or
(iii) because the Product [*]; or (iv) due to events beyond the reasonable
control of ABBOTT shall not constitute a failure of diligence by ABBOTT under
this Article, nor a breach by ABBOTT of this Agreement provided, however, that
no such delay (other than as set forth in this Section 3.1 (B)(1)) shall extend
the periods of the time set forth in Section 3.2 of this Agreement. If an event
set forth in Section 3.1 (B)(1) delays the submission of a Regulatory Filing or
the First Shipment Date, ABBOTT and SPECTRx shall negotiate in good faith to
extend the time periods set forth in Section 3.2(A) and (B) by a period of time
commensurate with such delay.
3.2 Development Program Milestone Due Diligence. ABBOTT shall make
certain payments during the Development Program in accordance with Section
4.2(B).
(A) If the First Shipment Date has not occurred and if ABBOTT
has not submitted a Regulatory Filing to the FDA and has not made the payment
set forth at Section 4.2(B)(ii) within [*] after the earlier of SPECTRx's having
completed the Phase 1b milestone in accordance with Appendix 2.4 (or any
extended time period agreed to by the parties pursuant to Section 3.1) or the
Development Program Notification, then ABBOTT may make such payment and extend
the time to submit such Regulatory Filing for an [*] so that the total period
becomes [*]. Unless the parties agree to extend such time for the Regulatory
Filing, if ABBOTT has not made such Regulatory Filing during [*], then upon
written notice from SPECTRx, this Agreement shall terminate subject to the
applicable provisions of Section 10.3 and Section 10.4; provided that, if such
Regulatory Filing did not occur due to one of the events set forth in Section
3.1 (B), then SPECTRx shall not be entitled to the grant back of rights set
forth in Sections 6.2(C) and 7.1.
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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(B) If the First Shipment Date has not occurred and ABBOTT has
not made the payment set forth in Section 4.2(B)(iv) within either [*] if a 510K
Filing is required or [*] if a PMA or equivalent is required (or any extended
time period agreed to by the parties pursuant to Section 3.1, plus any extension
taken under Section 3.2(A)) after the earlier of SPECTRx's having completed the
Phase 1b milestone in accordance with Appendix 2.4 or the Development Program
Notification, then ABBOTT may make such payment and extend the time for the
First Shipment Date for [*], such additional period to commence immediately upon
expiration of the relevant initial period. Unless the parties agree to further
extend such time for the First Shipment Date, if the First Shipment Date has not
occurred during the [*] extension period or if ABBOTT does not make the payment
to extend, then upon written notice from SPECTRx, this Agreement shall terminate
subject to the applicable provisions of Section 10.3 and Section 10.4; provided
that if the First Shipment Date did not occur due to the events set forth in
Section 3.1(B), then SPECTRx shall not be entitled to the grant back of rights
set forth in Sections 6.2(C) or 7.1.
3.3 Marketing. Promptly upon receipt of relevant regulatory approval
for any country in the Territory, ABBOTT shall diligently undertake and pursue
all marketing, sales, promotional and other commercialization activities as
reasonably required to maximize the sale of Licensed Product in that country and
to promote and support the Licensed Product by undertaking advertising, sales
training, exhibitions, and seminars including, without limitation: (A) properly
training, equipping and deploying its sales force to promote the Licensed
Product in such country including providing appropriate incentives; (B) making a
financial commitment as is customary in the industry for direct marketing and
promotional support of the Licensed Product in such country during the first two
(2) years of commercialization, and thereafter such amounts as are commensurate
with projected sales of
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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the Licensed Product in such country, and (C) providing technical support to end
users by using an appropriate specialist staff. For purposes of this provision,
ABBOTT will not be deemed to have failed to exercise diligence if ABBOTT
undertakes the tasks hereunder in accordance with ABBOTT's normal procedures for
training, launching a new product and marketing products or in accordance with
ABBOTT's historical practices in various regions of the world.
3.4 Manufacturing. ABBOTT shall undertake all manufacture of the
Product and Disposables and may self-manufacture or have the Product and/or
Disposables manufactured by a Third Party, in the sole discretion of ABBOTT.
4. LICENSE
4.1 Grant. Subject to the terms and conditions of this Agreement:
(A) SPECTRx hereby grants to ABBOTT a royalty-bearing,
Exclusive License, with the right to sublicense, under the Licensed Patents and
Know-How to make, have made, use, sell and import the Product in the Territory
with the exception of Singapore and the Netherlands provided, however, that any
such sublicense for the sale of Product in the United States, European Union
countries or Japan shall be subject to the approval of SPECTRx, which approval
shall not be unreasonably withheld. Regardless of the terms of such sublicense,
ABBOTT shall remain jointly and separately liable to SPECTRx under the present
Agreement for all obligations, including, but not limited to, royalties, under
this Agreement as if the sales of Licensed Products were directly by ABBOTT
under this Agreement.
(B) SPECTRx hereby grants to ABBOTT a royalty-bearing,
nonexclusive license, with the right to sublicense, under the Licensed Patents
and Know-How to make, have made, use, sell and import the Product in Singapore
and the Netherlands.
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(C) The Exclusive License granted under Section 4.1(A) and the
nonexclusive license granted under Section 4.1(B) are collectively referred to
hereunder as "Licenses."
4.2 Stock Purchase; License Fees and Royalties.
(A) Within fifteen (15) days of the Effective Date, ABBOTT
shall purchase five hundred thousand (500,000) shares of SPECTRx preferred stock
at six dollars ($6.00) per share for a total payment of Three Million Dollars
($3,000,000), in accordance with the Stock Purchase Agreement appended as
Exhibit A to this Agreement.
(B) In partial consideration for the Licenses granted to
ABBOTT under Section 4.1, ABBOTT shall make license fee payments [*] in the
amounts and within the time frames as follows:
(i) [*] of the date of the Development Program
Notification by ABBOTT to SPECTRx, ABBOTT shall pay SPECTRx [*].
(ii) [*] of ABBOTT submitting a Regulatory Filing
regarding the Product to the FDA, ABBOTT shall pay SPECTRx [*].
(iii) [*] of receipt by ABBOTT of a written notice of
approval of the Regulatory Filing by the FDA, ABBOTT shall pay to SPECTRx [*];
or if ABBOTT receives notice of regulatory approval of its Regulatory Filing in
any country in Europe or in Japan prior to that of the FDA, then (in lieu of and
not in addition to such [*] payment) ABBOTT shall pay to SPECTRx [*] of receipt
of such notice and [*] of receipt of ABBOTT's notice of approval from the FDA.
(iv) [*] of the First Shipment Date, ABBOTT shall
pay to SPECTRx [*].
(v) [*] of written notification and evidence of
notice of allowance of the first United States Licensed Patent which includes a
claim which covers the interstitial fluid sampling
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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which the Product (including Product under development) would infringe except
for the rights granted under this Agreement, ABBOTT shall pay to SPECTRx [*].
(C) In partial consideration for the Licenses granted under
Section 4.1, ABBOTT shall pay a royalty based on the annual Net Sales of the
Licensed Product in the Territory, such royalty to be calculated on a graduated
basis as follows, subject to Section 4.2(D):
<TABLE>
<CAPTION>
Net Sales [*] Royalty Rate
$MM (% of Net Sales)
------------- ----------------
<S> <C> <C>
First [*] at [*]
Next [*] at [*]
Next [*] at [*]
Next [*] at [*]
Remainder at [*]
</TABLE>
For example, if total Net Sales for the year are [*], then the royalty would be
calculated as follows: [*].
For so long as a product is covered by a major Valid Claim (as defined
in Section 4.2(D)) in all of the designated countries ("Designated Countries")
in a given region ("Region") as such Designated Countries and Regions are
constituted in Appendix 4.2(C), then all sales of said product and associated
Disposables by ABBOTT or its sublicensees in the countries of that Region shall
be deemed gross sales for the determination of Net Sales of Licensed Product for
the purposes of this Section. If Regions or Designated Countries are affected by
geographical or political changes that negatively affect patent prosecution,
ABBOTT and SPECTRx shall confer on needed modifications to Appendix 4.2(C).
(D) For a period of [*] from the First Shipment Date in any of
the [*], ABBOTT shall have the obligation to pay royalties on any product and
associated Disposables sold by ABBOTT which utilizes technology under the
Licensed Patents [*] within the Field even if such
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treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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product does not infringe a Valid Claim of a patent included in the Licensed
Patents and therefore is not a Licensed Product. If after such [*] expires, a
product sold by ABBOTT in a particular country in a given Region utilizes
technology under the Licensed Patents within the Field, but does not infringe a
major Valid Claim in the Licensed Patents in every Designated Country in such
given Region, then, unless sales of such product in such country constitute
infringement of a Valid Claim of Licensed Patents, ABBOTT may at anytime
thereafter cease to pay royalties pursuant to this Section on its Net Sales in
any such country in such Region and ABBOTT's license in that country shall
terminate. If the patent process in one or two Designated Countries extends
beyond the [*] from the First Shipment Date for reasons outside the control of
SPECTRx (as reasonably determined by ABBOTT) and SPECTRx has been seeking such
patent protection diligently (as reasonably determined by ABBOTT), ABBOTT shall
continue to pay, in its sole discretion, royalties in such Region provided that
a Valid Claim of a patent covering the Licensed Product sold by ABBOTT in such
Region exists in all the other Designated Countries in such Region. For purposes
of this Section, "major Valid Claim" means a Valid Claim encompassing a core
function of such ABBOTT product (e.g., method for extracting interstitial
fluid.)
(E) If a product of ABBOTT is not covered by a Valid Claim due
to the decision of a court or governmental agency of competent jurisdiction that
all claims of Licensed Patents in a given Designated Country of a Region which
cover such product are unenforceable or invalid, then ABBOTT shall have no
obligation to pay royalties for activities in all countries of that Region for
which there is no Valid Claim covering such product unless a decision not
subject to appeal becomes final which reverses this determination with regard to
at least one claim covering such product in such country. However, royalties
shall be accrued during such period and if requested by SPECTRx, shall
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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be escrowed under reasonable commercial terms, including receipt of interest. If
the determination is reversed by a final decision, SPECTRx shall receive the
escrowed royalties and interest. If the decision is not so reversed, ABBOTT
shall receive the escrowed royalties and interest. If ABBOTT elects not to
continue to pay royalties upon a final determination which does not reverse such
finding, then ABBOTT's license in such Designated Country shall terminate. Upon
termination in such Designated Country, ABBOTT's obligation to pay royalties in
the remaining countries of the corresponding Region shall be determined by the
presence in each country of a Valid Claim covering such product. For each
country in which ABBOTT so chooses not to pay royalties in such country,
ABBOTT's license in such country shall immediately terminate; provided, however,
it shall not terminate if a product of ABBOTT is not covered by a Valid Claim in
a given country in such corresponding Region due to the decision of a court or
governmental agency of competent jurisdiction as set forth above and ABBOTT
shall have no obligation to pay royalties hereunder with regard to such product
unless a decision not subject to appeal becomes final. Such royalties shall be
accrued with regard to such country under the same terms as set forth above for
a Designated Country. If ABBOTT elects not to continue to pay royalties upon a
final determination which does not reverse such finding, then ABBOTT's license
in such country shall terminate.
(F) No royalty shall be payable for products (which if sold
with Product would be Disposables) which are sold separately from and not used
with Product as determined by publicly available marketing data generally
accepted in the industry or other mutually agreed upon methods.
4.3 Credited Against Royalties. The license fee payment of [*] set
forth in Section 4.2(B)(iii) and the license fee payment of [*] set forth in
Section 4.2(B)(iv) shall be credited against future royalties. Such payments
shall be credited against royalties due to SPECTRx at the time of
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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payment of such royalty so that SPECTRx shall receive [*] of the royalty amount
due to it (i.e., for every dollar in royalties due SPECTRx, SPECTRx shall
receive [*]) until the total of [*] has been credited against royalties due
SPECTRx from ABBOTT.
4.4 Royalty Stacking. If ABBOTT is obligated or has agreed to pay a
total royalty rate that exceeds [*] of Net Sales of the Licensed Products,
whether the royalty is due to SPECTRx or to Third Parties, then ABBOTT may
reduce the royalty rate payable to SPECTRx by [*]. Such royalty limitation shall
not include those royalties for which ABBOTT is obligated to a Third Party under
agreements entered into prior to the Effective Date for either (A) technology
which may be integrated into the Product or Disposables or (B) technology which
is incorporated into the strips manufactured by ABBOTT's subsidiary, MediSense,
Inc. For example, if the total royalty rate paid by ABBOTT in a year is [*] and
the royalty rate for SPECTRx for that year is [*], then ABBOTT may decrease
SPECTRx's royalty rate by [*] of that which exceeds the royalty rate of [*]
which results in a SPECTRx royalty rate of [*] for that year. However, in no
event shall the total royalty rate for SPECTRx be less than [*].
4.5 Directly Competitive Product.
(A) If in any calendar quarter, a Third Party is selling a
Directly Competitive Product in any country where ABBOTT is selling the Licensed
Product, then ABBOTT may decrease the royalty rate by [*] in such country for
the period that the Directly Competitive Product and the Licensed Product are
both sold. For example, if the royalty rate for that year is [*], then the
royalty shall be calculated at a rate of [*] for the Net Sales in the country in
which the Directly Competitive Product and the Licensed Product are both sold.
The minimum royalty rate specified in Section 4.4 shall not be applicable to
calculations' under this Section.
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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(B) It a product was not designated as a Directly Competitive
Product, during any calendar quarter, because such product was subject to an
infringement action by ABBOTT or SPECTRx, and if such action is either settled
(as approved by ABBOTT and SPECTRx) or adjudicated so as to allow the continued
sale of such product in the country, then such product shall be retroactively
designated a Directly Competitive Product, and ABBOTT may deduct that portion of
the royalties that ABBOTT paid during the pendency of the infringement action,
that would not have been paid due to the Third Party sale of a Directly
Competitive Product, from any royalties thereafter due and payable to SPECTRx
under this Agreement.
(C) Any time after [*] from the date of first reduction of the
royalty rate in any country in the Territory under Section 4.5(A), (i) if the
Average Market Share of the Directly Competitive Products in that country
exceeds that of the Licensed Product and (ii) no Valid Claim of a patent under
the Licensed Patents covers the Directly Competitive Product in that country,
then (a) ABBOTT may terminate its Exclusive License or non-exclusive license for
such country upon written notification to SPECTRx and SPECTRx shall grant to
ABBOTT a nonexclusive license to use any Know-How in the Field as set forth
below in this Section 4.5(C); or (b) ABBOTT may continue to pay the reduced
royalty rate as set forth above and maintain its Exclusive License or
nonexclusive license for that country. If ABBOTT elects to terminate, SPECTRx
hereby grants to ABBOTT a nonexclusive, royalty-free license, with the right to
sublicense to use any Know-How in the Field which covers the manufacture, use or
sale of such ABBOTT product sold in any country where ABBOTT has terminated its
license under this Agreement covering such product in such country pursuant to
this Section 4.5(C).
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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(D) If SPECTRx has not granted a license or is not under a
binding obligation to grant a license to a Third Party or sublicensee in the
Field or is not itself actively engaged in significant development or
commercialization of a product in the Field and (i) the Directly Competitive
Product ceases sales in such country (and no other Directly Competitive Product
is sold in such country at that time) or (ii) a patent of SPECTRx issues in such
country and such patent has a Valid Claim covering the Directly Competitive
Product, or (iii) the Average Market Share of the Licensed Product exceeds that
of the Directly Competitive Product, then SPECTRx shall promptly notify ABBOTT
of any of the conditions arising under (i)-(iii) above (if ABBOTT has such
knowledge, ABBOTT may so notify SPECTRx). Thereafter upon written notice from
ABBOTT to SPECTRx, ABBOTT may have its Exclusive License or its nonexclusive
license reinstated on the same terms and conditions as set forth in Section
4.2(C); provided that if SPECTRx has granted a nonexclusive license to a Third
Party, SPECTRx shall promptly notify ABBOTT of such Third Party license and
ABBOTT and SPECTRx shall then enter into good faith negotiations to modify the
royalty rates of a nonexclusive reinstated license in such country to a rate no
greater than [*] of the rates set forth in Section 4.2(C).
4.6 No Multiple Royalties. No multiple royalties shall be payable
because a Licensed Product, its manufacture, use, sale or importation is or
shall be covered by more than one Valid Claim of a patent included in Licensed
Patents or more than one patent under Licensed Patents.
4.7.Royalty Report. Each royalty payment shall be accompanied by a
statement which sets forth the total Net Sales and calculations for deriving Net
Sales in each country, to the extent provided to ABBOTT through its normal
financial processes, expressed in U.S. dollars, the royalty rates, and royalties
payable in U.S. dollars.
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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4.8 Royalty Payments. Royalty payments for United States sales,
pursuant to Section 4.2(C) shall be paid to SPECTRx in United States dollars, by
electronic transfer to an account (within an institution that is equipped to
utilize such electronic transfer) designated by SPECTRx, within [*] after each
calendar quarter ending March 31, June 30, September 30, and December 31 of each
year, and within [*] after each such calendar quarter, for sales in countries
outside the United States. Royalty payments earned in countries outside the
United States shall be first determined by ABBOTT in the currency of the country
where Net Sales were made and then converted by ABBOTT directly to its
equivalent in U.S. dollars. Conversion of such currencies to U.S. dollars shall
be done in accordance with the procedures ordinarily used by ABBOTT in
converting foreign currency sales, based on the same method as used to calculate
ABBOTT sales worldwide, which procedures shall be in accordance with generally
accepted accounting principles consistently applied.
4.9 Records and Audit. ABBOTT shall keep and maintain records of Net
Sales and the calculations for deriving Net Sales made pursuant to this
Agreement for a period of two (2) years after the Net Sales period to which such
records relate. During this period, such records shall be open to inspection
upon reasonable written notice by SPECTRx to ABBOTT. Such inspection shall be
performed by a nationally recognized independent certified public accountant
selected by SPECTRx and approved by ABBOTT, which approval shall not be
unreasonably withheld. All expenses of such inspection shall be borne by
SPECTRx; provided that, if ABBOTT is found to have underpaid by more than five
percent (5%), then ABBOTT shall bear such expenses. The independent certified
public accountant shall sign a confidentiality agreement and shall then have the
right to examine the records kept pursuant to this Agreement and report findings
(but not the underlying data)
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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of the examination to SPECTRx as is necessary to evidence that records were or
were not maintained and used in accordance with this Agreement. A copy of any
report provided to SPECTRx by the independent certified public accountant shall
be given concurrently to ABBOTT.
4.10 Taxes. ABBOTT [*] under this Agreement provided that the parties
are entities incorporated under the laws of one of the states of the United
States. If one or more of the parties ceases to be so incorporated, then the
parties shall consult to determine the steps necessary to meet requirements of
appropriate fiscal or tax authorities [*].
5. RIGHT OF FIRST NEGOTIATION FOR ADDITIONAL ANALYTES
5.1 Analytes List. At anytime within two (2) years of the Effective
Date, ABBOTT may deliver to SPECTRx a written, prioritized list of additional
Analytes and [*] in which ABBOTT has an interest in development work. The
parties will promptly enter into good faith negotiations to mutually agree upon
a final list of Analytes (including panels) and [*] for development as well as
identify those Analytes in which ABBOTT has no interest (the "Analytes List").
The Analytes List shall be updated every twelve (12) months by the mutual
agreement of the parties.
5.2 Right of First Negotiation.
(A) During the period ending [*] from the First Shipment Date,
or [*] from the Effective Date, whichever comes first (the "Negotiation
Period"), ABBOTT shall have the right of first negotiation for rights to
practice the Licensed Patents and Know-How for development and commercialization
of those Analytes in conjunction with Licensed Patents and [*] to which SPECTRx
has rights with the right to sublicense, and which ABBOTT has identified as of
interest to ABBOTT, whether SPECTRx has agreed to their placement on the
Analytes List or not. Abbott's right of first negotiation for [*] is not limited
to those for which Abbott has existing rights for [*] technology. To
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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commence such negotiation, during the Negotiation Period, ABBOTT shall deliver
written notice ("ABBOTT Notice") to SPECTRx indicating on which such Analyte or
[*] it desires a license and/or a collaboration agreement from SPECTRx. ABBOTT
may only deliver one ABBOTT Notice per Analyte or [*].
(B) During the Negotiation Period, if SPECTRx desires to grant
a license for or collaborate on a particular Analyte or [*] and such Analyte has
been identified as of interest to ABBOTT, SPECTRx shall deliver written
notification of such intent or a proposal ("SPECTRx Notice") to ABBOTT. The
SPECTRx Notice shall be delivered to ABBOTT prior to SPECTRx engaging in
discussions with any Third Party concerning such Analyte or [*] during the
Negotiation Period; provided, that SPECTRx may acknowledge to any such Third
Party that ABBOTT has a right of first negotiation with regard to such Analyte
or [*] and describe the relevant terms of such right.
(C) ABBOTT shall have [*] after receipt of the SPECTRx Notice
to provide a written response indicating whether ABBOTT is interested or not in
such Analyte or [*]; provided, however, that ABBOTT shall not be required to
evaluate any Analyte or [*] until at least [*] from the Effective Date and then
ABBOTT shall not be required to evaluate more than [*] Analytes or [*] at the
same time. Notwithstanding the allotted [*] time period, at any time upon
receipt of SPECTRx Notice hereunder, if ABBOTT has no interest, it will promptly
so notify SPECTRx.
(D) At the time that the SPECTRx Notice is delivered to ABBOTT
or within fifteen (15) days of receipt of the ABBOTT Notice by SPECTRx, SPECTRx
shall provide to ABBOTT a full report on the current status of its research and
development activities on such Analyte or [*]. At any time within sixty (60)
days after receipt of such report, ABBOTT may send to SPECTRx an initial
proposal containing proposed financial and other material terms for a license
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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and/or collaboration agreement for the development and commercialization of such
Analyte or [*] (the "Initial Proposal"). If ABBOTT does not send an Initial
Proposal within such period of time or any extended time period agreed to by the
parties, then upon written notice from SPECTRx, ABBOTT's right of first
negotiation with regard to such Analyte or [*] shall cease.
(E) If ABBOTT sends an Initial Proposal to SPECTRx, SPECTRx
and ABBOTT shall promptly enter into good faith negotiations towards a license
and/or collaboration agreement upon mutually agreed terms and conditions.
Subject to SPECTRx making all reasonable efforts to meet and negotiate with
ABBOTT on a timely basis and in good faith, if SPECTRx and ABBOTT fail to reach
mutual agreement on a term sheet covering the material terms and conditions of a
license and/or collaboration agreement within [*] from the receipt of the
Initial Proposal by SPECTRx (or such extended time as agreed by the parties)
then upon written notice from SPECTRx, all negotiations shall cease and ABBOTT
shall have no further right of first negotiation with regard to such Analyte or
[*].
(F) Notwithstanding the other provisions of this Section 5.2,
if a [*] as agreed by the parties prior to [*], which utilizes technology
licensed to ABBOTT under this Agreement and [*] of Altea Technologies, Inc.
("ALTEA") , the parties agree to work together to develop and commercialize such
system upon mutually agreed development and commercial terms which are
reasonable.
(G) If, for any reason, ABBOTT's rights under this Article 5
shall expire or terminate as to any particular Analyte, then such rights shall
also terminate simultaneously for the related [*].
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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5.3 Agreement Terms. Any collaboration agreement negotiated by the
parties regarding an Analyte or [*] may contain appropriate payments by ABBOTT
to SPECTRx to cover the actual cost of necessary research and development as
mutually agreed by the parties. The parties acknowledge that the Research
Program under this Agreement is expected to provide base technology applicable
to the development of any additional Analyte or [*] to the extent [*] use
technology for Analyte extraction as described in Licensed Patents and Know-How
and/or developed under the Research Program. Therefore, any research and
development milestone payments agreed to by the parties will be limited to an
amount appropriate for the key tasks identified for the specific Analyte or [*]
and patents or know-how not included under Licensed Patents or Know-How and will
not include any premium for the existing base technology to the extent it was
developed under the Research Program or it is included under Licensed Patents or
Know-How. Except for [*], a license negotiated by the parties shall contain no
additional license fees except for those related to patents and know-how not
included under the Licensed Patents or Know-How and shall contain royalty rates
of not less than [*], nor greater than [*], of those royalty rates set forth in
Section 4.2(C).
6. OWNERSHIP OF INTELLECTUAL PROPERTY
6.1 SPECTRx Research Program Technology. All Research Program
Technology invented solely by SPECTRx employees, agents or contractors ("SPECTRx
Research Program Technology") shall be the property of SPECTRx, shall be
promptly disclosed in writing to ABBOTT, and shall be subject to the following:
(A) If the SPECTRx Research Program Technology is useful
solely within the Field, then such SPECTRx Research Program Technology shall be
included under the Licensed
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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Patents or Know-How, as appropriate, and shall be included under ABBOTT's
Licenses in the Field as set forth in Section 4.1.
(B) If the SPECTRx Research Program Technology is useful within the
Field and outside the Field, then
(i) such SPECTRx Research Program Technology shall be included
under the Licensed Patents or Know-How, as appropriate, and shall be included
under ABBOTT's Licenses in the Field as set forth in Section 4.1; and
(ii) SPECTRx shall hereby grant to ABBOTT a worldwide,
royalty-free, nonexclusive license with the right to sublicense under the
SPECTRx Research Program Technology to make, have made, use, sell and import
products within the field of [*]; and
(iii) ABBOTT shall have the right of first negotiation for a
license under the SPECTRx Research Program Technology in all other fields with
the exception of [*], such right to be exercised as set forth in Section 6.3(D).
(C) If the SPECTRx Research Program Technology is useful solely outside
the Field, then (i) if applicable, SPECTRx shall hereby grant to ABBOTT a
worldwide, royalty-free, nonexclusive license with the right to sublicense under
the SPECTRx Research Program Technology to make, have made, use, sell and import
products within the field of [*]; and (ii) ABBOTT shall have the right of first
negotiation to a license under the SPECTRx Research Program Technology in all
other fields with the exception of [*], such right to be exercised as set forth
in Section 6.3(D).
(D) The licenses granted to ABBOTT by SPECTRx under Sections 6.1(B)(ii)
and (C)(i) shall survive expiration or early termination of this Agreement for
any reason. For a period ending [*] from expiration or termination of this
Agreement, if either party desires exclusive rights
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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under any SPECTRx Research Technology for which ABBOTT has been granted a
nonexclusive license under Sections 6.1 (B)(ii) and (C)(i), then such party
shall notify in writing the other party. If the other party is not developing or
is not in the process of developing a commercial product covered by such rights,
then the parties shall enter into good faith negotiations as to the terms under
which the other party shall grant such rights to the notifying party.
(E) By way of clarification, but not limitation, all
technology invented by SPECTRx, its employees, agents or contractors outside the
Research Program and outside the Field or acquired or licensed by SPECTRx
outside the Field, are the sole property of SPECTRx, and SPECTRx shall have no
obligation hereunder to grant a license under such technology to ABBOTT.
6.2 ABBOTT Research Program Technology and Derived Technology
(A) All Research Program Technology invented solely
by ABBOTT employees, agents or contractors ("ABBOTT Research Program
Technology") shall be the property of ABBOTT and all ABBOTT Research Program
Technology in the Field shall be promptly disclosed in writing to SPECTRx and
shall be subject to Section 6.2(C)(i).
(B) Derived Technology shall be the property of ABBOTT. Such
Derived Technology shall be promptly disclosed in writing to SPECTRx and shall
be subject to Section 6.2(C)(ii).
(C) In the event of early termination by ABBOTT pursuant to
Section 2.5(A) (subject to the exception in that Section) or 2.5(B) or Section
10.2(A)(i) or by SPECTRx pursuant to Section 3.2(A) or (B) (subject to certain
exceptions set forth in those Sections) or pursuant to Section 10.2(D) prior to
the First Shipment Date:
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(i) ABBOTT shall grant to SPECTRx a worldwide,
royalty-bearing, nonexclusive license with the right to sublicense, under ABBOTT
Research Program Technology to make, have made, use, sell and import products in
the Field.
(ii) ABBOTT shall grant to SPECTRx a worldwide,
nonroyalty-bearing, nonexclusive license, with the right to sublicense, under
the Derived Technology to make, have made, use, sell and import products for
extracting interstitial fluid for any purpose. Additionally, SPECTRx may notify
ABBOTT of its interest in exclusive rights to [*] in which event ABBOTT will in
good faith negotiate with SPECTRx for exclusive rights on commercially
reasonable terms.
(D) ABBOTT and SPECTRx shall enter into a license agreement
regarding the licenses in Section 6.2(C) which shall contain the standard
license terms and conditions under which ABBOTT shall be entitled to [*] of all
license fees and royalties received by SPECTRx from any sublicense from SPECTRx
to a Third Party, which shall not include SPECTRx's existing license obligations
to ALTEA or Non-Invasive Monitoring Company, Inc. ("NIMCO") under an agreement
dated March 1, 1996.
(E) At any time prior to termination of this Agreement,
SPECTRx may notify ABBOTT in writing of SPECTRx's interest in obtaining from
ABBOTT (i) a nonexclusive license or (ii) an exclusive license to [*], in which
event ABBOTT will in good faith negotiate with SPECTRx toward such license on
commercially reasonable terms, provided, however, that the royalty rates shall
not exceed [*] or [*], respectively, of net sales and there shall be no license
fees imposed.
(F) By way of clarification, but not limitation, all
technology invented by ABBOTT employees, agents or contractors outside the
Research Program other than Derived Technology as noted above; all [*]
Technology including [*] and algorithms; and all technology under which
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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ABBOTT acquires a license from Third Parties, whether or not within the Field,
are the sole property of ABBOTT and ABBOTT shall have no obligation hereunder to
grant a license under such technology to SPECTRx.
6.3 Joint Research Program Technology. All Research Program
Technology invented by at least one employee, agent or contractor of ABBOTT and
at least one employee, agent or contractor of SPECTRx ("Joint Research Program
Technology") shall be the joint property of ABBOTT and SPECTRx subject to the
following:
(A) If the Joint Research Program Technology is useful within
the Field, then SPECTRx's interest in such Joint Research Program Technology
shall be included under the Licensed Patents or Know-How, as appropriate, and
shall be included under ABBOTT's Licenses in the Field as set forth in Section
4.1.
(B) If either party grants a license to a Third Party outside
the Field (or after termination of this Agreement within or outside what was
defined as the Field when the Agreement was effective) under that party's
interest in any Joint Research Program Technology, then the other party shall be
entitled to [*] of all license fees and royalties received by the licensed party
in consideration for such license which shall not include SPECTRx's existing
license obligations to ALTEA or NIMCO under an agreement dated March 1, 1996. If
the parties jointly grant an Exclusive License to a Third Party, then the
parties shall equally share in all license fees and royalties generated by such
license.
(C) If either party is interested in obtaining an Exclusive
License, or in outlicensing its interest under any Joint Research Program
Technology outside the Field, then such party ("licensing party") shall promptly
notify the other party and such other party shall have the right of
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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first negotiation to obtain an Exclusive License under the licensing party's
interest in such Joint Research Program Technology, in accordance with the
procedure under Section 6.3(D).
(D) ABBOTT and SPECTRx have the right of first negotiation to
certain Research Program Technology of the other or the Business (as defined in
Section 7.2) in accordance with Sections 6.1(B)(iii) and (C), 6.3(C) and 7.2. If
either party intends to outlicense or desires to collaborate regarding such
Research Program Technology or ABBOTT desires to sell the Business, such party
("Notifying Party") shall deliver written notification of such intent or a
proposal ("Notice") to the other party. The Notice shall be delivered prior to
the Notifying Party engaging in discussions with any Third Party concerning such
Research Program Technology or the Business, provided, that the Notifying Party
may acknowledge to any such Third Party that the other party has such a right of
first negotiation. The other party shall have thirty (30) days after receipt of
the Notice to provide a written response indicating whether or not it is
interested in such Research Program Technology or the Business. At the time that
the Notice is delivered, the Notifying Party shall provide to the other party a
report on the current status of its research and development activities with
regard to such Research Program Technology or information on the Business. At
any time within sixty (60) days after receipt of such report, the other party
may send to the Notifying Party an initial proposal containing proposed
financial and other material terms for a license and/or collaboration agreement
for the development and commercialization of such Research Program Technology or
for a purchase agreement for the Business (the "Proposal"). If the other party
does not send a Proposal within such period of time or any extended time period
agreed to by the parties, then the other party's right of first negotiation with
regard to such Research Program Technology or the Business shall expire. If the
other party sends a Proposal to the Notifying Party, the parties shall promptly
enter into good faith
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negotiations towards an agreement upon mutually agreed terms and conditions.
Subject to the Notifying Party making all reasonable efforts to meet and
negotiate with the other party on a timely basis and in good faith, if the
parties fail to reach mutual agreement on a term sheet covering the material
terms and conditions of an agreement within ninety (90) days from the receipt of
the Proposal, then upon written notice from the Notifying Party to the other
party, all negotiations shall cease and the other party shall have no further
right of first negotiation with regard to such Research Program Technology or
the Business, as the case may be.
6.4 ABBOTT Development Program Technology. All inventions,
developments, know- how, or discoveries, whether or not patentable, which are
invented solely by ABBOTT employees, agents or contractors during the course of
work under the Development Program ("ABBOTT Development Program Technology")
shall be the property of ABBOTT and all such ABBOTT Development Program
Technology to the extent applicable to the Field shall be subject to the license
under Section 7.1.
7. DEVELOPMENT PROGRAM TECHNOLOGY GRANT BACKS
7.1 Prior to First Shipment Date. After delivery of the Development
Program Notification from ABBOTT to SPECTRx and prior to the First Shipment
Date, in the event of early termination by ABBOTT under Section 10.2 (except for
termination under Section 10.2(B), (C)(i), (iii) or (iv) and (D)) or by SPECTRx
under Section 10.2(D) (which is not timely cured), then ABBOTT shall grant to
SPECTRx the following with regard to Development Program Technology: [*]. Upon
such termination, ABBOTT and SPECTRx shall enter into a license agreement the
material terms and royalty rates of which shall be the same as those set forth
in this Agreement provided, however, that it shall not contain license fees nor
milestone payments. The agreement shall specifically except (A)[*];
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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(B) [*] Technology including algorithms,[*], and [*] of the Product, which arise
during or from the Development Program or from [*] subsidiary or [*] from a
Third Party. ABBOTT shall have no obligation hereunder to grant back to SPECTRx
a license under any of the technology listed in 7.1(A) or (B).
7.2 After First Shipment Date. In the event of early termination by
ABBOTT after the First Shipment Date, except for termination under Section
10.2(D) for breach by SPECTRx, SPECTRx will have the right of first negotiation
for the purchase of the business of manufacturing and selling the Product (the
"Business"). The exercise of such right shall be in accordance with Section
6.3(D).
8. PATENTS
8.1 Patents Filing and Maintenance; Costs.
(A) SPECTRx shall be responsible for filing, prosecuting and
maintaining U.S. and foreign applications and patents within the Licensed
Patents, including any SPECTRx Research Program Technology included within the
Licensed Patents provided, however, that regarding the latter, ABBOTT shall
determine, with the input and cooperation of SPECTRx, whether such applications
and in which countries (at a minimum in all the Designated Countries) such
applications are filed and patents maintained. Any patent counsel selected by
SPECTRx to prosecute patents under such SPECTRx Research Program Technology
shall receive the prior written approval of ABBOTT, which shall not be
unreasonably withheld. ABBOTT shall be given an opportunity to review and
comment upon patent applications covering SPECTRx Research Program Technology.
If SPECTRx shall provide such opportunities, then ABBOTT shall make no claim
against SPECTRx with regard to the discharge of said responsibilities provided
that SPECTRx exercises reasonable
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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judgment. SPECTRx shall keep ABBOTT advised as to all material developments with
respect to all patents and patent applications within Licensed Patents and shall
promptly supply ABBOTT with copies of all papers received and proposed to be
filed in connection with the prosecution or defense thereof in sufficient time
for ABBOTT to comment thereon. SPECTRx may, at its sole discretion, file and
prosecute patent applications in any country as to which ABBOTT has determined
not to file.
(B) ABBOTT shall bear all costs (including, but not limited
to, attorney fees) incurred after the Effective Date in connection with such
preparation, filing, prosecution and maintenance for all U.S. and foreign
applications and patents covering SPECTRx Research Program Technology included
within the Licensed Patents. SPECTRx shall prepare an annual budget of such
costs for approval by ABBOTT. Any exceptions to such approved budget shall be
addressed on a case-by case basis. ABBOTT shall reimburse SPECTRx for such costs
in accordance with the approved budget within thirty (30) days of receipt of
documentation reasonably satisfactory to ABBOTT that evidences such costs. If
SPECTRx grants a license in any country to a Third Party under any SPECTRx
Research Program Technology for which ABBOTT is bearing such costs, then SPECTRx
shall become responsible for fifty percent (50%) of such costs from the
effective date of such license grant. If ABBOTT's Exclusive License or
nonexclusive license set forth in Section 4.1 is terminated in any country for
any reason by ABBOTT or SPECTRx, then ABBOTT's obligation to pay any such costs
associated with any patents and patent applications under such Exclusive License
or nonexclusive license in that country shall cease as of the date of
termination. If this Agreement is terminated in its entirety, then ABBOTT's
obligation under this Section to pay all patent costs shall terminate on such
date.
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(C) ABBOTT may, but shall have no obligation to assume
responsibility for the filing, prosecution or maintenance of any U.S. or foreign
patent application or patent within the Licensed Patents if SPECTRx is not
pursuing such activity with diligence. If ABBOTT shall assume such
responsibility, then SPECTRx shall make no claim against ABBOTT with regard to
its discharge of said responsibility provided that ABBOTT exercises reasonable
judgment in discharging this responsibility or discharges this responsibility
through a patent counsel approved by SPECTRx. SPECTRx shall not unreasonably
withhold its approval of any such patent counsel proposed by ABBOTT. In the
event ABBOTT does assume such responsibility, it shall provide SPECTRx with the
same information and opportunity to comment which SPECTRx is obligated to
provide it under Section 8.1(A) hereinabove. However, ABBOTT shall not be
responsible for any costs which SPECTRx may incur with regard to any such case
after ABBOTT assumes responsibility for said case.
8.2 Joint Patents Filing. ABBOTT shall notify SPECTRx in writing if
ABBOTT wants to pursue patent protection for any Joint Research Program
Technology and indicate in which countries it desires such protection. ABBOTT
shall then be responsible for filing, prosecuting and maintaining U.S. rights
and foreign applications and patents covering such Joint Research Program
Technology and all costs incurred in connection with such responsibility. ABBOTT
shall keep SPECTRx advised as to all material developments with respect to all
patents and patent applications regarding such Joint Research Program Technology
and shall promptly supply SPECTRx with copies of all papers received and
proposed to be filed in connection with the prosecution or defense thereof in
sufficient time for SPECTRx to comment upon. If SPECTRx grants a license to a
Third Party under SPECTRx's interest in any Joint Research Program Technology
for which ABBOTT is bearing such
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costs, then SPECTRx shall become responsible for fifty percent (50%) of such
costs from the effective date of such license grant. SPECTRx shall reimburse
ABBOTT for such costs within thirty (30) days of receipt of documentation
satisfactory to SPECTRx that evidences such costs.
8.3 Discontinuance of Prosecution.
(A) If ABBOTT elects not to have SPECTRx prepare and file a
patent application covering any SPECTRx Research Program Technology or elects to
discontinue the prosecution or maintenance of any patent applications or patents
covering such SPECTRx Research Program Technology, ABBOTT shall promptly notify
SPECTRx and SPECTRx may, but does not have the obligation to, file or continue
prosecution of such application or maintain such patent at its own expense.
(B) If ABBOTT elects not to prepare and file a patent
application covering any Joint Research Program Technology or elects to
discontinue the prosecution or maintenance of any patent applications or patents
covering such Joint Research Program Technology, ABBOTT shall promptly notify
SPECTRx and then SPECTRx may, but does not have the obligation to, file or
continue prosecution of such application or maintain such patent at its own
expense.
(C) If SPECTRx elects not to prepare and file a patent
application covering a SPECTRx Improvement referenced under Section 8.4 or if
either party elects to discontinue the prosection of any patent application or
maintenance of any patent under the Licensed Patents or covered by this Section
8.3, then that party shall promptly notify the other party and supply the other
party with copies of all written communications with the appropriate patent
authorities. That party may then, at its sole discretion, file or continue
prosecution of such application or maintain such patent at its own expense.
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8.4 Improvements.
SPECTRx shall promptly notify ABBOTT of any Improvements in the Field
or with respect to which ABBOTT has rights of first negotiation under Article 5
and of any efforts by SPECTRx to obtain patents on Improvements in the Field
including, but not limited to designation of the countries in which any patent
application in respect thereof is to be filed. SPECTRx shall use its reasonable
best efforts to obtain the right to sublicense under any licenses SPECTRx is
granted which cover improvements relating to the Licensed Patents or Know-How;
provided, that, with regard to any such Improvement sublicensed hereunder to
ABBOTT, ABBOTT shall pay to SPECTRx the same royalty rate (on Net Sales of
Product that incorporate such Improvement) paid by SPECTRx to a Third Party for
the license which covers such Improvement, subject to Section 4.4. ABBOTT shall
have the right to review and approve any such royalty rate prior to SPECTRx
entering into such license. Any patent application in respect of such
Improvement and any patent issued therefrom shall become part of the Licensed
Patents. Appendix 1.20 shall be modified to reflect such addition to Licensed
Patents. If any Improvement is not patented, it shall become part of the
Know-How.
8.5 Infringement by Third Parties
(A) In the event SPECTRx or ABBOTT have reason to believe that
a Third Party may be infringing any of the Licensed Patents by activities in the
Field, such party shall promptly notify the other party. SPECTRx may, in its
discretion, elect to enforce the Licensed Patents, through legal action or
otherwise, and ABBOTT agrees to reasonably cooperate with SPECTRx in such
enforcement. SPECTRx shall be entitled to retain any recovery which may be
obtained in any suit brought by SPECTRx. In the event SPECTRx does not commence
activities to diligently enforce the Licensed Patents within three (3) months
after notice of possible infringement is given between
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SPECTRx and ABBOTT, ABBOTT may institute suit and if diligently pursuing such
suit, may deduct the reasonable expenses of such suit from any royalties due to
SPECTRx from ABBOTT. SPECTRx agrees to serve as a nominal party if its presence
is legally required and to sign any papers necessary to support any litigation.
ABBOTT shall be entitled to retain any recovery which may be obtained in any
suit brought by ABBOTT. SPECTRx will provide all reasonable cooperation with
respect to any suit which ABBOTT may bring pursuant to this Section 8.5. If such
infringement has not ceased within [*] of the date of the notice from one party
to the other as set forth above and SPECTRx has not instituted suit or is not
actively prosecuting such suit, then ABBOTT, upon thirty (30) days written
notice to SPECTRx, may cease paying any royalties in the country in which such
infringement exists and the Agreement and license granted hereunder will
terminate as to such country.
(B) In the event SPECTRx or ABBOTT have reason to believe that
a Third Party may be infringing any of the patents covering the Joint Research
Program Technology by activities not in the Field, such party shall promptly
notify the other party and the parties shall promptly consult with one another
regarding action to be taken. If either party or both parties elect to enforce
the patents through legal action or otherwise, they will cooperate with each
other in such enforcement and will determine the appropriate sharing of expenses
of such enforcement and any recovery.
8.6 Third Party Claims of Infringement Against ABBOTT. ln the event
that a Third Party brings a legal action or administrative proceeding against
ABBOTT alleging infringement by ABBOTT, ABBOTT shall maintain control of its
defense, including any decision as to settlement, and shall bear the total costs
of any court award or settlement of such legal action (subject to its right to
adjust the royalty rate as set forth in Section 4.4) and all other costs, fees
and expenses related to the
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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resolution thereof and shall be entitled to keep the entire amount of any
damages awarded. ABBOTT shall notify SPECTRx promptly of such action if such
action relates to the practice of the Licensed Patents or Know-How and notify
SPECTRx of those terms of any settlement which would reflect adversely on the
Licensed Patents at a reasonable time before the settlement becomes final.
ABBOTT will consider any comments of SPECTRx.
9. REPRESENTATIONS AND WARRANTIES
9.1 By SPECTRx. Except as previously disclosed in a writing from
SPECTRx to ABBOTT dated September 26, 1996 (the receipt of which is acknowledged
by ABBOTT), SPECTRx hereby represents and warrants that:
(A) SPECTRx has the full right, power and corporate authority
to enter into this Agreement, and to make the promises and grant the licenses
set forth in this Agreement and that there are no outstanding agreements,
assignments or encumbrances in existence inconsistent with the provisions of
this Agreement.
(B) To the best of its knowledge, as of the Effective Date,
the Licensed Patents have not or will not be obtained through any intentional
activity, omission or representation by SPECTRx that would limit or destroy the
validity of the Licensed Patents and SPECTRx has no knowledge or information
that would impact on or affect the validity and/or enforceability of the
Licensed Patents.
(C) To the best of its knowledge, as of the Effective Date no
actions are threatened or pending before any court or governmental agency or
other tribunal relating to the Licensed Patents or Know-How.
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<PAGE> 46
(D) SPECTRx has not and will not authorize Third Parties to
practice the Licensed Patents or the Know-How or otherwise grant rights to make,
have made, use, sell and import the Product in the Field in the Territory that
are inconsistent with this Agreement.
(E) To the best of its knowledge, no Third Party has acquired,
owns or possesses any right, title or interest in or to the Licensed Patents or
Know-How in the Field.
(F) SPECTRx is in compliance and shall remain in compliance
with all material terms of any agreement with a Third Party which grants rights
to SPECTRx for technology under the Licensed Patents or Know-How, so as not to
adversely affect the rights of ABBOTT in such technology under this Agreement.
(G) As of the Effective Date, the patents, patent applications
and invention disclosures delivered to ABBOTT and the Know-How disclosed to
ABBOTT under the CDA constitute all of the inventions, developments, know-how
and discoveries in the Field which are owned by or to which SPECTRx has a right
and SPECTRx, to the best of its knowledge, has accurately disclosed to ABBOTT
the stage of development of all such inventions, developments, know-how and
discoveries in the Field.
9.2 By ABBOTT. ABBOTT hereby represents and warrants that:
(A) ABBOTT has the full right, power and corporate authority
to enter into this Agreement and to make the promises set forth in this
Agreement and that there are no outstanding agreements, assignments or
encumbrances in existence' inconsistent with the provisions of this Agreement.
(B) To the best of ABBOTT's knowledge, as of the Effective
Date, it does not have any information that would affect the validity or
enforceability of the Licensed Patents, of any
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actions threatened relating to Licensed Patents or Know-How or of any Third
Party rights to Licensed Patents or Know-How, except for that disclosed in a
writing from SPECTRx to ABBOTT dated September 26, 1996.
10. TERM AND TERMINATION
10.1 Term. The term of this Agreement shall commence on the
Effective Date, and unless sooner terminated pursuant to Sections 2.2, 2.5,
3.2, 4.2(D) or (E) (on a country by country basis), 10.2 or 14.1, shall
continue in effect until the last to expire of the patents under the Licensed
Patents. Upon such expiration, ABBOTT shall have a paid-up nonexclusive license
under the Know-How.
10.2 Early Termination. In addition to Sections 2.2, 2.5, 4.2(D)
and (E) (on a country by country basis), 3.2 and 14.1, this Agreement may be
terminated in accordance with the following provisions:
(A) By ABBOTT. For no cause by termination of the Agreement
and surrender of the Licenses granted hereunder (i) at any time prior to the
First Shipment Date upon sixty (60) days prior written notice from ABBOTT to
SPECTRx and (ii) at any time after the First Shipment Date upon one hundred
twenty (120) days prior written notice from ABBOTT to SPECTRx.
(B) Insolvency. By notice by either party to the other party
(provided that termination of SPECTRx shall only occur if an event of this
Section is followed by a material default by SPECTRx) upon:
(i) the insolvency of the other party, or the appointment
of a receiver by the other party for all or any substantial part of its
properties, provided that such receiver is not discharged within sixty (60)
days of his appointment;
(ii) the adjudication of the other party as a bankrupt;
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(iii) the admission by the other party in writing of
its inability to pay its debts as they become due;
(iv) the execution by the other party of an
assignment for the benefit of its creditors; or
(v) the filing by the other party of a petition to
be adjudged a bankrupt, or a petition or answer admitting the material
allegations of a petition filed against the other party in any bankruptcy
proceeding, or the act of the other party in instituting or voluntarily being
or becoming a party to any other judicial proceeding intended to effect a
discharge of the debts of the other party, in whole or in part.
(C) Product or Patent Failure. By thirty (30) days prior
written notice from ABBOTT to SPECTRx if:
(i) the Product [*], including being
uneconomical; or
(ii) the Product is found to be, or is challenged
as, not safe or efficacious by SPECTRx, by ABBOTT or by a Third Party,
including the FDA or equivalent foreign governmental agency; or
(iii) SPECTRx has not received notice that the PTO
will grant a letter of allowance relating to a United States patent application
seeking coverage for [*] from the Effective Date; or
(iv) ABBOTT is unable to acquire a license on
reasonable terms to a patent which dominates (according to opinion of outside
patent counsel reasonably acceptable to both parties) its practice of the
technology covered by any of the patents under the Licensed Patents which
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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technology is incorporated in a fundamental core feature of the Product or is
commercially or technically essential to the Product which ABBOTT has developed
in accordance with Section 3.
(D) Default.
(i) If either party believes that the other party
has committed a breach of any material provision of this Agreement, and the
other party has failed to remedy such breach within sixty (60) days after the
receipt of notice in writing of such breach from the nonbreaching party, then
the nonbreaching party may submit the issue of whether the other party has
committed a breach of any material provision hereunder for resolution in
accordance with the procedure set forth in Section 14.5 (Alternative Dispute
Resolution); and
(ii) if the neutral person (as set forth in Section
14.5) in accordance with the procedures set forth in Section 14.5 renders a
ruling that the breaching party has materially breached the Agreement;
(iii) and if the breaching party has materially
failed to comply with the terms of such ruling within the time period specified
therein for compliance or, if no time period is stated, then the nonbreaching
party has served notice upon the breaching party to undertake the actions
specified to comply with the terms of the ruling and the breaching party has
materially failed, within forty-five (45) days of such notice with regard to
payment obligations and within ninety (90) days of such notice with regard to
other obligations, to undertake such action, then the nonbreaching party shall
have the right to terminate this Agreement by delivering written notice to the
breaching party within thirty (30) days after expiration of the applicable
period under this Section 10.2(D)(iii); and
(iv) except as provided in Sections 2.2, 2.5, 3.2,
4.2(D) and (E) (on a country by country basis), 10.2(A)(B) and (C) and 14.1, the
foregoing rights to terminate this
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Agreement and to terminate the Licenses herein are the only such rights of the
parties to take such actions under this Agreement.
10.3 Consequences of Expiration or Early Termination
(A) On the date of expiration or early termination of
this Agreement by either party under Sections 2.2, 2.5, 3.2, 4.2(D) and
(E) (on a country by country basis), 10.2 and 14.1:
(i) ABBOTT's obligation to pay for costs of filing
patent applications and patent maintenance under Section 8.1(B) shall cease.
(ii) ABBOTT shall retain ownership of all clinical
data, Regulatory Filings and governmental marketing approvals and all other data
developed solely by ABBOTT; and SPECTRx shall retain ownership of all data
developed solely by SPECTRx. The parties shall retain joint ownership of all
Joint Research Program Technology, joint data and joint information.
(iii) ABBOTT's and SPECTRx's right of first
negotiation hereunder shall terminate except as set forth in Section 10.3(F).
(B) Within sixty (60) days of the date of expiration or
early termination by either party under Section 2.2, 2.5, 3.2, 4.2(D)
and (E) (on a country by country basis), 10.2 and 14.1, each party shall,
except as otherwise provided in this Agreement, return or destroy, and certify
to such destruction of, all Confidential Information of the other party and
each party may maintain one copy for archival purposes solely to confirm
compliance with the provisions of Article 13.
(C) On the date of expiration or early termination of
this Agreement under Section 2.2, by ABBOTT under Sections 2.5, 4.2(D)
and (E) (on a country by country basis) and 10.2(A), (C) and (D); or by SPECTRx
under Sections 3.2(A) or'(8) and 10.2(8) and (D) or by either party under
Section 14.1.
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(i) ABBOTT's Licenses pursuant to Section 4.1 and
the license under Section 4.5(C) (only upon early termination) shall
terminate. ABBOTT shall pay all royalties and other obligations which shall
have accrued through date of termination.
(ii) Any sublicenses granted by ABBOTT under the
Licenses shall be terminated by ABBOTT in accordance with the terms of such
sublicenses, but in no event shall such termination extend beyond thirty (30)
days after the termination date of this Agreement. Any Net Sales by such
sublicensee during this period shall be included in the calculation under
Section 4.2(C). ABBOTT shall be responsible for the performance of its
sublicensees.
(iii) ABBOTT and its sublicensees may dispose of, by
sale or otherwise, any remaining Product, whether characterized as clinical or
commercial Product, in the Territory. Any sales shall be included in the
calculation under Section 4.2(C).
(D) SPECTRx shall be entitled to the licenses set forth
in Section 6.2 (C) if ABBOTT terminates this Agreement under Section
2.5(A) (subject to the exception in that Section) or (B) or 10.2(A)(i) or if
SPECTRx terminates this Agreement under Section 3.2(A) or (B) (in accordance
with the terms of Section 3.2(A) or (B)) or under Section 10.2(D) prior to the
First Shipment Date.
(E) SPECTRx shall be entitled to a license in accordance
with the provisions of Section 7.1 (provided, that the conditions for
such license under Section 7.1 are met) if ABBOTT terminates this Agreement
under Section 2.5(B) or 10.2(A)(i) or if SPECTRx terminates this Agreement
under Section 3.2(A) or (8) or under Section 10.2(D) prior to the First
Shipment Date.
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(F) SPECTRx shall be entitled to the right of first
negotiation in accordance with the provisions of Section 7.2 if ABBOTT
terminates this Agreement after the First Shipment Date except for termination
by ABBOTT under Section 10.2(D).
(G) If ABBOTT terminates this Agreement under Section
10.2(A)(i) after the completion of Phase 1b by SPECTRx and prior to the First
Shipment Date, then ABBOTT shall pay a one time Development Program milestone
prepayment of [*] within forty-five (45) days after the termination date and
ABBOTT shall have no further liability for any unmet milestones or payments for
unmet milestones pursuant to Section 4.2(B)(i-v) under the Agreement.
(H) If the breach that gave rise to termination under Section
10.2(D) is a breach of a representation or warranty under Article 9, then the
nonbreaching party shall also have any available remedy under Article 11,
Indemnification.
10.4 Survival. Expiration or early termination of this Agreement
shall not relieve either party of its obligations incurred prior to
expiration or early termination. The following provisions shall survive
expiration or early termination of this Agreement or of any extensions thereof
for a period of ten (10) years or for such period of time as indicated in the
surviving provision: Section 4.8 Royalty Payments (as applicable to royalties
owed) and 4.9 Records and Audit; Article 6 (Ownership of Intellectual Property
except as to rights of first negotiation); Sections 10.3 (Consequences of
Expiration or Early Termination) and 10.4 (Survival); Article 11
(indemnification); Article 12 (Limitation of Liability and Remedies); Article
13 (Confidential Information, as to the obligations of the parties); Section
14.5 (Alternative Dispute Resolution) and Section 14.6 (Publicity). All license
provisions that survive termination, are irrevocable or arise due to
termination shall survive in
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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accordance with their terms. Any other provisions of this Agreement contemplated
by their terms to pertain to a period of time following termination or
expiration of this Agreement shall survive.
11. INDEMNIFICATION
11.1 By SPECTRx. SPECTRx shall indemnify, defend and hold ABBOTT, its
directors, employees, agents and representatives harmless from and against all
claims, causes of action, settlement costs (including, but not limited to,
reasonable attorney fees and expenses), losses or liabilities ("Liabilities") of
any kind (A) which are asserted by a Third Party or sublicensee to the extent
arising from the development, manufacture, use or sale of the Products to the
extent arising out of or attributable to any negligent act (except if the
negligent act or negligence in the performance of the act was directed or
requested by ABBOTT or the Research Committee) or omission or willful misconduct
on the part of SPECTRx, its directors, employees, agents or representatives; or
(B) to the extent arising from a breach of a representation or warranty in
Section 9.1.
11.2 By ABBOTT. ABBOTT shall indemnify, defend and hold SPECTRx, its
directors, employees, agents, representatives and licensors harmless from and
against all Liabilities (A) which are asserted by a Third Party or sublicensee
(including, but not limited to, product liability claims) to the extent arising
from the development, manufacture, use or sale of the Licensed Products, to the
extent arising out of or attributable to any negligent act or omission or
willful misconduct on the part of ABBOTT, its employees, agents, or
representatives or arising from any other theory of liability (except to the
extent such Liabilities arise from SPECTRx's directors', employees', agents',
representatives' or licensors' negligence or willful misconduct subject to the
limitation in Section 11.1); or (B) to the extent arising from a breach of a
representation or warranty in Section 9.2.
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11.3 Conditions of Indemnification. If either party expects to seek
indemnification under this Article, it shall promptly give notice to the
indemnifying party of the basis for such claim of indemnification. If
indemnification is sought as a result of any Third Party or sublicensee claim or
suit, such notice to the indemnifying party shall be within fifteen (15) days
after receipt by the other party of such claim or suit or within such time
period as not to materially prejudice the rights of the indemnifying party (if
to ABBOTT, notice to ABBOTT Laboratories, Risk Management, D-317, 100 Abbott
Park Road, Abbott Park, IL 60064-3500; if to SPECTRx, notice as set forth in
Section 14.2). Each party shall cooperate fully with the other party in the
defense of all such claims or Suits. No offer of settlement, settlement or
compromise shall be binding on a party hereto without its prior written consent
(which consent will not be unreasonably withheld) unless such settlement fully
releases the other party without any liability, loss, cost or obligation to such
party.
12. LIMITATION OF LIABILITY AND REMEDIES
12.1 Liability Limitation. EXCEPT FOR THIRD PARTY OR SUBLICENSEE
LIABILITY ARISING UNDER ARTICLE 11, IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR
INDIRECT, INCIDENTAL, PENAL OR CONSEQUENTIAL DAMAGES, OR OTHER SIMILAR DAMAGES
ARISING OUT OF THIS AGREEMENT.
12.2 Exclusive Remedies The remedies set forth in this Agreement shall
constitute the sole and exclusive remedies of the parties hereunder and the
parties shall not avail themselves of any other remedies, whether in equity or
at law, except that either party may seek injunctive relief and/or damages for
violation of Article 13.
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13. CONFIDENTIAL INFORMATION
13.1 Due Care. It is recognized by the parties that during the
term of this Agreement, the parties will exchange Confidential
Information pertaining to their performance hereunder. Each party will exercise
due care to prevent the disclosure of Confidential Information of the other
party.
13.2 Permitted Disclosures.
(A) Notwithstanding the above, nothing contained in this
Agreement shall preclude SPECTRx or ABBOTT from utilizing or disclosing to
others its Confidential Information or utilizing Confidential Information
received from the other party as may be required (i) for regulatory purposes,
including obtaining FDA or other governmental approvals subject to requesting
confidential treatment; (ii) for audit, tax or customs purposes subject to
requesting confidential treatment; (iii) for purposes of preparing Patent
applications consistent with the terms of this Agreement; (iv) to inform
investors and potential investors of SPECTRx of the pertinent terms of this
Agreement provided that such investors or potential investors have agreed in
writing to abide by terms of confidentiality substantially similar to those
under this Article; (v) by court or other government order, provided that the
party subject to such order notifies the other party and reasonably cooperates
with the other parties' efforts to obtain a protective order covering such
Confidential Information, or (vi) as otherwise required by law, provided that if
SPECTRx makes such disclosure, ABBOTT shall be given the opportunity for prior
review of and comment on (which comment will be considered by SPECTRx) any such
disclosure of ABBOTT Confidential Information as well as any references to
ABBOTT, the transactions under this Agreement, or this Agreement, including, but
not limited to, review and comment on any requests for redaction of ABBOTT or
SPECTRx Confidential Information, the redacted document, any registration
statements or other accompanying documents.
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(B) In addition to the foregoing, ABBOTT and SPECTRx may
disclose the Confidential Information of the other party, only to Third Parties
who have a reasonable need for the Confidential Information in the performance
of their services in connection with the matters set forth in this Agreement or
otherwise within the scope of the licenses set forth in Article 4; who are
informed of the confidential nature of the Confidential Information; and who are
bound not to disclose such Confidential Information.
(C) ABBOTT shall not use Confidential Information in Prior
Disclosures for use in conjunction with Delivery Applications.
13.3 Publication.SPECTRx shall not publish nor make any presentation
regarding the Research Program, or results of the Research Program unless such
information has been previously published by ABBOTT or is in the public domain
without breach of this Agreement by SPECTRx.
13.4 Other Agreements. The parties have entered into a Confidential
Disclosure Agreement dated December 13, 1995 ("CDA"). On and after the Effective
Date of this Agreement, all subject matter conveyed or covered under this
Agreement or the CDA shall be governed in all respects by the confidentiality
provisions contained in this Article 13. The obligations of the parties set
forth in this Article 13 shall apply during the term hereof and for a period of
five (5) years after the date of early termination or expiration of this
Agreement or any extension thereof.
14. MISCELLANEOUS
14.1 Force Majeure
(A) Delay or failure on the part of either party in performing
its obligations under this Agreement shall not subject such party to any
liability to the other if such delay or failure is caused by or results from
acts such as but not limited to acts of God, fire, explosion, flood, drought,
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war, riot, sabotage, embargo, strikes or other labor trouble, or compliance with
any law, order or regulation of any government entity acting with color of
right.
(B) Upon occurrence of an event of force majeure, the party
affected shall promptly notify the other in writing, setting forth the details
of the occurrence, and making every attempt to resume the performance of its
obligations as soon as practicable after the force majeure event ceases. If such
event prevents or will prevent performance of a material provision of the
Agreement by one party for more than six (6) months, then the other party may
immediately terminate this Agreement upon written notice to the non-performing
party, in accordance with Section 10.3.
14.2 Notices. Any notice permitted or required by this Agreement
shall be sent by (A) facsimile with a written confirmation copy, (B)
registered mail or (C) a recognized private mail carrier service, and such
notice shall be effective on the date received as indicated by the facsimile
imprint date in the case of (A) and the carrier receipt in the case of (B) and
(C), if sent and addressed as follows (or if regarding indemnification sent to
the address in Section 11.3) or to such other address as may be designated by a
party in writing:
If to SPECTRx: SPECTRx, Inc.
Attn: Mark A. Samuels
President, CEO
6025A Unity Drive
Norcross, GA 30071
Telefax: (770) 242-8639
With copy to: Richard Sherman, Esq.
QED Technologies
20 Valley Stream Parkway
Suite 265
Malvern, PA 19355
Telefax: (610) 695-2517
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If to ABBOTT: Abbott Laboratories
Director, Technology Acquisitions
Abbott Diagnostics Division --D9RK, AP6C
100 Abbott Park Road
Abbott Park, IL 60064-3500
Telefax: (847) 937-6951
With copy to: Division Vice President
Domestic Legal Division
D-322, AP6D
Abbott Laboratories
100 Abbott Park Road
Abbott Park, IL 60064-3500
Telefax: (847) 938-1206
14.3 Assignment. This Agreement may not be assigned or transferred by
either party, whether by operation of law or otherwise, without the consent of
the other party, which consent will not be unreasonably withheld.
14.4 Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their successors and permitted
assigns.
14.5 Alternative Dispute Resolution. The parties agree that any dispute
that arises in connection with this Agreement shall first be presented to the
respective presidents of the ABBOTT Diagnostic Products Division, and of
SPECTRx, or their designees, for resolution. If no resolution is reached, then
such dispute shall be resolved by binding Alternative Dispute Resolution ("ADR")
in the manner described in the Appendix 14.5.
14.6 Publicity. After the execution of this Agreement, a press release
regarding the transaction will be issued. The parties shall mutually agree upon
the content, text, timing and whether the press release shall be joint or issued
individually. During the term of this Agreement, neither party shall (A)
originate any publicity, news release or other public announcement, written or
oral, whether to the public press, stockholders or otherwise, relating to this
Agreement, any amendment
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hereto or performance hereunder, or (B) use the name of the other in any
publicity, news release or other public announcement, except (1) with the prior
written consent of the other party, or (2) as required by law, in which case the
originating party will give reasonable prior notice of such proposed disclosure
to the other party, will provide the basis for the disclosure and the content.
Consistent with applicable law, the other party will have the right to request
reasonable changes to the disclosure to protect its interests. If a party has
previously given consent to the other party for the public disclosure of certain
facts, then the other party does not have to obtain consent again to use the
same facts at a future time.
14.7 Relationship of the Parties. The relationship of the parties under
this Agreement is that of independent contractors. Nothing contained in this
Agreement is intended or is to be construed so as to constitute the parties as
partners, joint venturers, or either party as an agent or employee of the other.
Neither party has any express or implied right under this Agreement to assume or
create any obligation on behalf of or in the name of the other, or to bind the
other party to any contract, agreement or undertaking with any Third Party, and
no conduct of the parties shall be deemed to infer such right.
14.8 Appendices. All appendices and exhibits referenced herein are
hereby made a part of this Agreement.
14.9 Headings; Number The headings used in this Agreement are for
convenience only and are not a part of this Agreement. In this Agreement, the
singular shall include the plural and vice versa.
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14.10 Waiver No waiver by either party of any default, right or remedy
shall be effective unless in writing, nor shall any such waiver operate as a
waiver of any other or of the same default, right or remedy respectively, on a
future occasion.
14.11 Severability If any term or provision of this Agreement shall for
any reason be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other term or
provision hereof, and there shall be substituted for the provision at issue a
valid and enforceable provision as similar as possible to the provision at
issue.
14.12 Entire Agreement, Amendment This Agreement sets forth the entire
understanding of the parties with respect to the subject matter hereof and
supersedes all prior agreements, written and oral, between the parties except
for the CDA and the agreement between ABBOTT, SPECTRx, NIMCO and ALTEA dated the
same as this Agreement. No modification of any of the terms of this Agreement
shall be deemed to be valid unless it is in writing and signed by both parties.
No course of dealing or usage of trade shall be used to modify the terms and
conditions herein.
14.13 Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of Delaware, excluding its conflict of laws
principles.
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized representative as of the day and
year first above written.
ABBOTT LABORATORIES SPECTRx, INC.
By: /s/ Thomas Hodson By: /s/ Mark A. Samuels
---------------------- ---------------------
Title: President and Chief Operating Officer Title: President and CEO
---------------------------------------- ------------------
Date: October 8, 1996 Date: October 9, 1996
-------------------------------------- ----------------
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SERIES C PREFERRED STOCK
PURCHASE AGREEMENT
SPECTRX, INC.
6025A UNITY DRIVE
NORCROSS, GA 30071
<PAGE> 63
TABLE OF CONTENTS
<TABLE>
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SECTION 1 Authorization and Sale of Preferred Stock..................................................................1
1.1 Authorization.......................................................................................1
1.2 Sales of Preferred..................................................................................1
SECTION 2 Closing Dates; Delivery....................................................................................1
2.1 Closing Date........................................................................................1
2.2 Delivery............................................................................................1
SECTION 3 Representations and Warranties of the Company..............................................................2
3.1 Organization and Standing; Articles and By-Laws.....................................................2
3.2 Corporate Power.....................................................................................2
3.3 Subsidiaries........................................................................................2
3.4 Capitalization......................................................................................2
3.5 Authorization.......................................................................................3
3.6 Labor Agreements and Actions........................................................................3
3.7 Agreements; Action..................................................................................3
3.8 Title to Properties and Assets; Liens, etc..........................................................4
3.9 Compliance with Other Instruments, None Burdensome, etc.............................................4
3.10 Litigation, etc.....................................................................................5
3.11 Employees...........................................................................................5
3.12 Registration Rights.................................................................................5
3.13 Governmental Consent, etc...........................................................................5
3.14 Offering............................................................................................5
3.15 Brokers or Finders; Other Offers....................................................................6
3.16 Patents and Trademarks..............................................................................6
3.17 Financial Statements; No Material Adverse Change....................................................6
3.18 Disclosure..........................................................................................6
SECTION 4 Representations and Warranties of the Purchaser............................................................7
4.1 Experience..........................................................................................7
4.2 Investment..........................................................................................7
4.3 Rule 144............................................................................................7
4.4 No Public Market....................................................................................7
4.5 Access to Data......................................................................................7
4.6 Authorization.......................................................................................8
4.7 Brokers or Finders..................................................................................8
4.8 Tax Liability.......................................................................................8
4.9 Legend..............................................................................................8
</TABLE>
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TABLE OF CONTENTS
(CONTINUED)
<TABLE>
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SECTION 5 Conditions to Closing of Purchaser.........................................................................8
5.1 Representations and Warranties Correct..............................................................8
5.2 Covenants...........................................................................................9
5.3 Opinion of Company's Counsel........................................................................9
5.4 Compliance Certificate..............................................................................9
5.5 Blue Sky............................................................................................9
5.6 Amended and Restated Articles.......................................................................9
5.7 Registration Rights Agreement.......................................................................9
5.8 Development and License Agreement...................................................................9
5.9 Secretary's Certificate.............................................................................9
SECTION 6 Conditions to Closing of Company...........................................................................9
6.1 Representations....................................................................................10
6.2 Blue Sky...........................................................................................10
6.3 Amended and Restated Articles......................................................................10
6.4 Legal Matters......................................................................................10
SECTION 7 Affirmative Covenants of the Company and the Purchaser....................................................10
7.1 Financial Information..............................................................................10
7.2 Assignment of Rights to Financial Information......................................................10
7.3 Inspection.........................................................................................11
7.4 Termination of Covenants...........................................................................11
SECTION 8 Registration Rights.......................................................................................11
SECTION 9 Miscellaneous.............................................................................................11
9.1 Governing Law......................................................................................11
9.2 Survival...........................................................................................11
9.3 Successors and Assigns.............................................................................11
9.4 Entire Agreement; Amendment........................................................................11
9.5 Notices, etc.......................................................................................12
9.6 Delays or Omissions................................................................................12
9.7 Georgia Legend.....................................................................................12
9.8 Expenses...........................................................................................13
9.9 Finder's Fees......................................................................................13
9.10 Counterparts.......................................................................................13
9.11 Severability.......................................................................................13
9.12 Titles and Subtitles...............................................................................13
</TABLE>
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TABLE OF CONTENTS
(CONTINUED)
EXHIBITS
A Amended and Restated Certificate of Incorporation
B Exceptions to Representations and Warranties
C Proprietary Information Agreement
D Amended and Restated Registration Rights Agreement
E Legal Opinion
F License Agreement
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SPECTRX, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
This Agreement is made as of October 21, 1996 between SpectRx, Inc., a
Delaware corporation located at 6025A Unity Drive, Norcross, Georgia 30071 (the
"Company"), and Abbott Laboratories, an Illinois corporation located at 100
Abbott Park Road, Abbott Park, Illinois 60064 (the "Purchaser").
SECTION 1
AUTHORIZATION AND SALE OF PREFERRED STOCK
1.1 AUTHORIZATION. The Company will authorize the sale and issuance of
up to 500,000 shares of its Series C Preferred Stock (the "Series C Shares"),
having the rights, privileges and preferences as set forth in the Amended and
Restated Certificate of Incorporation (the "Articles") in the form attached to
this Agreement as Exhibit A.
1.2 SALES OF PREFERRED. Subject to the terms and conditions hereof, the
Company will severally issue and sell to the Purchaser and the Purchaser will
buy from the Company 500,000 Series C Shares the Closing (as defined below) for
the purchase price of $6.00 per share.
SECTION 2
CLOSING DATES; DELIVERY
2.1 CLOSING DATE. The closing of the purchase and sale of the Series C
Shares hereunder (the "Closing") shall be held at the offices of Wilson,
Sonsini, Goodrich & Rosati, Professional Corporation, 650 Page Mill Road, Palo
Alto, California 94304 at 9:00 a.m., local time, on October 21, 1996 or at such
other time and place upon which the Company and the Purchaser shall agree. The
Closing shall occur simultaneously with or promptly after execution and delivery
of this Agreement by the Purchaser and the Company, but in any event within ten
(10) days of the satisfaction of the conditions set forth in Section 5.
2.2 DELIVERY. At the Closing, the Company will deliver to the Purchaser
a certificate, registered in the Purchaser's name, representing the 500,000
Series C Shares to be purchased by the Purchaser at the Closing, against payment
of the purchase price therefor by cancellation of indebtedness, by check payable
to the Company, or by wire transfer per the Company's wiring instructions.
<PAGE> 67
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on Exhibit B attached hereto, the Company
represents and warrants to the Purchaser as follows:
3.1 ORGANIZATION AND STANDING; ARTICLES AND BY-LAWS. The Company is a
corporation duly organized and validly existing under, and by virtue of, the
laws of the State of Delaware and is in good standing under such laws. The
Company has requisite corporate power and authority to own and operate its
properties and assets, and to carry on its business as presently conducted and
as proposed to be conducted. The Company is not presently qualified to do
business as a foreign corporation in any jurisdiction other than Georgia, and
the failure to be so qualified will not have a material adverse affect on the
Company's business as now conducted or as now proposed to be conducted.
3.2 CORPORATE POWER. The Company will have at the Closing all requisite
legal and corporate power and authority to execute and deliver this Agreement
and the agreements set forth as Exhibits hereto (collectively, the
"Agreements"), to sell and issue the Series C Shares hereunder, to issue the
Common Stock issuable upon conversion of the Series C Shares and the Series C1
Preferred Stock and to carry out and perform its obligations under the terms of
the Agreements.
3.3 SUBSIDIARIES. The Company has no subsidiaries or affiliated
companies and does not otherwise own or control, directly or indirectly, any
equity interest in any corporation, association or business entity.
3.4 CAPITALIZATION. The authorized capital stock of the Company
consists or will, upon the filing of the Articles, consist of 15,000,000 shares
of Common Stock, 3,560,000 shares of Series A Preferred Stock, 3,560,000 shares
of Series A1 Preferred Stock, 1,375,000 shares of Series B Preferred Stock,
1,375,000 shares of Series B1 Preferred Stock, 500,000shares of Series C
Preferred Stock and 500,000 shares of Series C1 Preferred Stock (the Series C
and Series C1 Preferred Stock shall be referred to as the "Preferred Stock").
Immediately prior to the Closing 2,083,500 shares of Common Stock, 3,103,784
shares of Series A Preferred Stock and 1,300,000 shares of Series B Preferred
Stock will be outstanding and no other shares of capital stock will be
outstanding. There are also outstanding immediately prior to the Closing
warrants to purchase an aggregate of 1,268,643 shares of Common Stock and
360,000 shares of Series A Preferred Stock. All of the outstanding shares of
Common Stock, Series A Preferred Stock and Series B Preferred Stock are duly
authorized, validly issued, fully paid and nonassessable, and were issued in
compliance with applicable federal and state securities laws. The Series C
Shares, when issued pursuant to the terms of this Agreement, will be duly
authorized, validly issued, fully paid and nonassessable. The Company has
reserved 5,435,000 shares of Common Stock for issuance upon conversion of the
Preferred Stock, and 1,150,000 shares of its Common Stock for issuance pursuant
to its 1995 Incentive Stock Plan. The Company has also reserved 1,268,643 shares
of Common Stock and 360,000 shares of Series A Preferred Stock for issuance upon
the exercise of warrants to purchase
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shares of Common Stock and Series A Preferred Stock outstanding as of the
Closing. Except for those set forth in the Agreements, there are no options,
warrants or other rights (including conversion or preemptive rights) or
agreements outstanding to purchase any of the Company's authorized and unissued
capital stock.
3.5 AUTHORIZATION. All corporate action on the part of the Company, its
officers, directors and stockholders necessary for the authorization, execution,
delivery and performance of the Agreements by the Company, the authorization,
sale, issuance and delivery of the Series C Shares (and the Common Stock
issuable upon conversion of the Preferred Stock) and the performance of all of
the Company's obligations under the Agreements has been taken or will be taken
prior to the Closing. The Agreements, when executed and delivered by the
Company, shall constitute valid and binding obligations of the Company,
enforceable in accordance with their terms, except as the indemnification
provisions of paragraph 7 of the Registration Rights Agreement (as defined
below) hereof may be limited by principles of public policy, and subject to laws
of general application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies. The Series C Shares, when issued in compliance with
the provisions of this Agreement, will be validly issued, will be fully paid and
nonassessable, and will have the rights, preferences and privileges described in
the Articles; the Common Stock issuable upon conversion of the Preferred Stock
has been duly and validly reserved and, when issued in compliance with the
provisions of this Agreement and the Articles, will be validly issued, and will
be fully paid and nonassessable; and the Preferred Stock and such Common Stock
will be free of any liens or encumbrances, assuming the Purchaser takes the
Series C Shares with no notice thereof, other than any liens or encumbrances
created by or imposed upon the holders; provided, however, that the Preferred
Stock (and the Common Stock issuable upon conversion thereof) may be subject to
restrictions on transfer under state and/or federal securities laws as set forth
herein.
3.6 LABOR AGREEMENTS AND ACTIONS. The Company is not bound by or
subject to (and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or arrangement with
any labor union, and no labor union has requested or, to the knowledge of the
Company, has sought to represent any of the employees, representatives or agents
of the Company. There is no strike or other labor dispute involving the Company
pending, or to the knowledge of the Company threatened, which could have a
material adverse effect on the assets, properties, financial condition,
operating results, or business of the Company, nor is the Company aware of any
labor organization activity involving its employees. The Company is not aware
that any officer or key employee, or that any group of key employees, intends to
terminate their employment with the Company, nor does the Company have a present
intention to terminate the employment of any of the foregoing. The employment of
each officer and, to the best of the Company's knowledge, each employee of the
Company is terminable at the will of the Company.
3.7 AGREEMENTS; ACTION.
(a) Except for agreements explicitly contemplated hereby,
there are no agreements, understandings or proposed transactions between the
Company and any of its officers, directors, affiliates, or any affiliate thereof
nor are there agreements or understandings between any
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person and/or entities, which affects or relates to the voting or giving of
written consents with respect to any security or by a director of the Company.
(b) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company is a party or by which it is bound which may involve (i) obligations
(contingent or otherwise) of, or payments to the Company in excess of, $5,000,
or (ii) the license of any patent, copyright, trade secret or other proprietary
right to or from the Company or (iii) provisions restricting or affecting the
development, manufacture or distribution of the Company's products or services
or (iv) indemnification by the Company with respect to infringements of
proprietary rights.
(c) The Company has not (i) declared or paid any dividends, or
authorized or made any distribution upon or with respect to any class or series
of its capital stock, (ii) incurred any indebtedness for money borrowed or any
other liabilities individually in excess of $5,000 or, in the case of
indebtedness and/or liabilities individually less than $5,000, in excess of
$25,000 in the aggregate, (iii) made any loans or advances to any person, other
than ordinary advances for travel expenses, or (iv) sold, exchanged or otherwise
disposed of any of its assets or rights, other than the sale of its inventory in
the ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
3.8 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company has
good and marketable title to its properties and assets, and has good
title to all its leasehold interests, in each case subject to no mortgage,
pledge, lien, lease, encumbrance or charge, other than (i) the lien of current
taxes not yet due and payable, and (ii) possible minor liens and encumbrances
which do not in any case materially detract from the value of the property
subject thereto or materially impair the operations of the Company, and which
have not arisen otherwise than in the ordinary course of business. The Company
has timely filed or will file with appropriate taxing authorities all returns
and other information required with respect to taxes (regardless of form) for
all taxable periods ending on or prior to the Closing; all such returns shall
be or have been complete and accurate in all material respects.
3.9 COMPLIANCE WITH OTHER INSTRUMENTS, NONE BURDENSOME, ETC. The
Company is not in violation or default of any term of its Articles or Bylaws, or
in any material respect of any term or provision of any material mortgage,
indebtedness, indenture, contract, agreement, instrument, judgment, order or
decree, and to the best of its knowledge is not in violation of any statute,
rule or regulation applicable to the Company where such violation would
materially and adversely affect the Company. The execution, delivery and
performance of and compliance with the Agreements, and the issuance of the
Series C Shares and the Common Stock issuable upon conversion of the Preferred
Stock, have not resulted and will not result in any material violation of, or
conflict with, or constitute,
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with or without the passage of time and the giving of notice, a material
violation or default under the Company's Articles or Bylaws or any of its
agreements, nor result in the creation of any mortgage, pledge, lien,
encumbrance or charge upon any of the properties or assets of the Company; and
there is no such violation or default which materially and adversely affects the
business of the Company or any of its properties or assets.
3.10 LITIGATION, ETC. There are no actions, suits, proceedings or
investigations pending against the Company or its properties before any court or
governmental agency (nor, to the best of the Company's knowledge, is there any
reasonable basis therefor or threat thereof). The foregoing includes, without
limitation, actions pending or threatened (or any basis therefor known to the
Company) involving the prior employment of any of the Company's employees, their
use in connection with the Company's business of any information or techniques
allegedly proprietary to any of their former employers or their obligations
under any agreement with their former employers. The Company is not a party or
subject to the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company currently pending or which the
Company intends to initiate.
3.11 EMPLOYEES. To the best of the Company's knowledge, no employee of
the Company is in violation of any term of any employment contract, patent
disclosure agreement or any other contract or agreement relating to the
relationship of such employee with the Company or any other party because of the
nature of the business conducted or to be conducted by the Company. Each
employee of the Company with access to confidential or proprietary information
has executed a Proprietary Information Agreement, the form of which is attached
hereto as Exhibit D.
3.12 REGISTRATION RIGHTS. Except as set forth in the Amended and
Restated Registration Rights Agreement attached hereto as Exhibit D (the
"Registration Rights Agreement"), the Company is not under any contractual
obligation to register (as defined in Section 1 of the Registration Rights
Agreement) any of its presently outstanding securities or any of its securities
which may hereafter be issued.
3.13 GOVERNMENTAL CONSENT, ETC. No consent, approval or authorization
of or designation, declaration or filing with any governmental authority on the
part of the Company is required in connection with the valid execution and
delivery of this Agreement, or the offer, sale or issuance of the Series C
Shares (and the Common Stock issuable upon conversion of the Preferred Stock),
or the consummation of any other transaction contemplated hereby, except (a)
filing of the Articles in the office of the Delaware Secretary of State, and (b)
qualification (or taking such action as may be necessary to secure an exemption
from qualification, if available) of the offer and sale of the Series C Shares
(and the Common Stock issuable upon conversion of the Preferred Stock) under
applicable state securities laws, which filings and qualifications, if required,
will be accomplished in a timely manner.
3.14 OFFERING. Subject to the accuracy of the Purchaser's
representations in Section 4 hereof, the offer, sale and issuance of the Series
C Shares to be issued in conformity with the terms of this Agreement, and the
issuance of the Common Stock to be issued upon conversion of the Preferred
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Stock, constitute transactions exempt from the registration requirements of
Section 5 of the Securities Act of 1933, as amended (the "Securities Act") and
in compliance with applicable state securities laws.
3.15 BROKERS OR FINDERS; OTHER OFFERS. The Company has not incurred,
and will not incur, directly or indirectly, as a result of any action taken by
the Company, any liability for brokerage or finders' fees or agents' commissions
or any similar charges in connection with this Agreement.
3.16 PATENTS AND TRADEMARKS. There are no outstanding options,
licenses, or agreements of any kind relating to the intellectual property of the
Company. The Company is not bound by or a party to any options, licenses or
agreements of any kind with respect to the patents, trademarks, service marks,
trade names, copyrights, trade secrets, licenses, information, proprietary
rights and processes of any other person or entity. The Company has not received
any communications alleging that the Company has violated or, by conducting its
business as proposed, would violate any of the patents, trademarks, service
marks, trade names, copyrights or trade secrets or other proprietary rights of
any other person or entity. The Company is not aware that any of its employees
is obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with the use of his
best efforts to promote the interests of the Company or that would conflict with
the Company's business as proposed to be conducted. Neither the execution nor
delivery of this Agreement, nor the carrying on of the Company's business by the
employees of the Company, nor the conduct of the Company's business as proposed,
will, to the Company's knowledge, conflict with or result in a breach of the
terms, conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any of such employees is now obligated. The
Company does not believe it is or will be necessary to utilize any inventions of
any of its employees (or people it currently intends to hire) made prior to
their employment by the Company.
3.17 FINANCIAL STATEMENTS; NO MATERIAL ADVERSE CHANGE. The audited
financial statements of the Company for the fiscal years ended December 31,
1993, December 31, 1994 and December 31, 1995 (the "Financial Statements"),
which include audited balance sheets, statements of operations, statements of
stockholders' equity and statements of cash flows as of such dates and for the
periods then ended, have been prepared in accordance with generally accepted
accounting principles consistently applied and fairly present the financial
condition and results of operations of the Company as of such dates and for the
periods then ended. Except as set forth in the Schedule of Exceptions or as set
forth in the Financial Statements (including the footnotes thereto), there are
no liabilities, debts, claims or obligations, whether accrued, absolute,
contingent or otherwise, of or affecting the Company or its property or assets.
Except as set forth in the Schedule of Exceptions, since December 31, 1995 there
has been no material adverse change in the financial condition, operating
results, assets, operation or business prospects of the Company.
3.18 DISCLOSURE. This Agreement, together with the Exhibits attached
hereto and all other certificates delivered in connection herewith, when taken
as a whole, does not contain any untrue statement of a material fact or omit any
material fact necessary in order to make the statements contained herein not
misleading in light of the circumstances under which they were made. The
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Company has fully provided each Purchaser with all the information such
Purchaser has requested for deciding whether to purchase the Series C Shares and
all information which the Company believes is reasonably necessary to enable
such Purchaser to make such decision.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby severally represents and warrants to the Company
with respect to the purchase of the Series C Shares as follows:
4.1 EXPERIENCE. It has substantial experience in evaluating and
investing in private placement transactions of securities in companies similar
to the Company so that it is capable of evaluating the merits and risks of its
investment in the Company and has the capacity to protect its own interests.
4.2 INVESTMENT. It is acquiring the Series C Shares and the Common
Stock underlying the Preferred Stock for investment for its own account, not as
a nominee or agent, and not with the view to, or for resale in connection with,
any distribution thereof. It understands that the Series C Shares to be
purchased and the Common Stock underlying the Preferred Stock have not been, and
will not be, registered under the Securities Act by reason of a specific
exemption from the registration provisions of the Securities Act, the
availability of which depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of such Purchaser's representations as
expressed herein.
4.3 RULE 144. It acknowledges that the Preferred Stock and the
underlying Common Stock must be held indefinitely unless subsequently registered
under the Securities Act or unless an exemption from such registration is
available. It is aware of the provisions of Rule 144 promulgated under the
Securities Act which permit limited resale of shares purchased in a private
placement subject to the satisfaction of certain conditions, including, among
other things, the existence of a public market for the shares, the availability
of certain current public information about the Company, the resale occurring
not less than two years after a party has purchased and paid for the security to
be sold, the sale being effected through a "broker's transaction" or in
transactions directly with a "market maker" and the number of shares being sold
during any three-month period not exceeding specified limitations.
4.4 NO PUBLIC MARKET. It understands that no public market now exists
for any of the securities issued by the Company and that the Company has made no
assurances that a public market will ever exist for the Company's securities.
4.5 ACCESS TO DATA. It has had an opportunity to discuss the Company's
business, management and financial affairs with its management. It has also had
an opportunity to ask questions of officers of the Company, which questions were
answered to its satisfaction. It
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understands that such discussions, as well as any written information issued by
the Company, were intended to describe certain aspects of the Company's business
and prospects but were not a thorough or exhaustive description.
4.6 AUTHORIZATION. This Agreement when executed and delivered by such
Purchaser will constitute a valid and legally binding obligation of the
Purchaser, enforceable in accordance with its terms, except as the
indemnification provisions of paragraph 7 of the Registration Rights Agreement
may be limited by principles of public policy, and subject to laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief or other
equitable remedies.
4.7 BROKERS OR FINDERS. The Company has not, and will not, incur,
directly or indirectly, as a result of any action taken by such Purchaser, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement.
4.8 TAX LIABILITY. It has reviewed with its own tax advisors the
federal, state, local and foreign tax consequences of this investment and the
transactions contemplated by this Agreement (including any tax consequences
resulting from the recently enacted tax legislation). It relies solely on such
advisors and not on any statements or representations of the Company or any of
its agents. It understands that it (and not the Company) shall be responsible
for its own tax liability that may arise as a result of this investment or the
transactions contemplated by this Agreement.
4.9 LEGEND. It is understood that the certificates evidencing the
Series C Shares will bear the following legend: "THESE SECURITIES HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN
EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS
SOLD PURSUANT TO RULE 144 OF SUCH ACT."
SECTION 5
CONDITIONS TO CLOSING OF PURCHASER
The Purchaser's obligation to purchase the Series C Shares at the
Closing is, at the option of the Purchaser, subject to the fulfillment of the
following conditions:
5.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties made by the Company in Section 3 hereof shall be true and correct in
all material respects as of the Closing.
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5.2 COVENANTS. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company on or prior to the Closing shall
have been performed or complied with in all material respects.
5.3 OPINION OF COMPANY'S COUNSEL. The Purchaser shall have received
from Wilson Sonsini Goodrich & Rosati, counsel to the Company, an opinion
addressed to it, dated the Closing Date, in substantially the form of Exhibit E.
5.4 COMPLIANCE CERTIFICATE. The Company shall have delivered to the
Purchaser a certificate of the Company executed by the President of the Company,
dated as of the Closing certifying to the fulfillment of the conditions
specified in Sections 5.1 and 5.2 of this Agreement.
5.5 BLUE SKY. The Company shall have obtained all necessary state
securities law permits and qualifications, or have the availability of
exemptions therefrom, required by any state for the offer and sale of the Series
C Shares and the Common Stock issuable upon conversion of the Preferred Stock.
5.6 AMENDED AND RESTATED ARTICLES. The Articles shall have been filed
with the Delaware Secretary of State.
5.7 REGISTRATION RIGHTS AGREEMENT. The Company and the parties listed
thereon shall have executed and delivered the Registration Rights Agreement in
substantially the form attached hereto as Exhibit D.
5.8 DEVELOPMENT AND LICENSE AGREEMENT. The Company and the Purchaser
shall have entered into a research and development and license agreement in the
form attached hereto as Exhibit F.
5.9 SECRETARY'S CERTIFICATE. The Company shall have delivered to the
Purchaser a certificate of the Company executed by the Secretary of the Company,
dated as of the Closing, certifying (i) resolutions adopted by the Board of
Directors and the stockholders of the Company authorizing the execution of the
Agreement, the filing of the Restated Articles and the transactions contemplated
hereby; (ii) the Restated Articles and Bylaws of the Company; copies of third
party consents, approvals and filings required in connection with the
consummation of the transactions contemplated by the Agreement; and (iii) such
other documents relating to the transactions contemplated by the Agreement.
SECTION 6
CONDITIONS TO CLOSING OF COMPANY
The Company's obligation to sell and issue the Series C Shares at the
Closing is, at the option of the Company, subject to the fulfillment as of the
Closing of the following conditions:
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6.1 REPRESENTATIONS. The representations made by the Purchaser in
Section 4 hereof shall be true and correct when made, and shall be true and
correct on the Closing.
6.2 BLUE SKY. The Company shall have obtained all necessary state
securities law permits and qualifications, or have the availability of
exemptions therefrom, required by any state for the offer and sale of the Series
C Shares and the Common Stock issuable upon conversion of the Preferred Stock.
6.3 AMENDED AND RESTATED ARTICLES. The Articles shall have been filed
with the Delaware Secretary of State.
6.4 LEGAL MATTERS. All material matters of a legal nature which pertain
to this Agreement, and the transactions contemplated hereby, shall have been
reasonably approved by counsel to the Company.
SECTION 7
AFFIRMATIVE COVENANTS OF THE COMPANY AND THE PURCHASER
The Company hereby covenants and agrees as follows:
7.1 FINANCIAL INFORMATION. As long as the Purchaser holds not less than
66,700 shares of Preferred Stock and/or Common Stock issued upon conversion of
the Preferred Stock, to furnish to the Purchaser:
(a) As soon as practicable after the end of each fiscal year,
and in any event within 120 days thereafter, consolidated balance sheets of the
Company and its subsidiaries, if any, as of the end of such fiscal year, and
consolidated statements of income and consolidated statements of changes in
financial position of the Company and its subsidiaries, if any, for such year,
prepared in accordance with generally accepted accounting principles and setting
forth in each case in comparative form the figures for the previous fiscal year
(or, at the election of the Company, setting forth in comparative form the
budgeted figures for the fiscal year then reported), all in reasonable detail
and audited by independent public accountants of national standing selected by
the Company.
(b) As soon as practicable after the end of each calendar
quarter, and in any event within 15 days thereafter, an unaudited quarterly
report including a balance sheet, profit and loss statement cash flow analysis
(prepared in accordance with generally accepted accounting principles other than
for accompanying notes and subject to changes resulting from year-end audit
adjustments).
7.2 ASSIGNMENT OF RIGHTS TO FINANCIAL INFORMATION. The rights granted
pursuant to Section 7.1 may not be assigned or otherwise conveyed by any
Purchaser or by any subsequent transferee of any such rights without the prior
written consent of the Company; provided, however, that any Purchaser may assign
to any transferee, other than a competitor of the Company, and after
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giving notice to the Company, the rights granted pursuant to Section 7.1 to (i)
a transferee who acquires at least 66,700 shares of Preferred Stock and/or
Common Stock issued upon conversion of the Preferred Stock (appropriately
adjusted for recapitalizations) or (ii) any constituent partner of a Purchaser.
7.3 INSPECTION. The Company shall permit the Purchaser, at such
Purchaser's expense, to visit and inspect the Company's properties, to examine
its books of account and records and to discuss the Company's affairs, finances
and accounts with its officers, all at such reasonable times as may be requested
by the Purchaser, provided, however, that the Company shall not be obligated
pursuant to this Section 7.3 to provide access to any information which it
reasonably considers to be a trade secret or similar confidential information.
7.4 TERMINATION OF COVENANTS. The covenants set forth in Sections 7.1,
7.2 and 7.3 shall terminate and be of no further force or effect at such time as
the Company is required to file reports pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended.
SECTION 8
REGISTRATION RIGHTS
The Purchaser shall have the registration rights set forth in the
Registration Rights Agreement attached hereto as Exhibit D.
SECTION 9
MISCELLANEOUS
9.1 GOVERNING LAW. This Agreement shall be governed in all respects by
the internal laws of the State of Delaware as applied to agreements entered into
among Delaware residents to be performed entirely within Delaware.
9.2 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by the Purchaser and the
Closing of the transactions contemplated hereby.
9.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto,
provided, however, that the rights of the Purchaser to purchase the Preferred
Stock shall not be assignable without the consent of the Company.
9.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other documents
delivered pursuant hereto at the Closing constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof, and no party shall be liable or
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bound to any other party in any manner by any warranties, representations or
covenants except as specifically set forth herein or therein. Except as
expressly provided herein, neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated other than by a written instrument
signed by the party against whom enforcement of any such amendment, waiver,
discharge or termination is sought; provided, however, that holders of a
majority of the Common Stock issued or issuable upon conversion of the Preferred
Stock may, with the Company's prior written consent, waive, modify or amend on
behalf of the Purchaser, any provision hereof.
9.5 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or by facsimile transmission, or otherwise
delivered by hand or by messenger, addressed (a) if to the Purchaser, at the
Purchaser's address set forth above, or at such other address as such Purchaser
shall have furnished to the Company in writing, or (b) if to any other holder of
any shares, at such address as such holder shall have furnished the Company in
writing, or, until any such holder so furnishes an address to the Company, then
to and at the address of the last holder of such shares who has so furnished an
address to the Company, or (c) if to the Company, one copy should be sent to its
address set forth on the cover page of this Agreement and addressed to the
attention of the Corporate Secretary, or at such other address as the Company
shall have furnished to the Purchaser.
Each such notice or other communication shall for all purposes of
this Agreement be treated as effective or having been given when delivered if
delivered personally, or, if sent by mail, at the earlier of its receipt or 72
hours after the same has been deposited in a regularly maintained receptacle for
the deposit of the United States mail, addressed and mailed as aforesaid, or if
by facsimile transmission, as indicated by the facsimile imprint date.
9.6 DELAYS OR OMISSIONS. Except as expressly provided herein, no delay
or omission to exercise any right, power or remedy accruing to any holder of any
shares, upon any breach or default of the Company under this Agreement, shall
impair any such right, power or remedy of such holder nor shall it be construed
to be a waiver of any such breach or default, or an acquiescence therein, or of
or in any similar breach or default thereafter occurring; nor shall any waiver
of any single breach or default be deemed a waiver of any other breach or
default theretofore or thereafter occurring. Any waiver, permit, consent or
approval of any kind or character on the part of any holder of any breach or
default under this Agreement, or any waiver on the part of any holder of any
provisions or conditions of this agreement, must be in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
holder, shall be cumulative and not alternative.
9.7 GEORGIA LEGEND. The Purchaser acknowledges that each certificate
shall bear the following legend: THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN
RELIANCE ON PARAGRAPH 13 OF CODE SECTION 10-5-9 OF THE GEORGIA SECURITIES ACT OF
1973, AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT
UNDER SUCH ACT OR PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT.
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9.8 EXPENSES. The Company and the Purchaser shall bear its own legal
and other expenses with respect to this Agreement.
9.9 FINDER'S FEES. With respect to any finder's fees arising out of the
purchase of the Series C Shares pursuant to this Agreement:
(a) The Company hereby agrees to indemnify and to hold the
Purchaser harmless of and from any liability for any commission or compensation
in the nature of a finder's fee to any broker or other person or firm (and the
costs and expenses of defending against such liability or asserted liability)
for which the Company or any of its employees or representatives are
responsible.
(b) The Purchaser hereby agrees to indemnify and to hold the
Company harmless of and from any liability for any commission or compensation in
the nature of a finder's fee to any broker or other person or firm (and the
costs and expenses of defending against such liability or asserted liability)
for which such Purchaser or any of its employees or representatives, are
responsible.
9.10 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
9.11 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
9.12 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
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The foregoing agreement is hereby executed as of the date first above
written.
"PURCHASER" "COMPANY"
ABBOTT LABORATORIES, SPECTRX, INC.
an Illinois corporation a Delaware corporation
By: /s/ Thomas R. Hodgsen By: /s/ Mark A. Samuels
------------------------ --------------------
Title: President & Chief Operating Officer Title: President & CEO
------------------------------------- ------------------
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EXHIBIT A
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
<PAGE> 81
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED
CERTIFICATE OF "SPECTRX, INC.", FILED IN THIS OFFICE ON THE THIRTIETH DAY OF
SEPTEMBER, A.D., AT 4:30 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW
CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING.
/s/ Edward J. Freel
-----------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION:
2313878 8100 8128301
DATE:
960284480 10-01-96
<PAGE> 82
RESTATED CERTIFICATE OF INCORPORATION
OF
SPECTRX, INC.
SpectRx, Inc., a Corporation organized and existing under the laws of
the State of Delaware (the "Corporation"), hereby certifies that:
1. The name of the Corporation is SpectRx, Inc. The Corporation was
originally incorporated under the same name, and the original Certificate of
Incorporation was filed with the Secretary of State of the State of Delaware on
October 27, 1992.
2. This Certificate restates and amends the provisions of the
Corporation's Restated Certificate of Incorporation to read as set forth in
Exhibit A attached to this Certificate.
3. This restatement and amendment of the Corporation's Certificate of
Incorporation has been duly adopted by the Corporation's Board of Directors in
accordance with Sections 242 and 245 of the General Corporation Law of the State
of Delaware, and by the holders of each class of outstanding stock entitled to
vote thereon as a class by written consent given in accordance with Section 228
of the General Corporation Law of the State of Delaware. Written notice pursuant
to Section 228 has been given to those stockholders of the Corporation who have
not consented in writing to this action.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Restatement of Certificate of Incorporation to be signed by Mark A. Samuels, its
President, and attested by Robert D. Brownell, its Assistant Secretary, this
30th day of September, 1996.
SPECTRX, INC.
By: /s/ Mark A. Samuels
-------------------------------
Mark A. Samuels, President
ATTEST:
/s/ Robert D. Brownell
------------------------
Robert D. Brownell,
Assistant Secretary
<PAGE> 83
EXHIBIT A
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
SPECTRX, INC.
I
The name of this corporation is SpectRx, Inc. (the "Corporation").
II
The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle, Zip Code 19801. The name of its registered
agent at such address is The Corporation Trust Company.
III
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
IV
The Corporation is authorized to issue two classes of capital stock:
Preferred Stock, $0.001 par value per share, and Common Stock, $0.001 par value
per share. The total number of shares of Preferred Stock which the Corporation
shall have the authority to issue is 10,870,000 of which 3,560,000 shares shall
be designated Series A Preferred Stock ("Series A Preferred Stock"), 3,560,000
shares shall be designated Series A1 Preferred Stock ("Series A1 Preferred
Stock"), 1,375,000 shares shall be designated Series B Preferred Stock ("Series
B Preferred Stock"), 1,375,000 shares shall be designated Series B1 Preferred
Stock ("Series B1 Preferred Stock"), 500,000 shares shall be designated Series C
Preferred Stock ("Series C Preferred Stock"), and 500,000 shares shall be
designated Series C1 Preferred Stock ("Series C1 Preferred Stock"). The total
number of shares of Common Stock which the Corporation shall have the authority
to issue is 15,000,000. The Series A Preferred Stock, Series A1 Preferred Stock,
Series B Preferred Stock, Series B1 Preferred Stock, Series C Preferred Stock
and Series C1 Preferred Stock are herein collectively referred to as the
"Preferred Stock."
V
The rights, preferences, privileges and restrictions granted to or
imposed upon the Common Stock and the Preferred Stock are as follows:
<PAGE> 84
1. Dividends. The holders of Series A Preferred Stock, Series A1
Preferred Stock, Series B Preferred Stock, Series B1 Preferred Stock, Series C
Preferred Stock and Series C1 Preferred Stock shall be entitled, when and if
declared by the board of directors of the Corporation, to dividends out of
assets of the Corporation legally available therefor at the rate of $0.10,
$0.10, $0.40, $0.40, $0.60 and$0.60 per share, per annum, respectively.
Dividends on the Preferred Stock shall be payable in preference and prior to any
payment of any dividend on the Common Stock of the Corporation. Thereafter, the
holders of Common Stock shall be entitled, when and if declared by the board of
directors of the Corporation, to dividends out of assets of the Corporation
legally available therefor. Notwithstanding anything set forth in this paragraph
1, no dividends shall be payable on any shares of Common Stock issued with
respect to shares of Series A1 Preferred Stock, Series B1 Preferred Stock and
Series C1 Preferred Stock issued pursuant to paragraph 4(e)(ii)(A) and
4(e)(ii)(B). The right to dividends on shares of Common Stock and Preferred
Stock shall not be cumulative, and no right shall accrue to holders of Common
Stock or Preferred Stock by reason of the fact that dividends on said shares are
not declared in any prior period.
2. Liquidation Preference.
(a) Preference. In the event of any liquidation, dissolution
or winding up of the Corporation, either voluntarily or involuntarily, the
holders of Preferred Stock shall, subject to the right of each such holder to
convert such holder's shares of Preferred Stock into shares of Common Stock
pursuant to the provisions of Section 4 below, be entitled to receive, prior and
in preference to any distribution of any of the assets or surplus funds of the
Corporation to the holders of Common Stock of the Corporation by reason of their
ownership thereof, an amount equal to $1.00, $1.00, $4.00, $4.00, $6.00 and
$6.00 per share for each outstanding share of Series A Preferred Stock, Series
A1 Preferred Stock, Series B Preferred Stock, Series B1 Preferred Stock, Series
C Preferred Stock and Series C1 Preferred Stock, respectively, plus any declared
but unpaid dividends on such share. If upon such liquidation, dissolution or
winding up of the Corporation, the assets of the Corporation are insufficient to
provide for the cash payment described above to the holders of Preferred Stock,
such assets as are available shall be paid to the holders of Preferred Stock in
proportion to the full preferential amount each such holder is otherwise
entitled to receive.
After the payment or setting apart of payment to the holders
of Preferred Stock of the preferential amounts so payable to them, the holders
of Common Stock shall be entitled to receive any remaining assets of the
Corporation on a pro rata basis, based upon the number of shares held.
(b) Reorganization or Merger. A reorganization or merger of
the Corporation with or into any other corporation or corporations, or a sale of
all or substantially all of the assets of the Corporation shall be deemed to be
a liquidation within the meaning of this paragraph 2; provided that the holders
of Preferred Stock and Common Stock shall be paid in cash or in securities
received or in a combination thereof (which combination shall be in the same
proportions as the consideration received in the transaction). Any securities to
be delivered to the holders of the Preferred Stock and Common Stock upon a
merger, reorganization or sale of substantially all of the assets of the
Corporation shall be valued as follows:
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<PAGE> 85
(i) If traded on a securities exchange, the value
shall be deemed to be the average of the closing prices of the securities on
such exchange over the 30-day period ending three (3) business days prior to the
closing;
(ii) If actively traded over-the-counter, the value
shall be deemed to be the average of the closing bid prices over the 30-day
period ending three (3) business days prior to the closing; and
(iii) If there is no active public market, the value
shall be the fair market value thereof, as mutually determined by the
Corporation and the holders of not less than a majority of the outstanding
shares of Preferred Stock, provided that if the Corporation and the holders of a
majority of the outstanding shares of Preferred Stock are unable to reach
agreement, then by independent appraisal by an investment banker hired and paid
by the Corporation, but acceptable to the holders of a majority of the
outstanding shares of Preferred Stock.
(c) Noncash Distributions. If any of the assets of the
Corporation are to be distributed other than in cash under this paragraph 2 or
for any purpose, then the board of directors of the Corporation shall promptly
engage independent competent appraisers to determine the value of the assets to
be distributed to the holders of Preferred Stock or Common Stock. The
Corporation shall, upon receipt of such appraiser's valuation, give prompt
written notice to each holder of shares of Preferred Stock or Common Stock of
the appraiser's valuation.
3. Voting Rights.
(a) The holder of each share of Preferred Stock shall be
entitled to the number of votes equal to the number of shares of Common Stock
into which each share of Preferred Stock could be converted on the record date
for the vote or written consent of stockholders and, except as otherwise
required by law, shall have voting rights and powers equal to the voting rights
and powers of the Common Stock. The holder of each share of Preferred Stock
shall be entitled to notice of any stockholders' meeting in accordance with the
bylaws of the Corporation and shall vote with holders of the Common Stock upon
all matters submitted to a vote of stockholders, except those matters required
to be submitted to a class or series vote pursuant to paragraph 5 herein or by
law. Fractional votes shall not, however, be permitted and any fractional voting
rights resulting from the above formula (after aggregating all shares of Common
Stock into which shares of Preferred Stock held by each holder could be
converted) shall be rounded to the nearest whole number (with one-half rounded
upward to one).
(b) Notwithstanding the foregoing, as long as more than
800,000 shares of Preferred Stock are outstanding, the holders of Preferred
Stock, voting as a class, shall have the right to elect two members of the
Corporation's board of directors. The holders of Common Stock, voting as a
single class, shall have the right to elect all other members of the
Corporation's board of directors. Notwithstanding any Bylaw provisions to the
contrary, the stockholders entitled to elect a particular director shall be
entitled to remove such director or to fill a vacancy in the seat formerly
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<PAGE> 86
held by such a director, all in accordance with the applicable provisions
provided in the General Corporation Law of the State of Delaware.
4. Conversion. The holders of the Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Preferred Stock shall be
convertible without the payment of any additional consideration by the holder
thereof and, at the option of the holder thereof, at any time after the date of
issuance of such share at the office of the Corporation or any transfer agent
for the Preferred Stock. Each share of each series of Preferred Stock shall be
convertible into the number of fully paid and nonassessable shares of Common
Stock which results from dividing the Conversion Price (as hereinafter defined)
per share in effect for such series of Preferred Stock at the time of conversion
into the per share Conversion Value (as hereinafter defined) of such series.
Upon the filing of this Amended and Restated Certificate of Incorporation with
the Delaware Secretary of State, the initial Conversion Price per share of
Series A Preferred Stock, Series A1 Preferred Stock, Series B Preferred Stock,
Series B1 Preferred Stock, Series C Preferred Stock and Series C1 Preferred
Stock shall be $1.00, $1.00, $4.00, $4.00, $6.00 and $6.00, respectively. The
per share Conversion Value of the Series A Preferred Stock, the Series A1
Preferred Stock, the Series B Preferred Stock, the Series B1 Preferred Stock,
the Series C Preferred Stock and the Series C1 Preferred Stock shall be $1.00,
$1.00, $4.00, $4.00, $6.00 and $6.00, respectively. The initial Conversion Price
of the Series A Preferred Stock, the Series A1 Preferred Stock, the Series B
Preferred Stock, the Series B1 Preferred Stock, the Series C Preferred Stock and
the Series C1 Preferred Stock shall be subject to adjustments from time to time
as provided below. The number of shares of Common Stock into which a share of
Preferred Stock is convertible is hereinafter referred to as the "Conversion
Rate" of such series.
(b) Automatic Conversion. Each share of Preferred Stock shall
automatically be converted into shares of Common Stock at its then effective
Conversion Rate immediately upon the closing of a firm commitment underwritten
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended, covering the offer and sale of Common Stock
of which the aggregate gross proceeds attributable to sales for the account of
the Corporation exceed $10,000,000 at a per share issuance price of at least
$9.00 per share.
(c) Mechanics of Conversion. Before any holder of Preferred
Stock shall be entitled to convert the same into shares of Common Stock, such
holder shall surrender the certificate(s) therefor, duly endorsed, at the office
of the Corporation or of any transfer agent for the Preferred Stock and shall
give written notice to the Corporation at such office that the holder elects to
convert the same (except that no such written notice of election to convert
shall be necessary in the event of an automatic conversion pursuant to paragraph
4(b) hereof). The Corporation shall, as soon as practicable thereafter, issue
and deliver at such office to such holder of Preferred Stock certificate(s) for
the number of shares of Common Stock to which the holder shall be entitled as
aforesaid. Such conversion shall be deemed to have been made immediately prior
to the close of business on the date of such surrender of the shares of
Preferred Stock to be converted (except that in the case of an automatic
conversion pursuant to paragraph 4(b) hereof such conversion shall be
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<PAGE> 87
deemed to have been made immediately prior to the closing of the offering
referred to in paragraph 4(b)) and the person(s) entitled to receive the shares
of Common Stock issuable upon such conversion shall be treated for all purposes
as the record holder(s) of such shares of Common Stock on such date.
(d) Fractional Shares. In lieu of any fractional shares to
which the holder of Preferred Stock would otherwise be entitled, the Corporation
shall pay cash equal to such fraction multiplied by the fair market value of one
share of Common Stock as determined by the board of directors of the
Corporation. Whether or not fractional shares of Common Stock are issuable upon
such conversion shall be determined on the basis of the total number of shares
of Preferred Stock of each holder at the time converting into Common Stock and
the number of shares of Common Stock issuable upon such aggregate conversion.
(e) Adjustment of Conversion Price.
(i) Special Definitions. For purposes of this
paragraph 4(e), the following definitions shall apply:
(A) "Excluded Stock" shall mean:
(1) all shares of Common Stock issued and
outstanding on the date this document is filed with the Delaware Secretary of
State and all shares of Common Stock issued or issuable upon conversion of
Preferred Stock; and
(2) all shares of Common Stock or other
securities issued or issuable to officers, directors, consultants or employees
of the Corporation or lessors, lenders or licensors to the Corporation which
are approved by of the board of directors of the Corporation. All outstanding
shares of Excluded Stock (including shares of Common Stock issuable upon
conversion of the Preferred Stock) shall be deemed to be outstanding for all
purposes of the computations of subparagraph 4(e)(iii) below.
(B) "Financing" means any issuance of Common
Stock (including securities exercisable for or convertible into Common Stock)
in a transaction with gross proceeds to the Corporation equal to or greater
than $100,000 where the holders of Preferred Stock are offered an opportunity
to purchase their Preferred Stock Pro Rata Share of the additional shares of
Common Stock (including securities exercisable for or convertible into Common
Stock) issued in such transaction.
(C) "Preferred Stock Pro Rata Share" shall mean
the amount determined by multiplying the total number of shares of Common Stock
(including securities exercisable for or convertible into Common Stock) offered
for sale by the Corporation in a Financing to all parties by a fraction, (x)
the numerator of which is the total number of shares of Common Stock (including
securities convertible into Common Stock) held by such stockholder and (y) the
denominator of which is the total number of shares of Common Stock (including
securities
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convertible into Common Stock) then outstanding plus any shares reserved for
issuance pursuant to plans approved by the board of directors of the
Corporation.
(D) "Series A Dilutive Issuance" shall mean an
issuance of Common Stock (including securities exercisable for or convertible
into Common Stock) in a Financing for a consideration per share less than the
Conversion Price of the Series A Preferred Stock in effect on the date of and
immediately prior to such issue.
(E) "Series B Dilutive Issuance" shall mean an
issuance of Common Stock (including securities exercisable for or convertible
into Common Stock) in a Financing for a consideration per share less than the
Conversion Price of the Series B Preferred Stock in effect on the date of and
immediately prior to such issue.
(F) "Series C Dilutive Issuance" shall mean an
issuance of Common Stock (including securities exercisable for or convertible
into Common Stock) in a Financing for a consideration per share less than the
Conversion Price of the Series C Preferred Stock in effect on the date of and
immediately prior to such issue.
(G) "Participating Investor" shall mean any holder of
Preferred Stock that purchases at least its Preferred Stock Pro Rata Share of
either a Series A Dilutive Issuance or Series B Dilutive Issuance.
(H) "Non-Participating Investor" shall mean any
holder of Preferred Stock that is not a Participating Investor.
(ii) Shadow Preferred.
(A) Series A Preferred Stock. In the event the
Corporation issues additional shares of Common Stock (including securities
exercisable for or convertible into Common Stock) in a Series A Dilutive
Issuance, each share of Series A Preferred Stock held by each and every
Nonparticipating Investor shall, immediately prior to the closing of the
applicable Series A Dilutive Issuance (the "Closing"), be converted into one
fully paid and nonassessable share of Series A1 Preferred Stock plus such number
of fully paid and nonassessable shares of Common Stock as is determined by
multiplying one by the Forced Conversion Rate. The Forced Conversion Rate shall
be equal to (X) minus one, where (X) equals the per share Conversion Price of
Series A Preferred Stock immediately prior to the Closing divided into the per
share Conversion Value of Series A Preferred Stock. Upon the conversion of
Series A Preferred Stock held by a Nonparticipating Investor as set forth
herein, such shares of Series A Preferred Stock shall no longer be outstanding
on the books of the Corporation and the Nonparticipating Investor shall be
treated for all purposes as the record holder of such shares of Series A1
Preferred Stock and, if applicable, Common Stock upon the Closing of the
applicable Series A Dilutive Issuance.
(B) Series B Preferred Stock. In the event the
Corporation issues additional shares of Common Stock (including securities
exercisable for or convertible into Common
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Stock) in a Series B Dilutive Issuance, each share of Series B Preferred Stock
held by each and every Nonparticipating Investor shall, immediately prior to the
closing of the applicable Series B Dilutive Issuance (the "Closing"), be
converted into one fully paid and nonassessable share of Series B1 Preferred
Stock plus such number of fully paid and nonassessable shares of Common Stock as
is determined by multiplying one by the Forced Conversion Rate. The Forced
Conversion Rate shall be equal to (X) minus one, where (X) equals the per share
Conversion Price of Series B Preferred Stock immediately prior to the Closing
divided into the per share Conversion Value of Series B Preferred Stock. Upon
the conversion of Series B Preferred Stock held by a Nonparticipating Investor
as set forth herein, such shares of Series B Preferred Stock shall no longer be
outstanding on the books of the Corporation and the Nonparticipating Investor
shall be treated for all purposes as the record holder of such shares of Series
B1 Preferred Stock and, if applicable, Common Stock upon the Closing of the
applicable Series B Dilutive Issuance.
(C) Series C Preferred Stock. In the event the
Corporation issues additional shares of Common Stock (including securities
exercisable for or convertible into Common Stock) in a Series C Dilutive
Issuance, each share of Series C Preferred Stock held by each and every
Nonparticipating Investor shall, immediately prior to the closing of the
applicable Series C Dilutive Issuance (the "Closing"), be converted into one
fully paid and nonassessable share of Series C1 Preferred Stock plus such number
of fully paid and nonassessable shares of Common Stock as is determined by
multiplying one by the Forced Conversion Rate. The Forced Conversion Rate shall
be equal to (X) minus one, where (X) equals the per share Conversion Price of
Series C Preferred Stock immediately prior to the Closing divided into the per
share Conversion Value of Series C Preferred Stock. Upon the conversion of
Series C Preferred Stock held by a Nonparticipating Investor as set forth
herein, such shares of Series C Preferred Stock shall no longer be outstanding
on the books of the Corporation and the Nonparticipating Investor shall be
treated for all purposes as the record holder of such shares of Series C1
Preferred Stock and, if applicable, Common Stock upon the Closing of the
applicable Series C Dilutive Issuance.
(iii) Adjustment of Conversion Price for Issuance of Common
Stock. No adjustment in the Conversion Price of Series A1 Preferred Stock or
Series B1 Preferred Stock or Series C1 Preferred Stock shall be made in respect
of the issuance of additional shares of Common Stock or securities exercisable
for or convertible into Common Stock (other than in the event of stock
dividends, subdivisions, split-ups, combinations, dividends or recapitalizations
which are covered by paragraphs 4(e)(iv), (v) and (vi) hereof).
The Conversion Price of each series of Preferred Stock shall
be subject to adjustment from time to time as follows:
If the Corporation shall issue any Common Stock other than
Excluded Stock for a consideration per share less than the Conversion Price in
effect immediately prior to the issuance of such Common Stock (excluding stock
dividends, subdivisions, split-ups, combinations, dividends or recapitalizations
which are covered by paragraphs 4(e)(iv), (v) and (vi)), the Conversion Price in
effect immediately after each such issuance shall forthwith (except as provided
in this paragraph 4(e)) be adjusted to a price equal to the quotient obtained by
dividing:
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(1) an amount equal to the sum of
(x) the total number of shares of
Common Stock outstanding (including any shares of Common Stock issuable upon
conversion of the Preferred Stock, or deemed to have been issued pursuant to
subdivision (C) of this clause (iii)) immediately prior to such issuance
multiplied by the Conversion Price in effect immediately prior to such issuance,
plus
(y) the consideration received by
the Corporation upon such issuance, by
(2) the total number of shares of Common
Stock outstanding (including any shares of Common Stock issuable upon conversion
of the Preferred Stock or deemed to have been issued pursuant to subdivision (C)
of this clause (iii)) immediately after the issuance of such Common Stock.
For the purposes of this clause (iii), the
following provisions shall be applicable:
(A) 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 any discounts or commissions paid or incurred by the
Corporation in connection with the issuance and sale thereof.
(B) 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 value thereof as determined by
the board of directors of the Corporation, in accordance with generally accepted
accounting treatment; provided, however, that if, at the time of such
determination, the Corporation's Common Stock is traded in the over-the-counter
market or on a national or regional securities exchange, such fair market value
as determined by the board of directors of the Corporation shall not exceed the
aggregate "Current Market Price" (as defined below) of the shares of Common
Stock being issued.
(C) In the case of the issuance of (i)
options to purchase or rights to subscribe for Common Stock (other than Excluded
Stock), (ii) securities by their terms convertible into or exchangeable for
Common Stock (other than Excluded Stock), or (iii) options to purchase or rights
to subscribe for such convertible or exchangeable securities (other than
Excluded Stock):
(1) 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), if any, received by the Corporation 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;
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(2) 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 conversion or exchange 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
Corporation for any such securities and related options or rights (excluding any
cash received on account of accrued interest or accrued dividends), plus the
minimum additional consideration, if any, to be received by the Corporation 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);
(3) 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, or
on any change in the minimum purchase price of such options, rights or
securities, other than a change resulting from the antidilution provisions of
such options, rights or securities, the Conversion Price shall forthwith be
readjusted to such Conversion Price as would have obtained had the adjustment
made upon (x) the issuance of such options, rights or securities not exercised,
converted or exchanged prior to such change, as the case may be, been made upon
the basis of such change or (y) the options or rights related to such securities
not converted or exchanged prior to such change, as the case may be, been made
upon the basis of such change; and
(4) 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 Conversion Price shall forthwith be readjusted to
such Conversion Price as would have obtained had the adjustment made upon the
issuance of such options, rights, convertible or exchangeable securities or
options or rights related to such convertible or exchangeable securities, as the
case may be, been made upon the basis of the issuance of only the number of
shares of Common Stock actually issued upon the exercise of such options or
rights, upon the conversion or exchange of such convertible or exchangeable
securities or upon the exercise of the options or rights related to such
convertible or exchangeable securities, as the case may be.
(iv) If the number of shares of Common Stock
outstanding at any time after the date hereof 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, on the date such payment is made or such change is
effective, the Conversion Price of a series of Preferred Stock shall be
appropriately decreased so that the number of shares of Common Stock issuable on
conversion of any shares of such series of Preferred Stock shall be increased in
proportion to such increase of outstanding shares of Common Stock.
(v) If the number of shares of Common Stock
outstanding at any time after the date hereof is decreased by a combination of
the outstanding shares of Common Stock, then, on
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the effective date of such combination, the Conversion Price of a series of
Preferred Stock shall be appropriately increased so that the number of shares of
Common Stock issuable on conversion of any shares of a series of Preferred Stock
shall be decreased in proportion to such decrease in outstanding shares of
Common Stock.
(vi) In case, at any time after the date hereof, of
any capital reorganization (other than a reorganization covered by paragraph
2(b) above), or any reclassification of the stock of the Corporation (other than
as a result of a stock dividend or subdivision, split-up or combination of
shares of stock), the shares of a series of Preferred Stock shall, after such
capital reorganization or reclassification, be convertible into the kind and
number of shares of stock or other securities or property of the Corporation or
otherwise to which such holder would have been entitled if immediately prior to
such capital reorganization or reclassification he had converted his shares of
such series of Preferred Stock into Common Stock. The provisions of this clause
(vi) shall similarly apply to successive reorganizations and reclassifications
of the type described in the first sentence of this section 4(e)(vi).
(vii) All calculations under this paragraph 4 shall
be made to the nearest cent or to the nearest one hundredth (1/100) of a share
of stock, as the case may be.
(viii) For the purpose of any computation pursuant to
this paragraph 4(e), the "Current Market Price" at any date of one share of
Common Stock, shall be deemed to be the average of the highest reported bid and
the lowest reported offer prices on the preceding business day as furnished by
the National Quotation Bureau, Incorporated (or equivalent recognized source of
quotations) or the closing sale price, if reported; provided, however, that if
the Common Stock is not traded in such manner that the quotations referred to in
this clause (viii) are available for the period required hereunder, Current
Market Price shall be determined in good faith by the board of directors of the
Corporation, but if challenged by the holders of more than 50% of the
outstanding shares of Preferred Stock, then as determined by an independent
appraiser selected by the board of directors of the Corporation, the cost of
such appraisal to be borne by the challenging parties.
(f) Minimal Adjustments. No adjustment in the Conversion
Price need be made if such adjustment would result in a change in the
Conversion Price of less than $0.01. Any adjustment of less than $0.01 which is
not made shall be carried forward and shall be made at the time of and together
with any subsequent adjustment which, on a cumulative basis, amounts to an
adjustment of $0.01 or more in the Conversion Price.
(g) No Impairment. The Corporation will not through any
reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this paragraph 4 and in the
taking of all such action as may be necessary or appropriate in order to protect
the Conversion Rights of the holders of Preferred Stock against impairment.
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(h) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Rate pursuant to this paragraph 4,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon written request at any time
of any holder of Preferred Stock, furnish or cause to be furnished to such
holder a like certificate setting forth (i) such adjustments and readjustments,
(ii) the Conversion Rate of such series of Preferred Stock at the time in
effect, and (iii) the number of shares of Common Stock and the amount, if any,
of other property which at the time would be received upon the conversion of
such holder's shares of Preferred Stock.
(i) Notices of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution (including any
distribution under section 2(b) above), any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities or
property or to receive any right, the Corporation shall mail to each holder of
Preferred Stock at least ten (10) days prior to such record date, a notice
specifying the date on which any such record is to be taken for the purpose of
such dividend or distribution or right, and the amount and character of such
dividend, distribution or right.
(j) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of Preferred Stock such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of Preferred Stock, the
Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares of stock as shall be sufficient for such purpose.
(k) Notices. Any notice required by the provisions of this
paragraph 4 to be given to the holder of shares of Preferred Stock shall be
deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at such holder's address appearing on the
books of the Corporation.
(l) Reissuance of Converted Shares. No shares of Preferred
Stock which have been converted into Common Stock after the original issuance
thereof shall ever again be reissued and all such shares of Preferred Stock so
converted shall upon such conversion cease to be a part of the authorized shares
of stock of the Corporation.
5. Protective Provisions.
(a) Preferred Stock. In addition to any other class vote that
may be required by law, so long as any of the Preferred Stock shall be
outstanding the Corporation shall not, without first
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<PAGE> 94
obtaining the approval (by vote or written consent, as provided by law) of the
holders of at least a majority of the then outstanding shares of Preferred
Stock, voting together as a single class:
(i) Change of Rights. Materially and adversely alter or
change the rights, preferences or privileges of the Preferred Stock;
(ii) Create a New Class. Create, or obligate itself to
create, any new class or series of shares of stock having preferences
over or being on a parity with any outstanding shares of Preferred Stock as to
dividends, assets, liquidation preferences, conversion rights or voting rights
or being otherwise superior to or on a parity with any such preference or
priority of any outstanding shares of Preferred Stock, or authorize or issue
shares of stock of any class or series (or any bonds, debentures, notes or
other obligations convertible into or exchangeable for, or having option rights
to purchase, any shares of stock of this Corporation) having any such
preference or priority or being otherwise superior to or being on a parity with
any such preference or priority; or
(iii) merge or consolidate with any other Corporation or sell,
lease, or convey substantially all of the assets of the corporation or otherwise
effect a recapitalization or reorganization of the Corporation.
VI
1. Limitation of Directors' Liability. The liability of the directors
of this Corporation for monetary damages shall be eliminated to the fullest
extent permissible under the laws of the State of Delaware.
2. Indemnification of Corporate Agents. This Corporation is authorized
to indemnify the directors and officers of the Corporation to the fullest extent
permissible under the laws of the State of Delaware.
3. Repeal or Modification. Any repeal or modification of the foregoing
provisions of this Section VI shall not adversely affect any right of
indemnification or limitation of liability of an agent of this Corporation
relating to acts or omissions occurring prior to such repeal or modification.
VII
The Corporation is to have perpetual existence.
VIII
In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter, amend or
repeal the bylaws of the Corporation.
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<PAGE> 95
IX
The number of directors which will constitute the whole Board of
Directors of the Corporation shall be as specified in the bylaws of the
Corporation.
X
The election of directors need not be by written ballot unless the
bylaws of the Corporation shall so provide.
XI
Meeting of stockholders may be held within or without the State of
Delaware, as the bylaws may provide. The books of the Corporation may be kept
(subject to any provisions contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the bylaws of the Corporation.
XII
Advance notice of new business and stockholder nomination for the
election of directors shall be given in the manner and to the extent provided in
the bylaws of the Corporation.
XIII
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Restated Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
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<PAGE> 96
EXHIBIT B
EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES
<PAGE> 97
SCHEDULE OF EXCEPTIONS
This Schedule of Exceptions, dated as of October 21, 1996, is made and
given pursuant to Section 3 of the SpectRx, Inc. Series C Preferred Stock
Purchase Agreement dated October 21, 1996 (the "Agreement"). The Section numbers
in this Schedule of Exceptions correspond to the section numbers in the
Agreement; however, any information disclosed herein under any section number
shall be deemed to be disclosed and incorporated into any other section number
under this Agreement where such disclosure would be appropriate. Any terms
defined in the Agreement shall have the same meaning when used in this Schedule
of Exceptions as when used in the Agreement unless the context otherwise
requires.
3.3 Subsidiaries. The Company is currently in the process of forming a
subsidiary (the "Subsidiary") for the purpose of commercializing certain
technology of the Company. The Company intends to own approximately 65% of the
Subsidiary, and the remaining stock of the Subsidiary will be owned by the
Subsidiary's management.
3.4 Capitalization. One of the warrants outstanding as of the Closing,
for the purchase of up to 824,000 shares of Common Stock, is not currently
exercisable and will only become exercisable upon the occurrence of certain
events as specified in the warrant.
3.7 Agreements; Action.
- The Company has entered into an agreement with one of
its officers, Jonathon Eppstein, Vice President of
Research and Development (the "Officer"), and two
corporations controlled by the Officer, pursuant to
which the Company received a license to certain
technology owned by the Officer's corporations. In
return, the Company paid a license fee, agreed to pay
a royalty and issued a warrant to the corporations
which, upon the occurrence of certain events, will
become exercisable.
- Mark Samuels and Keith Ignotz, the Company's chief
executive officer and chioef operating officer,
respectively, purchased shares of Common Stock of the
Company and paid for such shares by delivering a
promissory note to the Company. The aggregate amount
owed under the notes was approximately $48,525 as of
the Closing.
- The Company has entered into a development and
licensing agreement with Boehringer Mannheim
Corporation.
- The Company has entered into a development and
licensing agreement with Healthdyne Technologies.
<PAGE> 98
- The Company has entered into a development and
licensing agreement with Teijin Limited.
- The Company has entered into a licensing agreement
with Joseph R. Lakowicz.
- The Company has entered into a licensing agreement
with M.D. Andersen Cancer Center, University of
Texas.
- The Company has entered into a licensing agreement
with Georgia Institute of Technology.
3.10 Litigation, etc. The Company has received a demand notice for
payment of a $20,000 license fee due under an expired license from Martin
Marietta Energy Systems. The Company is presently in the process of negotiating
a resolution of this dispute.
3.16 Patents and Trademarks
The Company purchased all of the technology and other intellectual
property, relating to non-invasive means of diagnosing disease through the use
of fluorescence spectroscopy, of Laser Atlanta Optics, Inc.
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<PAGE> 99
EXHIBIT C
PROPRIETARY INFORMATION AGREEMENT
<PAGE> 100
SPECTRX, INC.
EMPLOYEE PROPRIETARY INFORMATION AGREEMENT
As a condition of my employment with Spectrx, Inc., its subsidiaries,
affiliates, successors or assigns (together the "COMPANY"), and in consideration
of my employment with the Company and my receipt of the compensation now and
hereafter paid to me by Company, I agree to the following:
1. At-Will Employment. I understand and acknowledge that my employment
with the Company is for an unspecified duration and constitutes "at-will"
employment. I acknowledge that this employment relationship may be terminated at
any time, with or without good cause or for any or no cause, at the option
either of the Company or myself, with or without notice.
2. Confidential Information.
(a) Company Information. I agree at all times during the term of my
employment and thereafter, to hold in strictest confidence, and not to use,
except for the benefit of the Company, or to disclose to any person, firm or
corporation without written authorization of the Board of Directors of the
Company, any Confidential Information of the Company. I understand that
"CONFIDENTIAL INFORMATION" means any Company proprietary information, technical
data, trade secrets or know-how, including, but not limited to, research,
product plans, products, services, customer lists and customers (including, but
not limited to, customers of the Company on whom I called or with whom I became
acquainted during the term of my employment), markets, software, developments,
inventions, processes, formulas, technology, designs, drawings, engineering,
hardware configuration information, marketing, finances or other business
information disclosed to me by the Company either directly or indirectly, in
writing, orally, by drawings, or by observation of parts or equipment. I further
understand that Confidential Information does not include any of the foregoing
items which has become publicly known and made generally available through no
wrongful act of mine or of others who were under confidentiality obligations as
to the item or items involved.
(b) Former Employer Information. I agree that I will not, during my
employment with the Company, improperly use or disclose any proprietary
information or trade secrets of any former or concurrent employer or other
person or entity and that I will not bring onto the premises of the Company any
unpublished document or proprietary information belonging to any such employer,
person or entity unless consented to in writing by such employer, person or
entity.
(c) Third Party Information. I recognize that the Company has
received and in the future will receive from third parties their confidential or
proprietary information subject to a duty on the Company's part to maintain the
confidentiality of such information and to use it only for certain limited
purposes. I agree to hold all such confidential or proprietary information in
the strictest confidence and not to disclose it to any person, firm or
corporation or to use it except as necessary in carrying out my work for the
Company consistent with the Company's agreement with such third party.
3. Inventions.
(a) Inventions Retained and Licensed. I have attached hereto, as
Exhibit A, a list describing all inventions, original works of authorship,
developments, improvements, and trade secrets which were made by me prior to my
employment with the Company, which belong to me, which relate to the Company's
proposed business, products or research and development, and which are not
assigned to the Company hereunder (collectively referred to as "Prior
Inventions"); or, if no such list is attached, I represent that there are no
such Prior Inventions. If in the course of my employment with the Company, I
incorporate into any invention, improvement, development, product, copyrightable
material or trade secret any invention, improvement, development, concept,
discovery or other proprietary information owned by me or in which I have an
interest, the Company is hereby granted and shall have a nonexclusive,
royalty-free, irrevocable, perpetual, worldwide license to make, have made,
modify, use and sell such item as part of or in connection with such product,
process or machine.
<PAGE> 101
(b) Assignment of Inventions. I agree that I will promptly make
full written disclosure to the Company, will hold in trust for the sole right
and benefit of the Company, and hereby assign to the Company, or its designee,
all my right, title, and interest in and to any and all inventions, original
works of authorship, developments, concepts, improvements or trade secrets,
whether or not patentable or registrable under copyright or similar laws, which
I may solely or jointly conceive or develop or reduce to practice, or cause to
be conceived or developed or reduced to practice, during the period of time I am
in the employ of the Company (collectively referred to as "INVENTIONS"), except
as provided in Section 3(f) below. I further acknowledge that all original works
of authorship which are made by me (solely or jointly with others) within the
scope of and during the period of my employment with the Company and which are
protectible by copyright are "works made for hire," as that term is defined in
the United States Copyright Act.
(c) Inventions Assigned to the United States. I agree to assign to
the United States government all my right, title, and interest in and to any and
all Inventions whenever such full title is required to be in the United States
by a contract between the Company and the United States or any of its agencies.
(d) Maintenance of Records. I agree to keep and maintain adequate
and current written records of all Inventions made by me (solely or jointly with
others) during the term of my employment with the Company. The records will be
in the form of notes, sketches, drawings, and any other format that may be
specified by the Company. The records will be available to and remain the sole
property of the Company at all times.
(e) Patent and Copyright Registrations. I agree to assist the
Company, or its designee, at the Company's expense, in every proper way to
secure the Company's rights in the Inventions and any copyrights, patents, mask
work rights or other intellectual property rights relating thereto in any and
all countries, including the disclosure to the Company of all pertinent
information and data with respect thereto, the execution of all applications,
specifications, oaths, assignments and all other instruments which the Company
shall deem necessary in order to apply for and obtain such rights and in order
to assign and convey to the Company, its successors, assigns and nominees the
sole and exclusive rights, title and interest in and to such Inventions, and any
copyrights, patents, mask work rights or other intellectual property rights
relating thereto. I further agree that my obligation to execute or cause to be
executed, when it is in my power to do so, any such instrument or papers shall
continue after the termination of this Agreement. If the Company is unable
because of my mental or physical incapacity or for any other reason to secure my
signature to apply for or to pursue any application for any United States or
foreign patents or copyright registrations covering Inventions or original works
of authorship assigned to the Company as above, then I hereby irrevocably
designate and appoint the Company and its duly authorized officers and agents as
my agent and attorney in fact, to act for and in my behalf and stead to execute
and file any such applications and to do all other lawfully permitted acts to
further the prosecution and issuance of letters patent or copyright
registrations thereon with the same legal force and effect as if executed by me.
(f) Exception to Assignments. I understand that the provisions of
this Agreement requiring assignment of Inventions to the Company do not apply to
any invention which qualifies under the provisions of Exhibit B attached hereto.
I will advise the Company promptly in writing of any inventions that I believe
meet the criteria of Exhibit B.
4. Conflicting Employment. I agree that, during the term of my
employment with the Company, I will not engage in any other employment,
occupation, consulting or other business activity directly related to the
business in which the Company is now involved or becomes involved during the
term of my employment, nor will I engage in any other activities that conflict
with my obligations to the Company.
5. Returning Company Documents. I agree that, at the time of leaving
the employ of the Company, I will deliver to the Company (and will not
keep in my possession, recreate or deliver to anyone else) any and all devices,
records, data, notes, reports, proposals, lists, correspondence,
specifications, drawings, blueprints, sketches, materials, equipment, other
documents or property, or reproductions of any aforementioned items developed
by me pursuant to my employment with the Company or otherwise belonging to the
Company, its successors or assigns. In the event of the termination of my
employment, I agree to sign and deliver the "TERMINATION CERTIFICATION"
attached hereto as Exhibit C.
6. Notification to New Employer. In the event that I leave the employ
of the Company, I hereby grant consent to notification by the Company to my new
employer about my rights and obligations under this Agreement.
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<PAGE> 102
7. Solicitation of Employees. I agree that for a period of twelve (12)
months immediately following the termination of my relationship with the Company
for any reason, whether with or without cause, I shall not either directly or
indirectly solicit, induce, recruit or encourage any of the Company's employees
to leave their employment, or take away such employees, or attempt to solicit,
induce, recruit, encourage or take away employees of the Company, either for
myself or for any other person or entity.
8. Representations. I agree to execute any proper oath or verify any
proper document required to carry out the terms of this Agreement. I represent
that my performance of all the terms of this Agreement will not breach any
agreement to keep in confidence proprietary information acquired by me in
confidence or in trust prior to my employment by the Company. I have not entered
into, and I agree I will not enter into, any oral or written agreement in
conflict herewith.
9. Arbitration and Equitable Relief.
(a) Arbitration. Except as provided in Section 9(b) below, I agree
that any dispute or controversy arising out of or relating to any
interpretation, construction, performance or breach of this Agreement, shall be
settled by arbitration to be held in Norcross, Georgia in accordance with the
rules then in effect of the American Arbitration Association. The arbitrator may
grant injunctions or other relief in such dispute or controversy. The decision
of the arbitrator shall be final, conclusive and binding on the parties to the
arbitration. Judgement may be entered on the arbitrator's decision in any court
having jurisdiction. The Company and I shall each pay one-half of the costs and
expenses of such arbitration, and each of us shall separately pay our counsel
fees and expenses.
(b) Equitable Remedies. I agree that it would be impossible or
inadequate to measure and calculate the Company's damages from any breach of the
covenants set forth in Sections 2, 3, and 5 herein. Accordingly, I agree that if
I breach any of such Sections, the Company will have available, in addition to
any other right or remedy available, the right to obtain an injunction from a
court of competent jurisdiction restraining such breach or threatened breach and
to specific performance of any such provision of this Agreement. I further agree
that no bond or other security shall be required in obtaining such equitable
relief and I hereby consent to the issuance of such injunction and to the
ordering of specific performance.
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10. General Provisions
(a) Governing Law; Consent to Personal Jurisdiction. This Agreement
will be governed by the laws of the State of Georgia. I hereby expressly consent
to the personal jurisdiction of the state and federal courts located in Georgia
for any lawsuit filed there against me by the Company arising from or relating
to this Agreement.
(b) Entire Agreement. This Agreement sets forth the entire
agreement and understanding between the Company and me relating to the subject
matter herein and merges all prior discussions between us. No modification of or
amendment to this Agreement, nor any waiver of any rights under this agreement,
will be effective unless in writing signed by the party to be charged. Any
subsequent change or changes in my duties, salary or compensation will not
affect the validity or scope of this Agreement.
(c) Severability. If one or more of the provisions in this
Agreement are deemed void by law, then the remaining provisions will continue in
full force and effect.
(d) Successors and Assigns. This Agreement may not be assigned
without the prior written consent of the Company. Subject to the foregoing
sentence, this Agreement will be binding upon my heirs, executors,
administrators and other legal representatives and will be for the benefit of
the Company, its successors, and its assigns.
Date:
--------------------- ------------------------
(Name)
- --------------------------
Witness
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<PAGE> 104
EXHIBIT A
LIST OF PRIOR INVENTIONS
AND ORIGINAL WORKS OF AUTHORSHIP
Identifying
Number of
Title Date Brief Description
----- ---- -----------------
__ No inventions or improvements
__ Additional Sheets Attached
Signature of Employee:
-----------------------------------
(Name)
Date:
------------------------------------
<PAGE> 105
EXHIBIT B
EXCEPTION TO ASSIGNMENTS
The assignment provisions shall not apply to an invention that the
employee developed entirely on his or her own time without using the employer's
equipment, supplies, facilities, or trade secret information except for those
inventions that either:
(1) Relate at the time of conception or reduction to practice of
the invention to the employer's business, or actual or demonstrably anticipated
research or development of the employer.
(2) Result from any work performed by the employee for the
employer.
<PAGE> 106
EXHIBIT C
SPECTRX, INC.
TERMINATION CERTIFICATION
This is to certify that I do not have in my possession, nor have I failed
to return, any devices, records, data, notes, reports, proposals, lists,
correspondence, specifications, drawings, blueprints, sketches, materials,
equipment, other documents or property, or reproductions of any aforementioned
items belonging to Spectrx, Inc., its subsidiaries, affiliates, successors or
assigns (together, the "COMPANY").
I further certify that I have complied with all the terms of the
Company's Employee Proprietary Information Agreement signed by me, including the
reporting of any inventions and original works of authorship (as defined
therein), conceived or made by me (solely or jointly with others) covered by
that agreement.
I further agree that, in compliance with the Employee Proprietary
Information Agreement, I will preserve as confidential all trade secrets,
confidential knowledge, data or other proprietary information relating to
products, processes, know-how, designs, formulas, developmental or experimental
work, computer programs, data bases, other original works of authorship,
customer lists, business plans, financial information or other subject matter
pertaining to any business of the Company or any of its employees, clients,
consultants or licensees.
I further agree that for twelve (12) months from this date, I will not
hire any employees of the Company and I will not solicit, induce, recruit or
encourage any of the Company's employees to leave their employment.
Date:
---------------------------
-------------------------------
(Name)
<PAGE> 107
EXHIBIT D
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
<PAGE> 108
SPECTRX, INC.
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
This Amended and Restated Registration Rights Agreement (the
"Agreement") amends and restates the Prior Registration Rights Agreement (as
defined in Section 1 hereof) and is effective as of October 21, 1996 by and
among SpectRx, Inc., a Delaware corporation (the "Company"), the holders of
Registrable Securities (as such term is defined in the Prior Registration Rights
Agreement) and the purchaser of the Company's Series C Preferred Stock.
NOW THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement and in the agreements pursuant to which the holders of Registrable
Securities acquired their Registrable Securities in the Company, the parties
hereby agree as follows:
1. Amendment of Prior Registration Rights Agreements. This Agreement
amends and restates the Prior Registration Rights Agreement in its entirety.
Such amendment and restatement is effective upon the execution of this Agreement
by the holders of at least a majority of the Registrable Securities (as such
term is defined in the Prior Registration Rights Agreement) outstanding as of
the date of this Agreement. For purposes of this Agreement, the term "Prior
Registration Rights Agreement" shall mean that certain Amended and Restated
Registration Rights Agreement dated August 30, 1996.
2. Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"Act" shall mean the Securities Act of 1933, as amended.
"Commission" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Act.
"Holder" shall mean any person owning or having the right to acquire
Registrable Securities and any person holding Registrable Securities to whom the
rights under this Agreement have been transferred in accordance with paragraph
11 hereof.
"Initiating Holders" shall mean any Holders who in the aggregate
possess more than 50% of the Registrable Securities.
"Register," "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Act, and the declaration or ordering of the effectiveness of
such registration statement.
"Registrable Securities" shall mean (i) the Common Stock issuable or
issued upon conversion of the Series A Preferred Stock, (ii) the Common Stock
issuable or issued upon conversion of the Series A1 Preferred Stock, (iii) the
Common Stock issuable upon conversion of the Series A
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Preferred Stock issuable or issued upon exercise of certain warrants issued
pursuant to the Note and Warrant Purchase Agreement dated April 6, 1994, (iv)
the Common Stock issuable upon conversion of the Series A Preferred Stock
issuable or issued upon exercise of certain warrants issued pursuant to the Note
and Warrant Purchase Agreement dated April 29, 1994, (v) the Common Stock
issuable upon conversion of the Series A Preferred Stock issuable or issued upon
exercise of certain warrants issued pursuant to the Note and Warrant Purchase
Agreement dated June 15, 1994, (vi) the Common Stock issuable or issued upon
conversion of the Series B Preferred Stock, (vii) the Common Stock issuable or
issued upon conversion of the Series B1 Preferred Stock, (viii) the Common Stock
issuable or issued upon conversion of the Series C Preferred Stock, (ix) the
Common Stock issuable or issued upon conversion of the Series C1 Preferred
Stock, and (x) any Common Stock or other securities issued or issuable with
respect to such Series A Preferred Stock, Series A1 Preferred Stock, Series B
Preferred Stock, Series B1 Preferred Stock, Series C Preferred Stock, Series C1
Preferred Stock, or Common Stock upon any stock split, stock dividend,
recapitalization, or similar event, or any Common Stock otherwise issued or
issuable with respect to such Series A Preferred Stock, Series A1 Preferred
Stock, Series B Preferred Stock, Series B1 Preferred Stock, Series C Preferred
Stock, Series C1 Preferred Stock, or Common Stock; provided, however, that
shares of Common Stock or other securities shall only be treated as Registrable
Securities if and so long as they have not been (i) sold to or through a broker
or dealer or underwriter in a public distribution or a public securities
transaction or (ii) sold by a person in a transaction in which their rights
under this Agreement are not assigned.
"Registration Expenses" shall mean all expenses, except Selling
Expenses as otherwise stated below, incurred by the Company in complying with
paragraphs 3, 4 and 5 hereof, including, without limitation, all registration,
qualification and filing fees, printing expenses, escrow fees, fees and
disbursements of counsel for the Company, blue sky fees and expenses, 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, selling
commissions, stock transfer taxes applicable to the securities registered by the
Holders, and any fees and expenses of special counsel of a selling stockholder.
3. Requested Registration.
(a) Request for Registration. In case the Company shall
receive from Initiating Holders a written request that the Company effect any
registration, qualification or compliance with respect to at least 80% of the
shares of Registrable Securities held by them (or any lesser number of shares of
Registrable Securities having an expected aggregate offering price, net of
underwriting discounts and commissions, greater than $7,500,000), the Company
will:
(i) promptly give written notice of the proposed
registration, qualification or compliance to all other Holders; and
(ii) as soon as practicable, use its best efforts to
effect such registration, qualification or compliance (including, without
limitation, appropriate qualification under applicable blue
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<PAGE> 110
sky or other state securities laws and appropriate compliance with applicable
regulations issued under the Act and any other governmental requirements or
regulations) as may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of such Registrable Securities as are
specified in such request, together with all or such portion of the Registrable
Securities of any Holder or Holders joining in such request as are specified in
a written request received by the Company within 20 days after receipt of such
written notice from the Company.
Provided, however, that the Company shall not be
obligated to take any action to effect any such registration, qualification or
compliance pursuant to this paragraph 3:
(1) In any particular jurisdiction in which
the Company would be required to execute a general consent to service of process
in effecting such registration, qualification or compliance unless the Company
is already subject to service in such jurisdiction and except as may be required
by the Act;
(2) Prior to the earlier of (i) September 1,
1998 or (ii) six months after the effective date of the Company's first
registered public offering of its stock;
(3) During the period starting with the date
sixty (60) days prior to the Company's estimated date of filing of, and ending
on the date three (3) months immediately following the effective date of, any
registration statement pertaining to securities of the Company (other than a
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan), provided that the Company is actively employing in good
faith all reasonable efforts to cause such registration statement to become
effective;
(4) After the Company has effected two such
registrations pursuant to this paragraph 3(a), and such registrations have been
declared or ordered effective; or
(5) If the Company shall furnish to such
Holders a certificate signed by the President of the Company that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company or its stockholders for a registration statement to be filed at such
time, then the Company's obligation to use its best efforts to register, qualify
or comply under this paragraph 3 shall be deferred for a period not to exceed 90
days from the date of receipt of written request from the Initiating Holders,
provided, however, that the Company may not make such certification more than
once every calendar year.
Subject to the foregoing clauses (1) through (5), the Company
shall file a registration statement covering the Registrable Securities so
requested to be registered as soon as practicable, after receipt of the request
or requests of the Initiating Holders and in any event within one hundred eighty
(180) days after receipt of such request.
(b) Underwriting. In the event that a registration pursuant to
this paragraph 3 is for a registered public offering involving an underwriting,
the Company shall so advise the Holders as part of the notice given pursuant to
paragraph 3(a)(i). In such event, the right of any Holder to such
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<PAGE> 111
registration shall be conditioned upon such Holder's participation in the
underwriting arrangements required by this paragraph 3, and the inclusion of
such Holder's Registrable Securities in the underwriting to the extent requested
shall be limited to the extent provided herein.
The Company shall (together with all Holders proposing to
distribute their securities through such underwriting) enter into an
underwriting agreement in customary form with the managing underwriter selected
for such underwriting by a majority in interest of the Initiating Holders, but
subject to the Company's reasonable approval. Notwithstanding any other
provision of this paragraph 3, if the managing underwriter advises the
Initiating Holders in writing that marketing factors require a limitation of the
number of shares to be underwritten, then the Company shall so advise all
holders of Registrable Securities and the number of shares of Registrable
Securities that may be included in the registration and underwriting shall be
allocated among all Holders thereof (except those Holders who have indicated to
the Company their decision not to distribute any of their Registrable Securities
through such underwriting) in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities held by such Holders at the time of
filing the registration statement, provided, however, that the number of shares
of Registrable Securities to be included in such underwriting shall not be
reduced unless all other securities are first entirely excluded from the
underwriting. No Registrable Securities excluded from the underwriting by reason
of the underwriter's marketing limitation shall be included in such
registration. To facilitate the allocation of shares in accordance with the
above provisions, the Company or the underwriters may round the number of shares
allocated to any Holder to the nearest 100 shares.
If any Holder of Registrable Securities disapproves of the
terms of the underwriting, such person may elect to withdraw therefrom by
written notice to the Company, the managing underwriter and the Initiating
Holders. The Registrable Securities and/or other securities so withdrawn shall
also be withdrawn from registration, and such Registrable Securities shall not
be transferred in a public distribution prior to 90 days after the effective
date of such registration, or such other shorter period of time as the
underwriters may require.
4. Company Registration.
(a) Notice of Registration. If at any time or from time to
time the Company shall determine to register any of its securities, either for
its own account or the account of a security holder or holders, other than (i)
in connection with the Company's initial public offering, (ii) a registration
relating solely to employee benefit plans, or (iii) a registration relating
solely to a Commission Rule 145 transaction, the Company will:
(i) promptly give to each Holder written notice thereof;
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 within 20 days after receipt of such written notice from the
Company, by any Holder.
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<PAGE> 112
(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 a part of the written notice given
pursuant to paragraph 4(a)(i). In such event the right of any Holder to
registration pursuant to this paragraph 4 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of 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 and the other holders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the managing underwriter selected for such underwriting by the
Company.
Notwithstanding any other provision of this paragraph 4, if
the managing underwriter determines that marketing factors require a limitation
of the number of shares to be underwritten, the managing underwriter may limit
the Registrable Securities or other securities to be included in such
registration or exclude them entirely. The Company shall so advise all Holders
and other holders distributing their securities through such underwriting and
the number of shares of Registrable Securities and other securities that may be
included in the registration and underwriting shall be allocated among the
holders thereof in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities and other securities held by such holders at
the time of filing the registration statement. To facilitate the allocation of
shares in accordance with the above provisions, the Company may round the number
of shares allocated to any Holder or holder to the nearest 100 shares.
If any Holder or holder disapproves of the terms of any such
underwriting, he may elect to withdraw therefrom by written notice to the
Company and the managing underwriter. Any securities excluded or withdrawn from
such underwriting shall be withdrawn from such registration, and shall not be
transferred in a public distribution prior to 90 days after the effective date
of the registration statement relating thereto, or such other shorter period of
time as the underwriters may require.
(c) Right to Terminate Registration. The Company shall have
the right to terminate or withdraw any registration initiated by it under this
paragraph 4 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration.
5. Registration on Form S-3.
(a) If any Holder or Holders request that the Company file a
registration statement on Form S-3 (or any successor form to Form S-3) for a
public offering of shares of the Registrable Securities the reasonably
anticipated aggregate price to the public of which, net of underwriting
discounts and commissions, would exceed $500,000, and the Company is a
registrant entitled to use Form S-3 to register the Registrable Securities for
such an offering, the Company shall use its best efforts to cause such
Registrable Securities to be registered for the offering on such form and to
cause such Registrable Securities to be qualified in such jurisdictions as the
Holder or Holders may reasonably request; provided, however, that the Company
shall not be required to effect more than one registration pursuant to this
paragraph 5 in any calendar year. The substantive provisions of paragraph 4(b)
shall be applicable to each registration under this paragraph 5.
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<PAGE> 113
(b) Notwithstanding the foregoing, the Company shall not be
obligated to take any action pursuant to this paragraph 5: (i) in any particular
jurisdiction in which the Company would be required to execute a general consent
to service of process in effecting such registration, qualification or
compliance unless the Company is already subject to service in such jurisdiction
and except as may be required by the Act; (ii) if the Company, within ten (10)
days of the receipt of the request of the initiating Holders, gives notice of
its bona fide intention to effect the filing of a registration statement with
the Commission within ninety (90) days of receipt of such request (other than
with respect to a registration statement relating to a Rule 145 transaction, an
offering solely to employees or any other registration which is not appropriate
for the registration of Registrable Securities); (iii) during the period
starting with the date sixty (60) days prior to the Company's estimated date of
filing of, and ending on the date six (6) months immediately following, the
effective date of any registration statement pertaining to securities of the
Company (other than a registration of securities in a Rule 145 transaction or
with respect to an employee benefit plan), provided that the Company is actively
employing in good faith all reasonable efforts to cause such registration
statement to become effective; or (iv) if the Company shall furnish to such
Holder a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors it would be seriously detrimental
to the Company or its stockholders for registration statements to be filed at
such time, then the Company's obligation to use its best efforts to file a
registration statement shall be deferred for a period not to exceed 90 days from
the receipt of the request to file such registration by such Holder provided
that the Company may not make such certification more than once every calendar
year.
6. Expenses of Registration. All Registration Expenses
(exclusive of underwriting discounts and commissions or fees of special
counsel for a selling Holder) incurred in connection with (i) two registrations
pursuant to paragraph 3 and (ii) all registrations pursuant to paragraphs 4 and
5 shall be borne by the Company.
7. Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Agreement,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will:
(a) Prepare and file with the Commission a registration
statement with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for at least one hundred
and twenty (120) days or until the distribution described in the Registration
Statement has been completed;
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.
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<PAGE> 114
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(g) Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Agreement, on the date
that such Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Agreement, (i) an opinion, dated
such date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities and (ii) a letter
dated such date, from the independent accountants of the Company, in form and
substance as is customarily given by independent accountants to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities.
8. Indemnification.
(a) The Company will indemnify each Holder, each of its
officers and directors and partners, and each person controlling such Holder
within the meaning of Section 15 of the Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Agreement, and
each underwriter, if any, and each person who controls any underwriter within
the meaning of Section 15 of the Act, against all expenses, claims, losses,
damages or liabilities (or actions in respect thereof), including any of the
foregoing incurred in settlement of any litigation, commenced or threatened,
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any registration statement, prospectus, offering
circular or other document, or any amendment or supplement thereto, 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, in light of the circumstances in
which they were made, not misleading, or any violation by the Company of any
federal, state or common law rule or regulation applicable to the Company in
connection with any such registration, qualification or compliance, and the
Company will reimburse each such Holder, each of its officers and directors, and
each person controlling such Holder,
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<PAGE> 115
each such underwriter and each person who controls any such underwriter, for any
legal and any other expenses reasonably incurred in connection with
investigating, preparing or defending any such claim, loss, damage, liability or
action, provided that the Company will not be liable in any such case to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on any untrue statement or omission or alleged untrue statement or
omission, made in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by such Holder,
controlling person or underwriter and stated to be specifically for use therein.
(b) Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company or such underwriter within the meaning of Section 15 of the Act, and
each other such Holder, each of its officers and directors and each person
controlling such Holder within the meaning of Section 15 of the Act, 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, such Holders,
such directors, officers, persons, 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 in reliance upon and
in conformity with written information furnished to the Company by an instrument
duly executed by such Holder and stated to be specifically for use therein.
Notwithstanding the foregoing, the liability of each Holder under this
subsection (b) shall be limited in an amount equal to the public offering price
of the shares sold by such Holder, unless such liability arises out of or is
based on willful conduct by such Holder.
(c) Each party entitled to indemnification under this
paragraph 8 (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 litigation,
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, provided, however, that the Indemnifying Party
shall bear the expense of independent counsel for the Indemnified Party if the
Indemnified Party reasonably determines that representation of both parties by
the same counsel would be inappropriate due to actual or potential conflicts of
interest, 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 Agreement unless the failure to give such notice is
materially prejudicial to an Indemnifying Party's ability to defend such action
and provided further, that the Indemnifying Party shall not assume the defense
for matters as to which there is a conflict of interest or separate and
different defenses. 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
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<PAGE> 116
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.
9. Information by Holder. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the Registrable Securities held by
them and the distribution proposed by such Holder or Holders as the Company may
request in writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Agreement.
10. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Registrable Securities to the public without registration, after
such time as a public market exists for the Common Stock of the Company, the
Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Act, at all times after the
effective date that the Company becomes subject to the reporting requirements of
the Act or the Securities Exchange Act of 1934, as amended.
(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
Act and the Securities Exchange Act of 1934, as amended (at any time after it
has become subject to such reporting requirements);
(c) So long as a Holder owns any Registrable Securities to
furnish to the Holder forthwith upon request a written statement by the Company
as to its compliance with the reporting requirements of said Rule 144 (at any
time after 90 days after the effective date of the first registration statement
filed by the Company for an offering of its securities to the general public),
and of the Act and the Securities Exchange Act of 1934 (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 of the
Company and other information in the possession of or reasonably obtainable by
the Company as a Holder may reasonably request in availing itself of any rule or
regulation of the Commission allowing a Holder to sell any such securities
without registration.
11. Transfer of Registration Rights. The rights to cause the Company to
register securities granted Holders under paragraphs 3, 4 and 5 may be assigned
to a transferee or assignee in connection with any transfer or assignment of
Registrable Securities by a Holder provided that: (i) such transfer may
otherwise be effected in accordance with applicable securities laws, and (ii)
such assignee or transferee acquires at least 400,000 shares of Registrable
Securities. Notwithstanding the foregoing, the rights to cause the Company to
register securities may be assigned, in connection with a distribution by such
Holder, to any parent or subsidiary company or to any partner, former partner,
or the estate of any such partner without compliance with item (ii) above,
provided written notice thereof is promptly given to the Company.
-9-
<PAGE> 117
12. Standoff Agreement. Each Holder agrees, in connection with the
Company's initial public offering of the Company's securities that, upon request
of the Company or the underwriters managing any underwritten offering of the
Company's securities, not to sell, make any short sale of, loan, grant any
option for the purchase of, or otherwise dispose of any Common Stock of the
Company (other than those included in the registration) without the prior
written consent of the Company or such underwriters, as the case may be, for
such period of time (not to exceed one hundred eighty (180) days) from the
effective date of such registration as may be requested by the underwriters,
provided that the officers and directors of the Company enter into similar
agreements.
13. Termination of Registration Rights. All rights of the Holders
under this Agreement shall terminate four (4) years from the date of the
Company's initial public offering.
14. Amendment of Registration Rights. Any provision of the Agreement
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the holders of a majority of the Registrable
Securities then outstanding. Any amendment or waiver effected in accordance with
this paragraph shall be binding upon each holder of any Registrable Securities
then outstanding, each future holder of all such Registrable Securities, and the
Company.
15. Limitations on Subsequent Registration Rights. From and after the
date of this Agreement, the Company shall not, without the prior written consent
of the Holders of a majority of the then outstanding Registrable Securities,
enter into any agreement with any holder or prospective holder of any securities
of the Company which would allow such holder or prospective holder (a) to
include such securities in any registration filed under paragraph 3 hereof,
unless under the terms of such agreement, such holder or prospective holder may
include such securities in any such registration only to the extent that the
inclusion of his securities will not reduce the amount of the Registrable
Securities of the Holders which is included or (b) to make a demand registration
which could result in such registration statement being declared effective prior
to the earlier of either of the dates set forth in subparagraph 3(a)(ii)(2) or
within one hundred twenty (120) days of the effective date of any registration
effected pursuant to paragraph 3.
16. Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement among the parties with regard to the subject matter
hereof. Nothing in this Agreement, express or implied, is intended to confer
upon any person or entity, other than the parties hereto and their respective
successors and assigns, any rights, remedies, obligations, or liabilities under
or by reason of this Agreement, except as expressly provided herein.
17. Governing Law. This Agreement shall be governed in all respects
by the laws of the State of Delaware as such laws are applied to agreements
between Delaware residents entered into and to be performed entirely within
Delaware.
18. Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
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<PAGE> 118
19. Notices, etc. All notices and other communications required or
permitted hereunder shall be effective upon receipt and shall be in writing and
may be delivered in person, by telecopy, electronic mail, overnight delivery
service or U.S. mail, in which event it may be mailed by first-class, certified
or registered, postage prepaid, addressed (a) if to a Holder, at such Holder's
address set forth at the end of this Agreement, or at such other address as such
Holder shall have furnished the Company in writing, or, until any such holder so
furnishes an address to the Company, then to and at the address of the last
holder of such shares who has so furnished an address to the Company, or (b) if
to the Company, at its address set forth at the end of this Agreement, or at
such other address as the Company shall have furnished to the Holders and each
such other holder in writing.
20. Severability. Any invalidity, illegality or limitation on the
enforceability of the Agreement or any part thereof, by any Holder whether
arising by reason of the law of the respective Holder's domicile or otherwise,
shall in no way affect or impair the validity, legality or enforceability of
this Agreement with respect to other Holders. If any provision of this Agreement
shall be judicially determined to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
21. Titles and Subtitles. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
22. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
23. Delays or Omissions. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to the Holders, upon any breach or
default of the Company under this Agreement, shall impair any such right, power
or remedy, nor shall it be construed to be a waiver of any such breach or
default, or any acquiescence therein, or of any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. It is further agreed that any waiver, permit, consent or approval of
any kind or character by a Holder of any breach or default under this Agreement,
or any waiver by a Holder of any provisions or conditions of this Agreement must
be in writing and shall be effective only to the extent specifically set forth
in writing and that all remedies, either under this Agreement, or by law or
otherwise afforded to a Holder, shall be cumulative and not alternative.
24. Attorneys' Fees. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
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<PAGE> 119
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first written above.
COMPANY: SPECTRX, INC.
By: /s/ Mark A. Samuels
---------------------
Title: President & CEO
-------------------
INVESTORS: HILLMAN MEDICAL VENTURES 1993 L.P.,
a Delaware limited partnership
By: Hillman/Dover Limited
Partnership, general partner
By: Wilmington Securities, Inc., its
sole general partner
By: /s/ Darlene Clarke
-------------------------
Title: Vice President
-----------------------
NORO-MOSELEY PARTNERS II, L.P., a
Georgia limited partnership
By: Moseley & Company, II,
general partner
By: /s/ Jack R. Kelly Jr.
-------------------------------
Jack R. Kelly Jr.
Title: General Partner
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<PAGE> 120
HILLMAN MEDICAL VENTURES 1994 L.P.,
a Delaware limited partnership
By: Hillman/Dover Limited
Partnership, general partner
By: Wilmington Securities, Inc., its
sole general partner
By: /s/ Darlene Clarke
-----------------------
Title: Vice President
--------------------------
HILLMAN MEDICAL VENTURES 1995 L.P.,
a Delaware limited partnership
By: Hillman/Dover Limited
Partnership, general partner
By: Wilmington Securities, Inc., its
sole general partner
By: /s/ Darlene Clarke
------------------------------
Title: Vice President
---------------------------
HILLMAN MEDICAL VENTURES 1996 L.P.,
a Delaware limited partnership
By: Hillman/Dover Limited
Partnership, general partner
By: Wilmington Securities, Inc., its
sole general partner
By: /s/ Darlene Clarke
----------------------
Title: Vice President
-------------------
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<PAGE> 121
ABBOTT LABORATORIES,
an Illinois corporation
By: /s/ Thomas R. Hodgsen
----------------------------
Title:President & Chief Operating Officer
-----------------------------------
/s/ Dean Maloof
-----------------------
Dean Maloof
/s/ Frank Maloof
-----------------------
Frank Maloof
/s/ Stephen G. Maloof
-----------------------
Stephen G. Maloof
PMM, INC.
By: /s/ Peter M. Mondalek
-------------------------
Peter M. Mondalek
-----------------------
Karen Etheridge
/s/ William Chambers
-----------------------
William Chambers
/s/ Rogers Badgett
-----------------------
Rogers Badgett
/s/ Michael P. Moore
-----------------------
Michael P. Moore
/s/ William Zachary, Jr.
-----------------------
William Zachary, Jr.
/s/ John Imhoff, M.D.
-----------------------
John Imhoff, M.D.
-14-
<PAGE> 122
/s/ Keith D. Ignotz
------------------------
Keith D. Ignotz
/s/ Richard Bowe, M.D.
------------------------
Richard Bowe, M.D.
/s/ Joseph Calabro
------------------------
Joseph Calabro
/s/ I. William Collins
------------------------
I. William Collins, O.D.
/s/ Steven Davis
------------------------
Steven Davis
/s/ Emory J. Etheridge
------------------------
Emory J. Ethridge
/s/ Jimmy Funderburke
------------------------
Jimmy Funderburke
/s/ R. Andrew Garrett
------------------------
R. Andrew Garrett
/s/ Nelson Gold
------------------------
Nelson Gold
The Gavin Herbert, Inc. Successor Trust
By:
-----------------------------------
Title: Trustee
-15-
<PAGE> 123
/s/ Randolf Lindblad
-----------------------
Randolf Lindblad, M.D.
/s/ David Marco
-----------------------
David Marco
/s/ Mark Miehle
-----------------------
Mark Miehle
/s/ Doug Myers and Heather Myers
---------------------------------
Doug Myers and Heather Myers JROS
/s/ Charles M. Phillips
-----------------------
Charles M. Phillips
/s/ Lawrence Phillips
-----------------------
Dr. Lawrence Phillips
POWERVISION, INC.
By: /s/ Clive Harris
-----------------------
Title: Director
--------------------
/s/ Dale Rorabaugh
-----------------------
Dr. Dale Rorabaugh
/s/ Ilse Fong
-----------------------
Ilse Fong
-16-
<PAGE> 124
EXHIBIT E
LEGAL OPINION
<PAGE> 125
October 21, 1996
To Abbott Laboratories
Ladies and Gentlemen:
Reference is made to the Series C Preferred Stock Purchase Agreement,
dated as of October __, 1996 (the "Agreement"), complete with all listed
exhibits thereto, by and among SpectRx, Inc., a Delaware corporation (the
"Company"), and Abbott Laboratories, an Illinois corporation (the "Purchaser"),
which provides for the issuance by the Company to the Purchaser of shares of
Series C Preferred Stock of the Company (the "Series C Shares"). This opinion is
rendered to you pursuant to Section 5.3 of the Agreement, and all terms used
herein have the meanings defined for them in the Agreement unless otherwise
defined herein.
We have acted as counsel for the Company in connection with the
negotiation of the Agreement and the issuance of the Series C Shares. As such
counsel, we have made such legal and factual examinations and inquiries as we
have deemed advisable or necessary for the purpose of rendering this opinion. In
addition, we have examined originals or copies of such corporate records of the
Company, certificates of public officials and such other documents which we
consider necessary or advisable for the purpose of rendering this opinion. In
such examination we have assumed the genuineness of all signatures on original
documents, the authenticity and completeness of all documents submitted to us as
originals, the conformity to original documents of all copies submitted to us
and the due execution and delivery of all documents (except as to due execution
and delivery by the Company) where due execution and delivery are a prerequisite
to the effectiveness thereof.
As used in this opinion, the expression "to our knowledge," "known to
us" or similar language with reference to matters of fact means that, after an
examination of documents made available to us by the Company, and after
inquiries of officers of the Company, but without any further independent
factual investigation, we find no reason to believe that the opinions expressed
herein are factually incorrect. Further, the expression "to our knowledge",
"known to us" or similar language with reference to matters of fact refers to
the current actual knowledge of the attorneys of this firm who have worked on
matters for the Company solely in connection with the Agreement and the
transactions contemplated thereby. Except to the extent expressly set forth
herein or as we otherwise believe to be necessary to our opinion, we have not
undertaken any independent investigation to determine the existence or absence
of any fact, and no inference as to our knowledge of the existence or absence of
any fact should be drawn from our representation of the Company or the rendering
of the opinion set forth below.
For purposes of this opinion, we are assuming that you have all
requisite power and authority, and have taken any and all necessary corporate or
partnership action, to execute and deliver the Agreement, and we are assuming
that the representations and warranties made by the Purchaser in the
<PAGE> 126
Agreement and pursuant thereto are true and correct. We are also assuming that
the Purchaser has purchased the Series C Shares for value, in good faith and
without notice of any adverse claims within the meaning of the California
Uniform Commercial Code.
The opinions hereinafter expressed are subject to the following
qualifications:
(a) We express no opinion as to the effect of applicable
bankruptcy, insolvency, reorganization, moratorium or other similar federal or
state laws affecting the rights of creditors;
(b) We express no opinion as to the effect of rules of law
governing specific performance, injunctive relief or other equitable remedies
(regardless of whether any such remedy is considered in a proceeding at law or
in equity);
(c) We express no opinion as to compliance with the anti-fraud
provisions of applicable securities laws;
(d) We express no opinion as to the enforceability of the
indemnification provisions of Section 7 of the Registration Rights Agreement to
the extent the provisions thereof may be subject to limitations of public policy
and the effect of applicable statutes and judicial decisions;
(e) We are members of the Bar of the State of California and,
except as set forth in paragraph 7 below with respect to the securities laws of
other states, we express no opinion as to any matter relating to the laws of any
jurisdiction other than the federal laws of the United States of America and the
laws of the State of California. To the extent this opinion addresses applicable
securities laws of states other than the State of California, we have not
retained nor relied on the opinion of counsel admitted to the bar of such
states, but rather have relied on compilations of the securities laws of such
states contained in reporting services presently available to us.
Based upon and subject to the foregoing, and except as set forth in the
Schedule of Exceptions to the Agreement, we are of the opinion that:
1. The Company is a corporation duly organized and validly
existing under, and by virtue of, the laws of the State of Delaware and
is in good standing under such laws. The Company has requisite corporate power
to own and operate its properties and assets, and to carry on its business as
presently conducted. The Company is qualified to do business as a foreign
corporation in the State of Georgia.
2. The Company has all requisite legal and corporate power to
execute and deliver the Agreement, to sell and issue the Series C
Shares thereunder, to issue the Common Stock issuable upon conversion of the
Series C Shares and to carry out and perform its obligations under the terms of
the Agreement.
3. The authorized capital stock of the Company consists of
15,000,000 shares of Common, 2,083,500 shares of which are issued and
outstanding, 3,560,000 shares of Series A Preferred of which 3,103,784 shares
are issued and outstanding, 3,560,000 shares of Series A1 Preferred none of
which are
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<PAGE> 127
issued and outstanding, 1,375,000 shares of Series B Preferred of which
1,172,071 shares of Series B Preferred issued and outstanding, and 1,375,000
shares of Series B1 Preferred none of which are issued and outstanding, 500,000
shares of Series C Preferred of which 500,000 shares of Series C Preferred are
to be issued and outstanding, and 500,000 shares of Series C1 Preferred none of
which are issued and outstanding . There are also options outstanding to
purchase an aggregate of 458,351 shares of Common Stock and warrants to purchase
an aggregate of 1,268,643 shares of Common Stock and 360,000 shares of Series A
Preferred Stock. All such issued and outstanding shares of Preferred Stock and
Common Stock have been duly authorized and validly issued and are fully paid and
nonassessable and free of any preemptive or similar rights contained in the
Certificate of Incorporation or Bylaws of the Company or, to our knowledge, in
any agreement to which the Company is a party. The Common Stock issuable upon
conversion of the Series C Shares has been duly and validly reserved, and when
issued in accordance with the Company's Certificate of Incorporation will be
validly issued, fully paid and nonassessable. The Series C Shares issued under
the Agreement will be validly issued, fully paid and nonassessable and free of
any liens, encumbrances and preemptive or similar rights contained in the
Certificate of Incorporation or Bylaws of the Company, or, to our knowledge, in
any agreement by which the Company is a party, except as specifically provided
in the Agreement and in that certain Series A Preferred Stock Purchase Agreement
dated as of February 5, 1993; provided, however, that the Series C Shares (and
the Common Stock issuable upon conversion thereof) may be subject to
restrictions on transfer under state and/or federal securities laws as set forth
in the Agreement. To our knowledge, except for rights described in the Agreement
and the Certificate of Incorporation, there are no other options, warrants,
conversion privileges or other rights presently outstanding to purchase or
otherwise acquire any authorized but unissued shares of capital stock or other
securities of the Company, or any other agreements to issue any such securities
or rights.
4. All corporate action on the part of the Company, its directors and
stockholders necessary for the authorization, execution and delivery of the
Agreement by the Company, the authorization, sale, issuance and delivery of the
Series C Shares (and the Common Stock issuable upon conversion thereof) and the
performance of the Company's obligations under the Agreement has been taken. The
Agreement has been duly and validly executed and delivered by the Company and
constitutes a valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms.
5. The execution, delivery and performance of and compliance with the
terms of the Agreement, and the issuance of the Series C Shares (and the Common
Stock issuable upon conversion thereof), do not violate any provision of the
Certificate of Incorporation or Bylaws, or, to our knowledge, any provision of
any applicable federal or state law, rule or regulation. To our knowledge, the
execution, delivery and performance of and compliance with the Agreement, and
the issuance of the Series C Shares (and the Common Stock issuable upon
conversion thereof) do not violate, or constitute a default under, any material
contract, agreement, instrument, judgment or decree binding upon the Company.
6. Except as identified in the Agreement, to our knowledge, there are
no actions, suits, proceedings or investigations pending against the Company or
its properties before any court or governmental agency (nor, to our knowledge,
has the Company received any written threat thereof), which, either in any case
or in the aggregate, are likely to result in any material adverse change in the
business or financial condition of the Company or any of its properties, or in
any material impairment of
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<PAGE> 128
the right or ability of the Company to carry on its business as now conducted,
or which questions the validity of the Agreement or any action taken or to be
taken by the Company in connection therewith.
7. No consent, approval or authorization of or designation, declaration
or filing with any governmental authority on the part of the Company is required
in connection with the valid execution and delivery of the Agreement, or the
offer, sale or issuance of the Series C Shares (and the Common Stock issuable
upon conversion thereof) or the consummation of any other transaction
contemplated by the Agreement, except (a) filing of the Amended and Restated
Certificate of Incorporation in the Office of the Secretary of State of the
State of Delaware, and (b) qualification (or taking such action as may be
necessary to secure an exemption from qualification, if available) under the
Delaware General Corporation Law and other applicable blue sky laws (but
excluding jurisdictions outside of the United States) of the offer and sale of
the Series C Shares (and the Common Stock issuable upon conversion thereof) and
the modification of rights of shareholders contemplated by the Agreement. The
filing referred to in clause (a) above has been accomplished and is effective.
Our opinion herein is otherwise subject to the timely and proper completion of
all filings and other actions contemplated herein where such filings and actions
are to be undertaken on or after the date hereof.
8. Subject to the accuracy of the Purchasers' Representations and
Warranties in Section 4 of the Agreement and their responses (if any) to the
Company's inquiries, we are of the opinion that the offer, sale and issuance of
the Series C Shares in conformity with the terms of the Agreement constitute
transactions exempt from the registration requirements of Section 5 of the
Securities Act of 1933, as amended.
This opinion is furnished to the Purchasers solely for their benefit in
connection with the purchase of the Series C Shares, and may not be relied upon
by any other person or for any other purpose without our prior written consent.
Very truly yours,
/s/ Wilson Sonsini Goodrich & Rosati
----------------------------------------
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
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<PAGE> 129
APPENDIX 1.20
LICENSED PATENTS
1. [*]
2. United States Patent No. 5,458,140, issued October 17, 1995,
entitled "Enhancement of Transdermal Monitoring Applications
with Ultrasound and Chemical Enhancers" and any reissuances
Thereof
3. [*]
4. [*]
5. [*]
6. [*]
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
<PAGE> 130
APPENDIX 1.25
PRIOR DISCLOSURES
SPECTRx CONFIDENTIAL
SUMMARY OF CONFIDENTIAL MATERIALS PROVIDED TO
ABBOTT BY SPECTRX
September 19, 1996
Video tapes presented to visiting Abbott contingent on [*] showing [*],
copies of which tapes will be sent to Abbott. Overhead transparencies
summarizing the history of NIMCO. Copy of the [*] tape presented to visiting
Abbott contingent on [*].
Fax Transmission of Letter of [*] to Jim Babb describing clinical study
to examine if any of the Glucose levels in the [*], i.e., is there a [*] in the
glucose [*] as it is [*]. This letter also described how we were able to modify
the [*] to work on [*] and the performance qualification data of the modified
[*].
Fax Transmission of Interim Progress Report of [*] sent to Jim Babb
describing the [*] clinical study on the first [*] subjects. Fax Transmission on
7-22-96 to Mark Weishaar, Memorandum of Terms Regarding Private Placement of
Equity Securities. Summarized proposed private placement, stock outstanding
series A, B, Preferred, common, warrants.
Fax Transmission of [*] to Tom Schapira in response to his letter of
[*] regarding the functional mechanism of the SpectRx [*] method. Summarizes the
typical operating parameters and discusses our method in the context of
patentability over the [*].
Delivery to Tom Schapira of several SpectRx prepared, [*] and various
different [*] used for histological and microscopic analysis by Abbott and
Abbott's sub-contractors. Results of this work summarized in the Abbott internal
report No. [*].
Materials entitled "Due Diligence Information" presented to Abbott
Laboratories (Jim Babb) on [*] in a binder. These materials consist of the
following documents:
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
<PAGE> 131
1. [*]
2. Invention Disclosure Statement for "A new concept
for [*]".
3. U.S. Patent No. 5,458,140
4. U.S. Patent No. 5,445,611
5. [*]
6. [*]
7. Invention Disclosure for "[*]".
8. Opinion from Dean Russell of Kilpatrick & Cody,
dated August 8, 1995.
Draft of the most generic [*] concept patent which formed the basis for
our recent [*]. Sent to Tom Schapira on [*].
Fax Transmission of a summary of the [*] situation regarding [*].
Copy of the [*]
Copy of NIMCO/ALTEA/SPECTRX Agreement dated March 1, 1996.
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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<PAGE> 132
APPENDIX 1.28
RESEARCH PROGRAM OUTLINE
(To be prepared by the Research Committee within sixty (60) days of the
Effective Date.)
<PAGE> 133
APPENDIX 2.3
COST CATEGORIES
R&D COSTS TO BE REIMBURSED SPECTRx, INC.
The following outlines, by type, the research and development expenses which
will be incurred by SPECTRx, Inc. with respect to the Research Program which are
to be reimbursed by ABBOTT:
Personnel Direct Costs
- Actual Research Program direct labor cost incurred
- Labor burden of 20% on actual Research Program direct labor
cost incurred to cover the cost of employer payroll taxes,
employee benefits and workers compensation insurance.
- Actual cost of training (including any travel costs incident
thereto) required for existing or new employees specific to
the Research Program.
- Actual cost of recruiting new employees (including any travel
costs incident thereto) specifically for the Research Program.
Such cost to be prorated in the event the new employee will be
supporting other R&D initiatives in addition to the Research
Program.
- All actual travel costs incurred specifically related to any
Research Program activities.
Other Direct Costs
- Actual contract R&D costs incurred which are specifically
related to the Research Program, including but not limited to
the cost of contract labor, outside laboratory services, and
other research support.
- Actual cost of all outside consultants utilized to assist in
the Research Program.
- Actual cost of all outside consultants utilized to assist in
the Research Program, including but not limited to the costs
of medical service providers, stipends to participants, and
supplies incident to the clinical trials.
- All actual travel costs incurred by nonemployees of SPECTRx,
Inc. which are specifically related to the Research Program,
including but not limited to travel costs for contract
employees and outside consultants.
- Actual cost of all research materials and supplies utilized in
the Research Program.
<PAGE> 134
- Actual cost of all equipment purchased or rented specifically
for the Research Program.
- Actual cost of software which is utilized to assist in the
Research Program.
Incremental R&D Overhead
- R&D overhead allocation to cover the incremental cost of the
following which must be incurred by SPECTRX specifically due
to the Research Program.
- Office Rental
- Utilities
- Telephone
- Office Expenses (office supplies, copier, fax, postage,
overnight delivery, etc.)
- Insurance
- Administrative Support used directly in support of Research
Program (direct support staff such as secretarial support)
-2-
<PAGE> 135
APPENDIX 2.4
MILESTONE CRITERIA
<PAGE> 136
MILESTONE 1a -[*]. [*] will prove the technology is capable of [*] in a short
time period.
OBJECTIVE: Demonstrate the [*] of using [*] techniques to collect a clean (i.e.
containing less than [*]) sample of [*] of sufficient volume (volume [*]) within
[*] total collection time. Performance to be shown on a study cohort made up of
[*] subjects, with statistically representative distribution of age, gender,
body mass, and ethnic background (skin pigmentation) applied to each sub-group.
The demonstration of [*] is exclusively limited to [*] of the sample of [*] from
the human subject, [*] of said sample to facilitate other processes such as
assaying this sample for glucose or any other analyte, or any other processes
not directly related to the basic sample extraction.
Measurement of success: Milestone 1a will be met if each of the following
desired outcomes are achieved:
1. [*]. When surveyed, [*] of the test cohort rate the [*] they
experienced with the [*] as clearly [*] which they associate with a
[*].
2. Volume of [*]. Within the [*] subjects, with [*] samples drawn from
each on [*] separate days, [*], the median volume of [*] collected
during a [*] shall be at least [*] as measured from the active
engagement of the [*], not necessarily the beginning of [*].
Furthermore, at least [*] of the [*] sampling events shall show at
least [*]. The [*] of the [*] may be performed by weighing the sample
collection reservoir before and after the [*] process on an analytical
balance with suitable sensitivity and precision to quantify the [*].
The reservoir used to collect the [*] may be constructed in any of the
following approved manners:
a. A simple chamber wherein the [*] merely forms a [*], and is then
collected for volumetric quantification by using either a
micro-capillary tube, a [*].
b. A [*] placed in the collection apparatus such that as the [*], it is
absorbed and held by the [*], which may be removed after the [*] for
[*].
c. Any other method which is designed by the joint research committee
and mutually agreed to by both SpectRx and Abbott.
3. [*]. [*] of the [*] shall show [*] was performed when a [*] is applied
to the site for [*]. [*] due to the [*] of the [*] observed at the [*].
4. Histology. [*] of the [*] shall show [*] have elapsed from the last day
of [*] greater than a [*]. To assist in making this evaluation as
objective as possible, a set of reference standards shall be assembled
which can be used by an impartial grader to establish the histology
score. This set of references shall be designed and mutually approved
by both Abbott and SpectRx and shall take into account such issues as
different skin colors, magnification used for viewing, possible methods
[*], and the specific apparatus to be used for the documentation and
archiving of the before and after condition of the [*].
5. Instrumentation. All hardware utilized in the [*] studies is expected
to be prototype and not miniaturized. Nevertheless, [*] shall also be
provided as part of the deliverable package required
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
-2-
<PAGE> 137
to satisfy the milestone 1a completion criteria. This review shall
cover such aspects of the hardware as [*] viability of the entire
product.
SpectRx will support the evaluation of assay systems per the direction
of the Research Committee. This support will include the design and
supply of [*], which mimic the capability of the SpectRx test
instruments in the ability of using [*].
6. A patent review of the technologies employed shall be performed, at
Abbott's expense to assess the questions regarding freedom to operate
within the existing intellectual property environment. The selection of
Legal counsel for this function shall be subject to decision by the
Research Committee.
MILESTONE 1b, [*] feasibility will integrate a [*] with the [*] to prove [*].
OBJECTIVE: Demonstrate the [*] of using an [*] and glucose assay techniques to
collect a clean (containing, [*] sample of [*]) of sufficient volume [*] within
[*]. The [*] may be implemented in its entirety with laboratory based prototype
devices which may have physical embodiments substantially different from any
product design to be implemented later, but which utilize the basic concepts and
demonstrate the feasibility of these concepts in a clinical testing environment
showing the ability to produce an amount of [*]. Additional time required by the
assay system itself is not included in this [*]. The demonstration of integrated
device feasibility is exclusively limited to the [*] and to the successful
measurement of the glucose content within this sample using the [*] chosen for
this [*]. These efforts are not designed to develop an optimized glucose assay
system, specifically tailored for this approach, but merely to demonstrate the
technical feasibility of the integrated concept. For example, it is expected
that the assay technologies potentially suitable for the final product will have
undergone substantial improvements in their own right in the areas of [*].
Additionally, [*] such as the [*] are not part of this effort.
Measurement of success: Milestone 1b will be met if each of the following
desired outcomes are achieved:
SpectRx Sampling Milestone:
1. Volume Extracted - Using a test base of [*] subjects, [*] will be [*]
from each subject. The success criteria will be that [*] of all [*]
will achieve [*].
2. Pain - If [*] differ from conditions in [*], then the criteria for the
[*].
3. Healing - If [*] differ from conditions in [*], then the criteria for
the [*].
4. Histology - If [*] differ from conditions in [*], then the criteria for
the [*].
Abbott Assay Milestone:
5. Volume - [*] of devices will report results with [*] applied and
achieve a precision of [*].
6. Accuracy -The performance with [*] test specimens of [*] will achieve:
[*].
Note: The Abbott assay milestone must be completed [*] of SpectRx
starting the [*] above or by the point in time SpectRx completes the 1b
sampling milestone above, whichever is later ("SpectRx Sampling
Milestone 1b Completion"). In the event the Abbott [*], or any modified
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
-3-
<PAGE> 138
version agreed to by the Research Committee, is not complete at the
time of [*]. Furthermore, if Abbott has not completed the Abbott assay
milestone above, or any modified version agreed to by the Research
Committee, [*] of SpectRx [*], [*] the balance of [*] will be
considered completed as regards to the license agreement between Abbott
and SpectRx. The parties recognize that upon SpectRx Sampling Milestone
1b Completion, the research team will work on integration of the
sampling and assay devices regardless of the status of the assay
performance.
Joint Milestone:
7. Completion of both the above milestone areas.
8. Accuracy - Integrated sampling/glucose assay performance criteria, with
the acceptance criteria being: The performance with [*] subjects, in
which an integrated device achieves [*], extraction of [*], and [*] for
glucose in a total time of [*] will achieve equivalent or better
performance, as judged by the correlation [*], both correlated to a
mutually agreed to clinically acceptable reference test method.
9. Instrumentation:
All hardware utilized in the [*] studies is expected to be [*].
Nevertheless, to the degree possible, an engineering review of the
technology focused on how the prototype hardware could be transferred
into a commercial realization shall also be provided as part of the
deliverable package required to satisfy the milestone 1a completion
criteria. This review shall cover such aspects of the hardware as [*]
viability of the entire product.
10. Patent Review if technology is different from 1a - A patent review of
the technologies employed shall be performed, at Abbott's expense to
assess the questions regarding freedom to operate within the existing
intellectual property environment. The selection of Legal counsel for
this function shall be subject to decision by the Research Committee.
The Research Committee can, by agreement of all those on the committee, revise
the foregoing milestone criteria during the Research Program based on any
additional marketing or technical data which may become available. After
agreement within the Research Committee, any such modified milestones will
become effective upon approval by the appropriate duly authorized
representatives of Abbott and SpectRx as part of an amendment to this Agreement.
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
-4-
<PAGE> 139
APPENDIX 4.2(C)
REGIONS AND DESIGNATED COUNTRIES
[*] [*] [*]
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[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
<PAGE> 140
[*]
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[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
-2-
<PAGE> 141
APPENDIX 14.5
ALTERNATIVE DISPUTE RESOLUTION
The parties recognize that bona fide disputes as to certain matters may
arise from time to time during the term of this Agreement which relate to either
party's rights and/or obligations. To have such a dispute resolved by this
Alternative Dispute Resolution ("ADR") provision, a party first must send
written notice of the dispute to the other party for attempted resolution by
good faith negotiations between their respective presidents (or their
equivalents) of the affected subsidiaries, divisions, or business units within
twenty-eight (28) days after such notice is received (all references to "days"
in this ADR provision are to calendar days).
If the matter has not been resolved within twenty-eight (28) days of
the notice of dispute, or if the parties fail to meet within such twenty-eight
(28) days, either party may initiate an ADR proceeding as provided herein. The
parties shall have the right to be represented by counsel in such a proceeding.
1. To begin an ADR proceeding, a party shall provide written notice to
the other party of the issues to be resolved by ADR. Within fourteen (14) days
after its receipt of such notice, the other party may, by written notice to the
party initiating the ADR, add additional issues to be resolved within the same
ADR.
2. Within twenty-one (21) days following receipt of the original ADR
notice, the parties shall select a mutually acceptable neutral to preside in the
resolution of any disputes in this ADR proceeding. If the parties are unable to
agree on a mutually acceptable neutral within such period, either party may
request the President of the CPR Institute for Dispute Resolution ("CPR"), 366
Madison Avenue, 14th Floor, New York, New York 10017, to select a neutral
pursuant to the following procedures:
(a) The CPR shall submit to the parties a list of not less
than five (5) candidates within fourteen (14) days after receipt of the request,
along with a Curriculum Vitae for each candidate. No candidate shall be an
employee, director, or shareholder of either party or any of their subsidiaries
or affiliates.
(b) Such list shall include a statement of disclosure by each
candidate of any circumstances likely to affect his or her impartiality.
(c) Each party shall number the candidates in order of
preference (with the number one (1) signifying the greatest preference) and
shall deliver the list to the CPR within seven (7) days following receipt of the
list of candidates. If a party believes a conflict of interest exists regarding
any of the candidates, that party shall provide a written explanation of the
conflict to the CPR along with its list showing its order of preference for the
candidates. Any party failing to return a list of preferences on time shall be
deemed to have no order of preference.
(d) If the parties collectively have identified fewer than
three (3) candidates deemed to have conflicts, the CPR immediately shall
designate as the neutral the candidate for whom the parties collectively have
indicated the greatest preference. If a tie should result between two
candidates, the CPR may designate either candidate. If the parties collectively
have identified three (3) or more candidates
<PAGE> 142
deemed to have conflicts, the CPR shall review the explanations regarding
conflicts and, in its sole discretion, may either (i) immediately designate as
the neutral the candidate for whom the parties collectively have indicated the
greatest preference, or (ii) issue a new list of not less than five (5)
candidates, in which case the procedures set forth in subparagraphs 2(a) - 2(d)
shall be repeated.
3. No earlier than twenty-eight (28) days or later than
fifty-six (56) days after selection, the neutral shall hold a hearing
to resolve each of the issues identified by the parties. The ADR proceeding
shall take place at a location agreed upon by the parties. If the parties
cannot agree, the neutral shall designate a location other than the principal
place of business of either party or any of their subsidiaries or affiliates.
4. At least seven (7) days prior to the hearing, each party shall
submit the following to the other party and the neutral:
(a) a copy of all exhibits on which such party intends to rely
in any oral or written presentation to the neutral;
(b) a list of any witnesses such party intends to call at the
hearing, and a short summary of the anticipated testimony of each witness;
(c) a proposed ruling on each issue to be resolved, together
with a request for a specific damage award or other remedy for each issue. The
proposed rulings and remedies shall not contain any recitation of the facts or
any legal arguments and shall not exceed one (1) page per issue.
(d) a brief in support of such party's proposed rulings and
remedies, provided that the brief shall not exceed twenty (20) pages. This page
limitation shall apply regardless of the number of issues raised in the ADR
proceeding. Except as expressly set forth in subparagraphs 4(a) - 4(d), no
discovery shall be required or permitted by any means, including depositions,
interrogatories, requests for admissions, or production of documents.
5. The hearing shall be conducted on two (2) consecutive days
and shall be governed by the following rules:
(a) Each party shall be entitled to five (5) hours of hearing
time to present its case. The neutral shall determine whether each party has had
the five (5) hours to which it is entitled.
(b) Each party shall be entitled, but not required, to make an
opening statement, to present regular and rebuttal testimony, documents or other
evidence, to cross-examine witnesses, and to make a closing argument.
Cross-examination of witnesses shall occur immediately after their direct
testimony, and cross-examination time shall be charged against the party
conducting the cross- examination.
(c) The party initiating the ADR shall begin the hearing and,
if it chooses to make an opening statement, shall address not only issues it
raised but also any issues raised by the responding party. The responding party,
if it chooses to make an opening statement, also shall address all issues
-2-
<PAGE> 143
raised in the ADR. Thereafter, the presentation of regular and rebuttal
testimony and documents, other evidence, and closing arguments shall proceed in
the same sequence.
(d) Except when testifying, witnesses shall be excluded from
the hearing until closing arguments.
(e) Settlement negotiations, including any statements made
therein, shall not be admissible under any circumstances. Affidavits prepared
for purposes of the ADR hearing also shall not be admissible. As to all other
matters, the neutral shall have sole discretion regarding the admissibility of
any evidence.
6. Within seven (7) days following completion of the hearing,
each party may submit to the other party and the neutral a post-hearing
brief in support of its proposed rulings and remedies, provided that such brief
shall not contain or discuss any new evidence and shall not exceed ten (10)
pages. This page limitation shall apply regardless of the number of issues
raised in the ADR proceeding.
7. The neutral shall rule on each disputed issue within fourteen
(14) days following completion of the hearing. Such ruling may adopt in
its entirety the proposed ruling and remedy of one of the parties on each
disputed issue but may adopt one party's proposed rulings and remedies on some
issues and the other party's proposed rulings and remedies on other issues or
may craft rulings and remedies other than those proposed by the parties. The
neutral shall not issue any written opinion or otherwise explain the basis of
the ruling if the neutral adopts a proposed ruling and remedy.
8. The neutral shall be paid a reasonable fee plus expenses.
These fees and expenses, along with the reasonable legal fees and
expenses of the prevailing party (including all expert witness fees and
expenses), the fees and expenses of a court reporter, and any expenses for a
hearing room, shall be paid as follows:
(a) If the neutral rules in favor of one party on all disputed
issues in the ADR, the losing party shall pay 100% of such fees and expenses.
(b) If the neutral rules in favor of one party on some issues
and the other party on other issues, the neutral shall issue with the rulings a
written determination as to how such fees and expenses shall be allocated
between the parties. The neutral shall allocate fees and expenses in a way that
bears a reasonable relationship to the outcome of the ADR, with the party
prevailing on more issues, or on issues of greater value or gravity, recovering
a relatively larger share of its legal fees and expenses.
(c) 9. The rulings of the neutral and the allocation of fees
and expenses shall be binding, non-reviewable, and non-appealable, and may be
entered as a final judgment in any court having jurisdiction.
10. Except as provided in paragraph 9 or as required by law, the
existence of the dispute, any settlement negotiations, the ADR hearing, any
submissions (including exhibits, testimony, proposed rulings, and briefs), and
the rulings shall be deemed Confidential Information. The neutral shall have the
authority to impose sanctions for unauthorized disclosure of Confidential
Information.
-3-
<PAGE> 1
EXHIBIT 10.24
STANDARD NET INDUSTRIAL LEASE
[GRUBB & ELLIS LOGO]
This Information Schedule is a part of the Lease between the parties named
below. The information in this Schedule is further explained and detailed in
the rest of the Lease, most particularly in the referenced Lease Paragraphs.
<TABLE>
<CAPTION>
INFORMATION &
PARAGRAPH #
<S> <C>
DATE OF LEASE: September 21, 1993
#1 -----------------------------------------------------------------------------------------
PARTIES Landlord: National Life Insurance Company
#1,19 d/b/a Plaza 85 Business Park
Karsten Realty Advisors
Courthouse Center
175 N.W. 1st Avenue, Suite 250
Miami, Florida 33128
Copy: Grubb & Ellis Company
Peachtree Center, South Tower
225 Peachtree Street, Suite 600
Atlanta, Georgia 30303
Tenant: Spectrx, Inc.
------------------------------------------------------------------------
6025 - A/B/C Unity Drive
------------------------------------------------------------------------
Norcross, Georgia 30071
------------------------------------------------------------------------
PREMISES: Approximately 9,763 Square Feet at 6025-A/B/C Unity Drive
#2.1 ----- ------------------------------------------------------
-----------------------------------------------------------------------------------------
Exhibits A&B
-----------------------------------------------------------------------------------------
#2.1(b) Adjacent Site Improvements (if none, so state) See Exhibit "B"
-----------------------------------------
Exhibit B
-----------------------------------------------------------------------------------------
LANDLORD'S WORK: (if none, so state) See Exhibit "C"
--------------------------------------------------------------------
# 3.1 Exhibit C
-----------------------------------------------------------------------------------------
OCCUPANCY: The "Date of Occupancy" shall be the first to occur of:
#3.2
a) November 1, 1993
--------------------------------------------------------------------------------------
b) The date Tenant begins business in the Premises
--------------------------------------------------------------------------------------
TERM: The "Lease Term" begins on the Date of Occupancy and ends at midnight on the last day of
#4 the Sixtieth (60th) full calendar month thereafter.
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
RENTS: Fixed Minimum Rent: Two Hundred Thirty Nine Thousand One Hundred Ninety Three and
#5 50/100 Dollars ($3,050.94) per month for 12 months. The Fixed Minimum Rent shall be
increased either (i) in accordance with Paragraph 5.1(c) or as detailed in Exhibit "E"
-----------------------------------------------------------------------------------------
ADDITIONAL RENTS:
#5.2, 7.3 Tenant's share of the Operating Costs, Real Estate Taxes, and Insurance Premiums is
8.2(b) established at Five POINT One PERCENT ( 5.1 % )
10.1, 11
PERMITTED USES: General Office, Optical Electronics Manufacturer and Developer
#6.1 -----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
LANDLORD'S BROKER: (if none, so state) Grubb & Ellis ; To be paid by Landlord
#20 ------------------------------------------------------
TENANT'S BROKER: (if none, so state) None ; To be paid by Landlord
#20 --------------------------------------------------------
ADDITIONAL EXHIBITS: The following Exhibits are attached to and made a part of this Lease.
A. Description of the Premises
B. Plan of the Premises
C. Landlord's Work and Tenant's Work
D. Dangerous/Hazardous Chemicals and Materials
E. Special Stipulations
</TABLE>
<PAGE> 3
STANDARD NET INDUSTRIAL LEASE
1. PARTIES: This lease is made as of the date shown in the Information
Schedule, between the parties as provided in said Schedule.
2. PREMISES: In consideration of the agreements in this Lease and other
consideration paid, Landlord leases to the Tenant and Tenant leases
from Landlord:
(a) the "Premises" are located in the "Building" located in
Landlord's "Industrial Park" described in Exhibit A and the
Information Schedule and are shown on Exhibit "B".
(b) the sole right to use the parking loading area, if any,
described in the Information Schedule and as shown as the
"Adjacent Site Improvements" on Exhibit "A".
(c) the non-exclusive right to use, together with Landlord and
other tenants of the Industrial Park, the driveways, parking
(to the extent not leased to other tenants for their sole
use), and grounds.
3. IMPROVEMENTS, DATE OF OCCUPANCY.
3.1 COMPLETION OF CONSTRUCTION: The Landlord's Work is described
in Exhibit "C". Any items to be paid for by Tenant are as
shown in Exhibit "C". Landlord will use reasonable efforts to
deliver the Premises to Tenant in substantial compliance with
the plans and specifications listed in Exhibit "C" on or
before the date provided in the Information Schedule, subject
to Article 15. Plans and specifications to be provided by
Tenant will be available to Landlord as provided in the
Information Schedule.
3.2 DATE OF OCCUPANCY: If the Date of Occupancy occurs under
(b) as provided in the Information Schedule, Landlord and
Tenant each agree, if asked, to execute an addendum listing
the date.
3.3 POSSESSION: Tenant may cancel this lease if possession is not
provided within ninety (90) days from the projected date of
occupancy. Tenant agrees not to seek damages if Landlord fails
to complete the Landlord's work or if occupancy is delayed due
to any of the events in Article 15 or any other cause.
4. TERM: Commencement and Termination. The Lease Term is as provided in
the Information Schedule. If the Date of Occupancy is the first day
of a month that month shall be the first full calendar month. If the
Tenant is on the Premises before the Date of Occupancy, the terms of
the Lease (except rentals) will govern. This lease is not terminable
by Tenant, except as expressly stated.
5. RENTS, SECURITY DEPOSITS.
5.1(a) FIXED MINIMUM RENT: Tenant agrees to pay Landlord Fixed
Minimum Rent (the Rent) for the Premises in the amounts listed
in the Information Schedule. The Rent will be paid in monthly
installments, in advance, without offset, deduction or prior
demand, on the first day of each month of the original and any
renewal Lease Term. The Rent for the time from the Date of
Occupancy to the first day of the next calendar month will be
paid on the Date of Occupancy.
5.1(b) RENT TAX: If any governmental agency imposes any tax measured
by the amount of rent paid, Tenant will pay such tax at the
time of payment of Fixed Minimum Rent or Additional Rent.
5.2(a) ADDITIONAL RENT: In addition to the Fixed Minimum Rent,
Tenant will pay as Additional Rent Tenant's share of the
property costs which includes: insurance premiums (whether
elective or required). Real property taxes and Tenant's share
of operating costs. Operating costs include all costs and
expenses of any kind or nature incurred by Landlord in
managing, operating, equipping, policing, protecting,
lighting, repairing, replacing
<PAGE> 4
and maintaining the Building and the common areas, including,
but not limited to, maintenance and repairs, common area
utilities, water and sewer, management, landscaping,
irrigation systems, cleaning, snow removal, signage, lighting,
pest control, security costs, supplies, trash removal, parking
lot sweeping, personal property taxes. Owners' Association
dues, maintenance of and replacement of equipment, exterior
painting, roof repairs, parking lot repairs, seal coating, and
striping, plumbing repairs, and compensation and benefits of
employees involved in such work. Excluded from Operating
Costs are net income taxes, financing costs, capital
improvements, leasing commissions, advertising expenses,
renovation of space for new tenants, and renovation as a
result of casualty from causes against which Landlord carried
insurance. If Tenant fails to pay its share of these
expenses, Landlord shall have the remedies provided for the
failure to pay rent.
5.2(b) PAYMENT OF ADDITIONAL RENT: Additional rent, together with
any tax measured by the amount of the additional rent, will be
paid in monthly installments on the first day of each month in
an amount reasonably established from time to time by
Landlord. Property costs for period including time outside
the Lease Term will be prorated. Landlord will provide an
accounting of actual costs at least annually and any refund
due Tenant or payment due Landlord shall be paid within
fifteen (15) days from receipt of notice.
5.2(c) TENANT'S SHARE: Tenant's share is the percentage obtained by
dividing the number of square feet of leasable area in the
Premises by the number of square feet of leasable area in the
building or Industrial Park (whichever is applicable). The
tenant's share is initially established as set forth in the
Information Schedule.
5.3 RENT OBLIGATIONS INDEPENDENT, STATEMENT, PRORATION, WHERE
PAYABLE, LATE CHARGE: The rent obligations are independent of
any other obligations of Tenant or Landlord and Tenant is not
entitled to any abatement or reduction in rent except as
expressly provided. Tenant waives the benefit of any statute
which would alter this agreement of the parties. Rent due for
any period which is less than one month will be prorated.
Rent is payable to Landlord at the address listed in the
Information Schedule or such other places the Landlord may
designate from time to time in writing. A five (5%) percent
handling fee is due on any rent not paid within ten (10) days
of the due date, unless Landlord elects to pursue actions
under Paragraph 13.
6. USE:
6.1 USE: Tenant covenants and agrees to use the Premises for no
purpose other than those listed in the Information Schedule.
6.2 COMPLIANCE WITH LAW: Tenant at its expense will comply
promptly with all statutes, ordinances, rules and regulations,
orders and requirements (including the recommendations of fire
rating organizations, Tenant's and Landlord's underwriters and
insurance companies), in effect during the Lease Term
regulating the use of the Premises by Tenant. Tenant will not
carry on nor permit any dangerous or offensive activity so as
to create damage to the Property, waste, a nuisance or
disturbance to other tenants.
6.3 ENVIRONMENTAL PROTECTIONS: Tenant acknowledges that there are
in effect federal, state and local laws, regulations, and
guidelines, and that additional and other laws, regulations,
and guidelines may hereinafter be enacted to take effect
relating to or affecting the Premises, and concerning the
impact on the environment of construction, land use,
maintenance and operation of structures, and the conduct of
business. Tenant will not cause or permit to be caused, any
act or practice, by negligence, omission, or otherwise, that
would adversely affect the environment, or do anything or
permit anything to be done that would violate any of said
laws, regulations or guidelines. Tenant agrees to comply with
Exhibit "D" ("Control of Dangerous/Hazardous Chemicals and
Materials"). Tenant shall indemnify, defend, protect and hold
Landlord, its employees, agents, officers and directors,
harmless from and against all claims, accidents, suits,
proceedings, judgments, losses, costs, damages, liabilities
(including, without limitation, sums paid in settlement of
claims), deficiencies, fines, penalties, punitive damages or
expenses (including, without limitation, reasonable attorneys,
experts', and consultants' fees, investigation and laboratory
fees, court costs and litigation expenses) resulting from any
adverse affect to the environment by Tenant, directly or
indirectly resulting from the presence of any
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Hazardous Materials in, on, or under the Premises that were
introduced to the Premises by Tenant. All obligations of
Tenant under this Article 6.3 shall survive the expiration or
earlier termination of the Lease.
6.4 CONDITION OF PREMISES: Tenant accepts the Premises in the
condition existing as of the date of this Lease, subject only
to the completion of Landlord's work. Tenant accepts the
Premises subject to all applicable zoning, municipal, county,
state and federal laws, ordinances and regulations governing
use of the Premises and to any covenants or restrictions of
record, and matters disclosed by any attached exhibits.
Tenant acknowledges that Landlord and Landlord's agent have
not made any representation or warranty as to the suitability
of the Premises for Tenant's business.
7. MAINTENANCE, REPAIRS AND ALTERATIONS:
7.1 TENANT'S OBLIGATIONS: During the Lease Term Tenant shall
maintain, replace and keep the Premises, fixtures and
equipment in good and clean order, condition and repair,
including but not limited to all windows and doors and their
fixtures, loading dock equipment (dock levelers, overhead
doors, dock shelters, seals and bumpers), pavement under sole
use of Tenant, electrical system, lighting (fixtures, bulbs,
ballasts, starters, and diffusers), plumbing, heating and
cooling system and equipment, floors, sprinkler system,
interior wall surfaces, interior partitions, mezzanines and
all adjacent site improvements. Tenant will maintain
maintenance contracts satisfactory to Landlord covering the
air conditioners and insurance policies covering boilers.
Tenant waives the benefits of any statute which would give
Tenant the right to make repairs at Landlord's expense or to
terminate this Lease because of Landlord's failure to keep the
Premises in good order, condition and repair.
Tenant agrees to store trash in suitable containers outside
the building. Tenant agrees not to store goods, pallets,
drums, or any other materials outside the premises.
Tenant shall not place a load upon any floor of the premises
exceeding the floor load per square foot area which such floor
was designed to carry and which is allowed by law. Use by
Tenant of any mezzanines for storage is at Tenant's sole risk
and Tenant agrees to indemnify Landlord from any claims
resulting from any such use.
In the event Landlord designated specific parking areas within
the parking and loading areas, Tenant will cause its
employees, agents, and invitees to park only in the designated
areas. No repair or servicing of any motorized vehicle shall
be allowed in the Premises or any parking or loading areas,
roadways or service areas within the Industrial Park. No
vehicle (including equipment, trailers, and machinery) shall
be abandoned or disabled or in a state of non-operation or
disrepairship upon the property of the Landlord, and Tenant
shall enforce this restriction against Tenant's employees,
agents, and invitees. Should Landlord determine that a
violation of this restriction has occurred, Landlord shall
have the right to cause the offending vehicle to be removed
and all costs of such removal shall be the obligation of the
Tenant responsible for such vehicle within ten (10) days of
written notice to Tenant.
7.2 LANDLORD'S OBLIGATIONS: Landlord will maintain the roof, the
structural integrity of the exterior walls, structural
supports and foundations of the Building and the paved areas
of the Industrial Park (except for pavement under Tenant's
sole use), unless covered by the provisions of Paragraph 9.3.
Landlord may enter the Premises on reasonable notice to carry
out its obligations. Landlord will not unduly interfere with
Tenant's operations. Landlord is not liable for any
reasonable interruption of Tenant's use of the Premises.
It is expressly agreed between the parties that the Landlord
will not be liable to the Tenant for any damage or injury
which may be sustained by the Tenant or those claiming through
Tenant as a result of leaks in the roof, foundation or outside
walls. The Landlord will be liable to the Tenant only in the
event of the Landlord's willful refusal to repair the roof,
foundation and outside walls, or Landlord's gross negligence
in making such repairs.
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7.3 RAIL SPUR USE AND COSTS (WHERE APPLICABLE):
(a) If Tenant has sole access to a rail spur servicing
the Building or Industrial Park, Tenant, at its sole
cost and expense, shall maintain and repair the
entire rail spur. Tenant also agrees to reimburse
Landlord as additional rent for all insurance and
other operating costs incurred by Landlord regarding
the rail spur within ten (10) days after receipt of a
statement from Landlord.
(b) If more than one tenant has access to a rail spur or
spurs servicing the Building or Industrial Park, the
Landlord shall coordinate all maintenance and
repairs. Tenants with access to the rail spur(s)
shall reimburse Landlord for the maintenance,
repairs, insurance and other operating costs based
upon the proportion of the Premises to the total
leasable area leased, from time to time, to tenants
having access to the rail spur(s). Tenant shall
reimburse Landlord as additional rent for such costs
within ten (10) days after receipt of a statement
from Landlord.
7.4 SURRENDER OF PREMISES: At the end of the term, or any other
termination, Tenant will return the Premises in good, clean
condition and operating order, after completion of maintenance
and replacement which is Tenant's responsibility. Damage by
ordinary wear and tear is excepted to the extent that it is
not part of Tenant's obligation to maintain and replace. Also
excepted is casualty from causes against which Landlord
carried insurance. Extraordinary wear and tear due to
Tenant's use of the Premises is the responsibility of Tenant.
Damage to the Premises caused by Paragraph 7.5(c) removals
will be repaired by Tenant. Tenant shall notify Landlord in
writing (cont) at least 120 days prior to vacating the
Premises and shall within 30 days prior to vacating arrange to
meet with Landlord for a joint inspection of the Premises
shall be deemed correct for the purpose of determining
Tenant's responsibility for repairs and restoration of the
Premises.
7.5 ALTERATIONS AND ADDITIONS:
7.5(a) CONSENT: Tenant will not make any alterations or improvements
to the Premises, or changes to the exterior of the Premises,
or the exterior of the Building without Landlord's prior
written consent. Landlord may condition its consent with any
of the following:
(i) Tenant's agreement to remove any alterations or
improvements upon termination, and to restore the
Premises to the prior condition.
(ii) A lien and completion bond equal to one and one-half
times the estimated cost of improvements.
(iii) Insurance necessary to protect both parties while
work is in progress.
(iv) Waivers of Liens from all contractors or
sub-contractors involved in the alterations or
improvements.
7.5(b) LIENS: Claims for labor or materials for, or purporting to be
for, labor or materials furnished to Tenant shall be paid by
Tenant when due, or secured by bond, so as to immediately
discharge any liens filed against the Premises, Building or
Industrial Park. In the event Tenant does not discharge any
such liens, Landlord shall have the right, but not the
obligation, to discharge such liens. Any such amount paid or
incurred by Landlord shall be immediately due and payable as
additional rent by Tenant to Landlord together with interest
at the rate indicated in Paragraph 24.10 from the date of
payment by Landlord until paid by Tenant.
7.5(c) SURRENDER OR REMOVAL OF ALTERATIONS: Unless removal is
required by Landlord, at Landlord's option, all alterations or
improvements will become the property of Landlord and will be
surrendered with the Premises at the end of the Lease Term or
other termination, without payment. Tenant's machinery and
equipment, unless it is fixed to the Premises so that it
cannot be removed without material damage, remains the
property of Tenant and may be removed by Tenant subject to
Paragraph 7.4.
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8. INSURANCE:
8.1 LIABILITY INSURANCE: During the Lease Term Tenant will
maintain a broad form policy of comprehensive general
liability insurance insuring Landlord and Tenant against
liability arising out of the use, occupancy or maintenance of
the Premises. The insurance will be for not less than
$1,000,000 combined single limit personal injury and property
damage. The limits of the insurance will not limit the
liability of Tenant. The policy will contain cross-liability
endorsements, if applicable, and will insure Tenant's
performance of the indemnity provisions of Paragraph 8.5. If
Tenant fails to maintain the required insurance, Landlord may,
but is not obligated to, maintain the insurance at Tenant's
expense. The policy shall expressly provide that it is not
subject to invalidation of the Landlord's interest by reason
of any act or omission on the part of Tenant.
8.2(a) LANDLORD'S INSURANCE: During the Lease Term Landlord will
maintain policies of insurance covering loss or damage to the
Building in the amount of the full replacement value,
providing protection against all perils included within the
classification of fire and extended coverage. Landlord may
elect to provide comprehensive general liability insurance,
rent loss, vandalism, malicious mischief, sprinkler leakage,
war, automobile, umbrella, flood boiler, air conditioner and
all-risk insurance. The insurance will provide for payment
for loss to Landlord or to the holder of a first mortgage or
deed of trust on the property.
8.2(b) PAYMENT OF PREMIUMS, INSURANCE POLICIES: Landlord shall pay
the premiums for the insurance policies maintained by Landlord
under Paragraph 8.2(a) and Tenant shall pay Landlord as
Additional Rent Tenant's share of the Premiums as provided in
Paragraph 5.2. If the Lease Term expires before the
expiration of the insurance period, Tenant's liability shall
be prorated on an annual basis.
8.2(c) TENANT'S PERSONAL PROPERTY: Tenant assumes all risk of loss
or damage to Tenant's Property. Tenant assumes the risk that
loss or damage to Tenant's Property, to the Premises or to the
Property may result in loss of income, profits or goodwill to
the business of Tenant or other persons interested in Tenant's
Property. Tenant releases and holds Landlord harmless from
liability for these losses or damage, except arising out of
Landlord's gross negligence or willful misconduct. Tenant's
Property includes all goods, equipment, inventory,
merchandise, records and other personal property and all
fixtures, improvements and betterments placed in or about the
Premises, belonging to Tenant or any person connected with, or
claiming under or through Tenant. Tenant agrees to indemnify
Landlord and save it harmless from all loss or claims,
including reasonable attorneys fees and costs in defending a
claim, arising out of loss or damage to Tenant's Property
belonging to others. Landlord means Landlord, its employees
and agents.
TENANT SHALL PROVIDE INSURANCE TO THE EXTENT OF NOT LESS THAN
NINETY PERCENT (90%) OF THE FAIR MARKET VALUE OF TENANT'S
PROPERTY AS APPRAISED BY TENANT'S INSURER(S), WITH AN AGREED
AMOUNT ENDORSEMENT. TENANT, AT ITS SOLE COST AND EXPENSE,
SHALL OBTAIN THE INSURANCE COVERAGES NECESSARY TO PROVIDE
PROTECTION FOR THE RISKS AND OBLIGATIONS TO INDEMNIFY ASSUMED
BY TENANT AND SHALL MAINTAIN SUCH INSURANCE FOR THE LEASE
TERM. TENANT AGREES TO NOTIFY EACH INSURANCE CARRIER OF THE
TENANT'S ASSUMPTION OF RISK, RELEASE AND INDEMNIFICATION
STATED ABOVE. TENANT ACKNOWLEDGES THAT ITS INSURANCE
COVERAGES COULD BE VOIDED OR OTHERWISE ADVERSELY AFFECTED BY
THE FOREGOING PARAGRAPH UNLESS THE INSURANCE CARRIER HAS
WAIVED ITS RIGHT OF SUBROGATION OR HAS OTHERWISE AGREED TO THE
ABOVE ASSUMPTION OF RISK, RELEASE AND HOLD HARMLESS AGREEMENT
AND INDEMNIFICATION.
8.3(a) TENANT'S INSURANCE POLICIES: Insurance carried by Tenant will
be with responsible carriers acceptable to Landlord and
licensed in the State in which the Property is located. The
Tenant will deliver to Landlord certified copies of the
policies of insurance or certificates evidencing the existence
and amounts of the insurance. No policy shall be cancelable
or subject to reduction of coverage or other modification
except after 30 days prior written notice to Landlord. Tenant
shall, at least 30 days prior to the expiration of the
policies,
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<PAGE> 8
furnish Landlord with renewals or "Binders" for the policies,
or Landlord may order the required insurance and charge the
cost to Tenant pursuant to Paragraph 23.
8.3(b) INCREASED RISK: Tenant will not do anything or permit
anything to be done or any hazardous condition to exist
("Increased Risk") which shall invalidate or cause the
cancellation of the insurance policies carried by either
Tenant or Landlord. If Tenant does or permits any Increased
Risk which causes an increase in the cost of Landlord's
insurance policies then Tenant shall reimburse Landlord
pursuant to Paragraph 23 for additional premiums attributable
to any act, omission or operation of Tenant causing the
increase in the premiums, including, but not limited to,
non-compliance with recommendations under Paragraph 6.2.
Payment of additional premiums will not excuse Tenant from
terminating or removing the Increased Risk unless Landlord
agrees in writing. Absent agreement, Tenant shall promptly
terminate or remove the Increased Risk.
8.4 WAIVER OF SUBROGATION ON PROPERTY POLICIES: Each party
releases the other party from any and all liability or
responsibility (to the other party or anyone claiming
through___ under them by way of subrogation or otherwise) for
_____ or damage to property resulting from causes insured
against, even if such casualty has been caused by the fault or
negligence of the other party, or anyone for whom such party
may be responsible.
8.5 INDEMNIFY: Tenant shall indemnify and hold harmless Landlord,
its agents and employees, from and against any and all claims
arising from: (a) Tenant's use of the Premises, (b) the
conduct of Tenant's business or anything else done or
permitted by Tenant to be done in or about the Premises or
elsewhere in the Industrial Park, (c) any breach or default in
the performance of Tenant's obligations under the Lease, or
arising from any negligence of the Tenant, or Tenant's agents,
contractors or employees. Tenant shall defend Landlord
against all costs, attorney's fees, expenses and liabilities
incurred in the defense of any such claim action or
proceeding. In case any action or proceeding is brought
against Landlord by reason of a claim, Tenant, upon notice
from Landlord, shall defend the same at Tenant's expense by
counsel satisfactory to Landlord. Tenant assumes all risk of
damage to property or injury to persons, in or about the
Premises arising from any cause and Tenant waives all such
claims against Landlord, except claims due to Landlord's gross
negligence or willful misconduct. The liability of Tenant to
indemnify Landlord, its agents and employees, shall not extend
to any matter against which Landlord shall be effectively
protected by insurance, provided that if any liability shall
exceed the amount of effective and collectable insurance, the
liability of Tenant shall apply to the excess. Whether the
insurance is "effective" depends in part, but not by way of
limitation, on the absence of any defense to coverage made the
insurer.
9. CASUALTY, DAMAGE:
9.1 DAMAGE TO PREMISES: Tenant will give immediate notice to
Landlord of fire or other casualty damage to the Premises.
Landlord will repair the Premises, except damage from items in
which Tenant is responsible for under Paragraph 6.3 herein and
unless it decides to terminate under Paragraph 9.2. Tenant
will be obligated to pay pro rata fixed and additional rent on
the portion of the Premises it can occupy.
9.2 OPTIONS TO TERMINATE:
9.2(a) PREMISES DAMAGE: If the Building is substantially destroyed
or the damage requires more than 150 days from the date of the
damage to repair, either Landlord or Tenant has the option to
terminate this Lease by giving written notice within 30 days
after the date of the damage (except Tenant shall not have
such option if less than twenty-five (25%) percent of the
Premises is damaged, in which case the provisions of 9.2(b)
shall apply). This Lease shall terminate either 30 days after
receipt of the notice or the date Tenant vacates the Premises,
whichever is sooner.
9.2(b) REPAIRS REQUIRING LESS THAN 150 DAYS TO REPAIR: If the
estimated repair time is less than 150 days and Landlord
diligently pursues repairs, Tenant may not terminate if repair
time runs over 150 days due to causes beyond Landlord's
control.
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9.2(c) DAMAGE DURING LAST SIX MONTHS OF TERM: If casualty damage
occurs to the Premises or to the Building during the last six
(6) months of the Lease Term, Landlord may terminate this
Lease. If Tenant has an unexpired option to extend, the
option to extend or renew must be exercised within twenty (20)
days of the casualty. If the option is exercised Landlord may
not cancel unless there is substantial damage. If the option
is not exercised, the option is terminated and Landlord may
terminate the Lease.
9.3 NEGLIGENCE OF TENANT - UNINSURED LOSS: An "Insured Loss" is
damage caused by an event which is either required to be or
which has been elected by Landlord to be covered by insurance
described in Paragraph 8.2(a). If casualty damage occurs
which is not an Insured Loss and which is due to a negligent
or willful act of Tenant, Tenant will repair the damage at its
expense and will remain liable for the full rent during
repair. Termination under Paragraph 9.2 will not be available
to Tenant.
9.4 TENANT CLAIMS: No compensation, claims, or diminution of rent
will be paid or allowed by Landlord, by reason of
inconvenience, annoyance, or injury to business, arising from
the necessity of repairing any other portion of the Building
however the necessity may occur.
10. REAL PROPERTY TAXES:
10.1 PAYMENT OF TAXES: Landlord shall pay the "Base Real Property
Taxes" on the Property during the Lease Term. Base Real
Property Taxes are real property taxes applicable to the
Property as shown on the tax bill for the most recent tax
fiscal year ending prior to the Commencement Date. Tenant
shall pay Landlord, Tenant's Share of the amount, if any, by
which the real property taxes during the Lease Term exceed the
Base Real Property Taxes as Additional Rent as provided in
Paragraph 5.2. If the Premises are not separately assessed,
Tenant's share of the real property tax payable by Tenant
shall be prorated.
10.2 DEFINITION OF "REAL PROPERTY TAX". The term "Real Property
Tax" includes any form of assessment, license fee, levy,
penalty or tax (other than inheritance or estate taxes),
imposed by an authority with direct or indirect power to tax
any legal or equitable interest of Landlord in the real
property of which the Premises are a part, but shall not
include any rent tax payable by Tenant under Paragraph 5, nor
any corporate franchise or income taxes.
10.3 PERSONAL PROPERTY TAXES: Tenant will pay, before delinquent,
all taxes assessed against trade fixtures, furnishings,
equipment and all other personal property of Tenant. Tenant
will cause these items to be assessed and billed separately
from the real property of Landlord.
11. UTILITIES: Tenant will pay directly to the appropriate supplier, the
cost of all water/sewer, gas, heat, light, electrical, telephone,
refuse disposal and other utilities and services supplied to the
Premises, and any taxes on those bills. If any services are not
separately metered, Tenant will pay as Additional Rent as provided in
Paragraph 5.2 a proportion of all jointly-metered utilities used by
other occupants of the property based either upon type and extent of
use or on area, as reasonably determined by Landlord.
12. ASSIGNMENT AND SUBLETTING:
12.1 LANDLORD'S CONSENT REQUIRED: Tenant will not voluntarily or
by operation of law assign, transfer, mortgage, sublet or
otherwise transfer or encumber all or part of Tenant's
interest in this Lease or in the Premises, without Landlord's
prior written consent which consent may not be unreasonably
withheld by Landlord. Any attempted assignment, transfer,
mortgage, encumbrance or subletting without consent shall be
void as against Landlord, and shall constitute a breach of the
Lease.
12.2 NO RELEASE OF TENANT: Regardless of Landlord's consent, no
subletting or assignment will alter the primary liability of
Tenant to pay the rent and to perform all other obligations to
be performed by Tenant. Acceptance
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of rent from any other person will not be deemed a waiver by
Landlord of any provision of this Lease. Consent to one
assignment or subletting will not be deemed consent to any
subsequent assignment or subletting.
12.3 PARTICIPATION BY LANDLORD: In the event of any assignment or
sublease involving rent in excess of the Fixed Minimum Rent or
Additional Rent required under this Lease as Excess Rent),
Landlord shall participate in the Excess Rent. Tenant shall
promptly forward to Landlord fifty (50%) percent of all such
Excess Rent collected from the assignee or subtenant and shall
supply Landlord with true copies as executed of all
assignments and subleases.
12.4 PROCESSING FEES: If Landlord consents to sublease or
assignment, Tenant will pay a processing fee of $350.
13. DEFAULTS, REMEDIES:
13.1 EVENTS OF DEFAULT: It is a default under this Lease if any of
the following "Events of Default" happens:
(a) If any Fixed Monthly Rent is not paid when due and
default continues for a period of five (5) days; or
(b) If any additional rent is not paid when due and
default continues for a period of ten (10) days; or
(c) If the provisions of Paragraph 6.3 are not fully complied with; or
(d) If Tenant defaults under any of the terms of this
Lease other than those in 13.1(a), (b) and (c), and
default continues for fifteen (15) days after written
notice (except if default cannot be completely cured
within fifteen (15) days, it will not be an Event of
Default if Tenant starts to cure within the fifteen
(15) day period, and in good faith continually
proceeds to remedy the default); or
(e) If Tenant or any person who has guaranteed
performance, files a voluntary petition in bankruptcy
or is adjudicated a bankrupt or insolvent, or files a
petition or answer seeking relief under any federal,
state or other statute or regulation, or seeks or
consents or acquiesces in the appointment of a
trustee, receiver or liquidator of Tenant or
guarantor, or of all or any substantial part of
Tenant's properties or of the Premises or any or all
rents, earnings, or income or makes an assignment for
the benefit of creditors, or admits in writing its
inability to pay its debts generally as they become
due; or
(f) If a petition is filed against Tenant, or any person
who has guaranteed performance, seeking relief under
any federal, state or other statute or regulation,
which remains undismissed or unstayed for an
aggregate of sixty (60) days (whether or not
consecutive), or if a trustee, receiver or liquidator
of Tenant or guarantor, or of all or any substantial
part of its properties or of the Premises or any or
all rents, or income is appointed without the consent
or acquiescence of Tenant, or guarantor, and the
appointment remains unvacated or unstayed for an
aggregate of sixty (60) days (whether or not
consecutive).
(g) In the event Tenant or Tenant's subsidiary or
affiliate shall lease other Premises from Landlord,
any default under such other leases shall be deemed
to be a default under this Lease and Landlord may
enforce all rights and remedies for an Event of
Default herein.
13.2 NOTICE, TERMINATION:
Landlord at any time after the happening of an Event of
Default may declare an Event of Default by written notice to
Tenant specifying the Event(s) of Default. In the same or a
later written notice Landlord may elect that this Lease
terminate at 5:00 p.m. on the date listed by Landlord. The
date will be at least five (5) days after the giving of the
termination notice (including the termination date). On the
date in the notice, subject
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to Paragraph 13.4, the Lease and all interests demised will
terminate and all rights of the Tenant shall cease. The
termination will not take place if before the stated date and
time:
(i) Tenant has paid all arrears of fixed minimum rent and
additional rent and all other amounts payable by
Tenant (together with interest pursuant to Paragraph
24.10) and as additional rent all expenses
(including, without limitation, attorney's fees and
expenses) incurred by Landlord due to any default by
Tenant, (the "arrearages"), and
(ii) All other defaults have been cured to the
satisfaction of Landlord.
13.3 REPOSSESSION, RELETTING: After notice of an Event of Default,
whether before or after a termination as provided in Paragraph
13.2, Landlord, without further notice and with no liability
to Tenant, may repossess the Premises, by summary proceedings,
ejectment or otherwise, and remove Tenant and all other
persons and any and all property from the Premises. After
such repossession, Landlord may (but is under no obligation
to) relet the Premises, any part thereof, or the Premises with
additional premises, on account of Tenant (until Landlord
makes demand for final damages), in Tenant's or Landlord's
name, without notice to Tenant, for a term (which may be more
or less than the period which would have been the balance of
the term of this Lease) and on conditions (including
concessions, periods of rent free use, or alterations) and for
purposes which Landlord determines and Landlord may receive
the rents. landlord is not liable for failure to collect any
rent due upon any such reletting.
13.4 SURVIVAL OF TENANT'S OBLIGATIONS, DAMAGES: No provisions in
Paragraphs 13.1, 13.2 and 13.3, will relieve Tenant of its
liability and obligations under this Lease, all of which will
survive. Landlord will not be deemed to accept a surrender of
Tenant's lease or otherwise discharge Tenant because Landlord
takes or accepts possession of the Premises or exercises
control over them as provided. Acceptance of surrender and
discharge may be done only by an instrument executed on behalf
of Landlord by its duly authorized officer or employee.
In the event of termination or repossession following an Event
of Default, Tenant will pay to Landlord the Arrearages up to
the earlier of the date of termination or repossession.
Further, Tenant until the end of what would have been the term
of this Lease in the absence of termination and whether or not
the Premises or any part have been relet, is liable to
Landlord for, and will pay to Landlord, as liquidated and
agreed "Current Damages" for Tenant's default:
(a) The Fixed Minimum Rent and all additional rent and
other charges payable by Tenant or which would be
payable if this Lease had not terminated, plus all
Landlord's expenses in connection with any reletting,
including, without limitation, repossession costs,
brokerage commissions, legal expenses, attorney's
fees, expenses of employees, alteration costs, and
expenses of preparation for such reletting.
(b) The net proceeds, if any, of any reletting on account
of Tenant pursuant to Paragraph 13.3. If the
Premises have been relet with additional premises,
the net proceeds, if any, of reletting shall be
prorated.
Tenant shall pay Current Damages to Landlord monthly on the
days on which the Fixed Minimum Rent would have been payable
if the Lease were not terminated, and Landlord is entitled to
recover from Tenant each month. After termination under
Paragraph 3.2, whether or not Landlord has collected Current
Damages, Tenant will pay to Landlord on demand, as liquidated
and agreed "Final Damages" for Tenant's default and in lieu of
all Current Damages beyond the date of demand, an amount equal
to the present cash value on the date of demand on the Fixed
Minimum Rent and additional rent and other charges which would
have been payable from the date of demand for what would have
been the unexpired term of this Lease if it has not been
terminated plus the Arrearages to the earlier of the date of
termination or repossession and Current Damages up to the date
of demand which remain unpaid.
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If any statute or rule of law governing a proceeding in which
Final Damages are to be proved validly limits the amount to
an amount less than that provided for, Landlord is entitled to
the maximum amount allowable under the statute or rule of law.
The discount rate of interest shall be as provided in
Paragraph 24.10.
14. CONDEMNATION:
14.1 PERMANENT CONDEMNATION: If the Premises or any portion are
taken under the power of eminent domain, or sold under the
threat of the exercise of the power (both called
"Condemnation"), this Lease will terminate as to the part
taken as of the first date the condemning authority takes
either title or possession. If the portion of the Premises
taken is more than twenty-five (25%) percent or makes the
balance unfit for Tenant's use, Tenant has the option to
terminate this Lease as of the date the condemning authority
takes possession. The option will be exercised in writing as
follows:
(i) Within thirty (30) days after the condemning
authority has taken possession.
(ii) Absent notice, within ten (10) days after the
condemning authority has taken possession.
If Tenant does not terminate, this Lease will remain in full
force and effect as to the portion of the Premises remaining.
The rent will be proportionately reduced.
Any award for Condemnation is the Landlord's whether the award
is made as compensation for diminution in value of the
leasehold or for the taking of the fee, or as severance
damages. Tenant is entitled to any award for damage to
Tenant's trade fixtures and removable personal property and
moving expenses. If this Lease is not terminated, Landlord,
to the extent of severance damages received, will repair
damage to the Premises caused by Condemnation except to the
extent that Tenant has been reimbursed by the condemning
authority. Tenant will pay any amount in excess of the
severance damages required to complete the repair.
14.2 TEMPORARY CONDEMNATION: Upon Condemnation of all or a part of
the Premises for temporary use, this Lease will continue
without change or abatement in Tenant's obligations, as
between Landlord and Tenant. Tenant is entitled to the award
made for the use. If the Condemnation extends beyond the term
of the Lease, the award will be prorated between the Landlord
and the Tenant as of the expiration date of the term. The
Tenant is responsible for the cost of any restoration work
required to place the Premises in the condition they were in
prior to Condemnation unless the release of the Premises
occurs after termination. In such case, Tenant will assign to
the Landlord any claim it may have against the condemning
authority. If Tenant has received restoration funds, it will
give the funds to Landlord within fifteen (15) days after
demand.
15. FORCE MAJEURE: If Landlord's performance of any obligations under any
provision in this Lease is delayed by an act or neglect of Tenant, Act
of God, strike, labor dispute, unavailability of materials, boycott,
governmental restrictions, riots, insurrection, war, catastrophe, or
act of the public enemy, the period for the beginning or completion of
the (cont.) obligation is extended for a period equal to the delay.
16. SUBORDINATION: This Lease, at Landlord's option, will be subordinate
to any form of security now or later placed on the property and to all
advances made on the security and to all renewals, modifications,
consolidations, replacements and extensions. Tenant's right to quiet
possession of the Premises will not be disturbed if Tenant is not in
default under this Lease, unless it is otherwise terminated under the
terms. If any mortgagee, trustee or ground lessor elects to have this
Lease prior to the lien of its security, and gives written notice to
Tenant, the Lease will be deemed prior to the security, whether dated
before or after the date of the security, or the recording date.
Tenant agrees to execute any required documents, and Tenant
irrevocably appoints Landlord as Tenant's attorney-in-fact to do so,
if Tenant fails to so execute within ten (10) days after written
demand.
17. ESTOPPEL CERTIFICATE: Tenant, after not less than ten (10) days prior
written notice from Landlord, will deliver to Landlord a written
statement (i) certifying that this Lease is unmodified and in full
force and effect (or, if modified, stating the nature of the
modification and certifying that this Lease, as so modified, is in
full force and effect) and the
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<PAGE> 13
date to which the rent and other charges are paid in advance, if any,
(ii) stating the amount of the security deposit, if any, held by
Landlord and (iii) acknowledge that there are not, to Tenant's
knowledge, any uncured defaults on the part of Landlord, or stating
any claimed defaults. The statement may be relied upon by any
prospective purchaser or lender of the Premises.
Tenant's failure to deliver the statement within said time will be
conclusive upon Tenant (i) that this Lease is in full force and
effect, without modification except as may be represented by Landlord,
(ii) that any security deposit is as represented by Landlord, (iii)
that there are no uncured defaults in Landlord's performance, and (iv)
that not more than one month's rent has been paid in advance.
If Landlord desires to sell or finance or refinance all or part of the
Premises, Tenant agrees to deliver to any proposed purchaser or lender
named by Landlord all financial statements of Tenant as may be
reasonably required by the proposed purchaser or lender. The
statements will include the past three years' financial statements of
Tenant. All financial statements will be received by Landlord in
confidence and will be used only for these purposes.
18. CORPORATE AUTHORITY: If Tenant is a corporation, each individual
executing this Lease on behalf of the corporation represents and
warrants that he is duly authorized to execute and deliver this Lease
on behalf of the corporation, in accordance with a duly adopted
resolution of the Board of Directors of the corporation, or in
accordance with the bylaws of the corporation, and that this Lease is
binding upon the corporation.
19. NOTICES: All notices required or permitted under this Lease shall be
in writing and shall be deemed duly given if sent by United States
certified or registered mail, return receipt requested, or by Federal
Express or other major overnight courier that provides evidence of
delivery, addressed to Landlord or Tenant, respectively, at the
addresses provided in the Information Schedule.
Either party by notice as provided above may change the address for
notices and/or payment of rent.
20. BROKER'S FEE: Landlord and Tenant represent and warrant to each other
that except as listed in the Information Schedule, no broker, agent or
finder has been employed by or in connection with this Lease and no
commissions are payable by it to any person. Tenant and Landlord each
agree to indemnify, defend and save harmless the other from any
expenses of claim for fees or commissions resulting from the
indemnifying party having dealt with any broker, agent or finder in
negotiating this Lease. Landlord and Tenant acknowledge that the
broker(s) in this transaction are as listed in the Information
Schedule and that payments of commissions will be in accordance with
their respective agreements. Tenant represents it did not deal with
any other broker, agent or finder purporting to represent Landlord.
21. LANDLORD'S ACCESS: Landlord and Landlord's agents have the right to
enter the Premises at reasonable times for the purpose of inspecting,
showing the Premises to prospective purchasers, tenants, lenders, and
making alterations, repairs, improvements or additions to the Premises
or to the Building that Landlord deems necessary or desirable.
Landlord may place any ordinary "For Sale" or "For Lease" signs on the
Premises or the Building, without rebate of rent liability.
22. LANDLORD'S LIABILITY: The term "Landlord" means only the owner or
owners of the fee title at the time in question. If the Landlord (or
the then grantor) transfers any title or interest, from and after the
date of transfer the Landlord (or the then grantor) is relieved of all
liability for Landlord's obligations. Any Security Deposit not
delivered to the grantee is excepted. Landlord's obligations under
this Lease shall thereafter be binding on Landlord's successors and
assigns. Tenant agrees to attorn to any transferee or lender of
Landlord.
23. LANDLORD'S RIGHT: If Tenant fails to make any required payment or
defaults in performing any other term in this Lease, Landlord may, but
need not (and without waiving the default), make such payment or
remedy other defaults for Tenant's account and at Tenant's expense,
immediately and without notice in case of emergency, otherwise on five
(5) days written notice to Tenant. The costs, with interest under
Article 24.10, and with a charge equaling fifteen (15%) percent of the
cost (to cover Landlord's overhead), in due as additional rent with
Tenant's next fixed minimum rent installment.
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<PAGE> 14
24. MISCELLANEOUS:
24.1 TIME OF ESSENCE: Time is of the essence under this Lease.
24.2 COVENANTS AND CONDITIONS: Each provision of this Lease
performable by Tenant is both a covenant and a condition.
24.3 CAPTIONS: Article and paragraph captions are only for
convenience.
24.4 INCORPORATION OF PRIOR AGREEMENTS, AMENDMENTS: This Lease
contains all agreements of the parties with respect to any
matter mentioned. No prior agreement or understanding is
effective after execution of this Lease. This Lease may be
modified in writing only, signed by the parties. The Exhibits
listed on the Information Schedule and attached to this Lease
are part of this Lease as fully as if placed in the body of
the Lease.
24.5 CUMULATIVE REMEDIES: No remedy or election is exclusive but,
wherever possible, is cumulative with all other remedies of
law or in equity.
24.6 SEVERABILITY: The invalidity of any provision of this Lease
as determined by a court of competent jurisdiction, shall not
affect the validity of any other provision. The valid
portions of the Lease shall be interpreted together to
accomplish the intent of the parties.
24.7 MERGER: The voluntary or other surrender by Tenant or a
mutual cancellation will work a merger, and at Landlord's
option, will terminate existing subtenancies or operate as an
assignment of subtenancies.
24.8 HOLDING OVER: If Tenant retains possession after the Lease
Term expires, without the written consent of Landlord, the
occupancy will be a tenancy from month to month at a rent in
the amount of twice the last fixed minimum rent plus all
additional rent and other charges payable, and upon all other
terms contained herein. Any options (i.e. renewal, expansion)
and rights of first refusal contained in the Lease are
terminated in the event of a holdover tenancy.
24.9 WAIVERS: Waiver by Landlord of any provision is not a waiver
of any other provision or of any subsequent breach by Tenant
of the same or any other provision. Landlord's consent or
approval in the future. The acceptance of rent by Landlord is
not a waiver of any breach by Tenant other than the failure of
Tenant to pay the particular rent accepted, regardless of
whether Landlord knows of such a breach.
24.10 INTEREST ON PAST DUE OBLIGATIONS: Any amount due to Landlord
not paid when due will bear interest from the date due at the
prime lending rate in effect from time to time at the Chase
Manhattan Bank, N.A., in New York City, or the highest rate of
interest payable under the law, whichever is lower. Payment
of interest will not cure any default by Tenant under this
Lease except as expressly provided.
24.11 ATTORNEY'S FEES: If either party brings an action regarding
terms or rights under this Lease, the prevailing party in any
action, on trial or appeal, is entitled to reasonable
attorney's fees as fixed by the court to be paid by the losing
party. The term "attorney's fees" shall include, but is not
limited to, reasonable attorney's fees incurred in any and all
judicial, bankruptcy, reorganization, administrative or other
proceeding, including appellate proceedings, whether the
proceedings arise before or after entry of a final judgment
and all costs and disbursements in connection with the matter.
24.12 WAIVER OF JURY TRIAL: Landlord and Tenant each waive trial by
jury in any action, proceeding, or counterclaim brought by
either of the parties to this Lease against the others on any
matter whatsoever arising out of or in any way connected with
this Lease or its termination, the relationship of Landlord
and Tenant,
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<PAGE> 15
Tenant's use or occupancy of the Premises, and/or any claim of
injury or damage and any emergency statutory or any other
statutory remedy.
24.13 RECORDING: Tenant will not record this Lease without
Landlord's written consent. Any recordation, at Landlord's
option, will constitute a non-curable default of Tenant.
24.14 SIGNS AND AUCTIONS: Tenant shall not place any sign upon or
conduct any auction on the Premises without Landlord's prior
written consent.
24.15 SECURITY: Tenant acknowledges that the rents reserved in this
Lease do not include the cost of security guards or other
security measures, and that Landlord has no obligation to
provide such services. Tenant assumes all responsibility for
the protection of Tenant, its agents, employees and invitees
from acts of third parties.
24.16 RELOCATION OF TENANT: Landlord reserves the right, at its
sole option, to relocate Tenant to a comparable space (the
Relocation Space) in the Industrial Park. Landlord may use
decorations and materials from the Premises or other materials
in making the Relocation Space comparable to the Premises.
Neither the Fixed Minimum Rent nor the Tenant's Share
percentage shall be changed on account of the move unless it
is raised or reduced in accordance with the share percentage
for the Relocation Space. Tenant agrees that no rights
granted in this Lease shall be deemed breached by Landlord's
exercise of rights under this paragraph. Landlord shall pay
the decoration costs, moving expenses for furniture, fixtures
and equipment, utility hookup charges and reasonable actual
out-of-pocket expenses incurred by Tenant.
24.17 EASEMENTS AND RESTRICTIVE COVENANTS: Landlord reserves the
right of grant and record easements, cross-easements, rights,
restrictive covenants and conditions and dedications which it
deems necessary or desirable. The grants will not
unreasonably interfere with Tenant's use of the Premises.
Tenant agrees to promptly execute documents requested by
Landlord. Failure to execute will be a material breach under
this Lease.
24.18 RULES AND REGULATIONS: Tenant will comply with Landlord's
rules and regulations respecting the Industrial Park. Notice
of the rules and regulations will be posted or given to
Tenant.
24.19 BINDING EFFECT, CHOICE OF LAW: Subject to provisions
restricting assignment or subletting and to the provisions of
Paragraph 22, this Lease will bind the parties, their personal
representatives, successors and assigns. This Lease shall be
governed by the laws of the state in which the Premises are
located.
24.20 ABSENCE OF OPTION: The submission of this Lease for
examination does not constitute a reservation of or an option
for the Premises and this Lease becomes effective only upon
execution by Landlord.
25. SPECIAL STIPULATIONS: Insofar as the following Special Stipulations
conflict with any of the foregoing provisions, the following Special
Stipulations shall control. Special Stipulations, if any, are
attached hereto and made a part of this Agreement as Exhibit "E".
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<PAGE> 16
Both parties acknowledge that they have reviewed this Lease thoroughly
and have given their voluntary consent to the provisions. The Landlord and
Tenant agree that, at execution, the terms are commercially reasonable and show
the intent of the parties.
The parties thereto have executed this Lease on the dates specified
below.
LANDLORD:
WITNESSES: NATIONAL LIFE INSURANCE COMPANY
a Vermont corporation
By: Karsten Realty Advisors
a California corporation
as Real Estate Investment Manager
By:
- ------------------------------------ ------------------------------------
By:
- ------------------------------------ ------------------------------------
TENANT: SPECTRX, INC.
WITNESSES:
By:
- ------------------------------------ ------------------------------------
Mr. Keith D. Ignotz
- ------------------------------------
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<PAGE> 17
SIGNAGE CRITERIA
In order to maintain a uniform appearance of Plaza 85 Business Park,
the following sign criteria has been established:
1. Color and design of signage solely controlled by Landlord.
2. Signage and installation to be paid by Tenant.
3. A schematic for tenant signage to be provided to insure
correct lettering of company name.
4. Landlord shall approve all copy and tenant shall initial
schematic prior to order placement by Landlord.
5. Landlord shall direct placement of all tenant signs and
methods of attachment to window.
<PAGE> 18
REGULATIONS
SIGNAGE: As described in "Signage Criteria".
LOCKS: All locks must be keyed to master in case of
emergency. Please contact leasing office if
locks need to be re-keyed.
JANITORIAL: Any person employed by Tenant to do janitorial work,
shall, while in the buildings be subject to and
under control and direction of the Landlord or its
agents (but not as agent of Landlord or its agent).
WATER/SEWER/TRASH: The project is serviced by a master meter and
numerous dumpsters. Each Tenant will pay a pro rata
share per month standard charge to Landlord. This
is subject to annual increases as per lease.
Tenants will incur an additional charge for any
trash left outside dumpster or tenant premises.
WINDOW COVERINGS: Bronze mini-blinds as specified by Landlord.
EXTERIOR PREMISES: Sidewalks, entrances, service areas, courts and
corridors of buildings shall not be obstructed or
used for storage or any purpose other than ingress
and egress by Tenant.
Tenant shall be permitted to move furniture and
office furnishings into or out of building only
between the hours of 5:30 p.m. and 8:00 a.m. and on
Saturday and Sunday. Any other moving time shall
be approved and controlled by Landlord.
QUIET ENJOYMENT: Tenant shall not unreasonably interfere with the
quiet enjoyment of all other occupants of buildings
and shall not permit any objectional noise or odor
to emanate from Premises, nor disturb, solicit or
canvass any occupant of buildings.
Landlord reserves the right to make such other and
further reasonable regulations as in its judgement
may from time to time be necessary for the safety,
good order and cleanliness of the buildings and
premises and any such other and further regulations
shall be binding upon the parties hereto with the
same force and effect had they been inserted herein
at a time of lease execution.
<PAGE> 19
EXHIBIT "A"
DESCRIPTION OF THE PREMISES AND ADJACENT SITE IMPROVEMENTS
The Premises are described as follows: Plaza 85 Business Park
6025 - A/B/C Unity Drive
Norcross, Georgia 30071
The Adjacent Site Improvements are described
as follows:
[map graphics]
PLAZA EIGHTY FIVE BUSINESS PARK
<PAGE> 20
EXHIBIT "B"
FLOOR PLAN
[Floor Plan graphic]
<PAGE> 21
EXHIBIT "C"
DESCRIPTION OF THE LANDLORD'S WORK AND TENANT'S WORK
1. Landlord hereby agrees to proceed with reasonable diligence to complete
construction of the Premises or otherwise to prepare the Premises for
Tenant's occupancy in accordance with the Plans and Specifications. Tenant
shall have no right to occupy the Premises until Landlord has notified
Tenant, in writing, that the work to be done by Landlord has been
substantially completed, except for minor finishing operations or items
necessary awaiting performance of any work done by Tenant. Prior to
performance of any work to be done by Tenant, a punch list will be prepared
by Landlord or representative of Landlord, and Tenant. However, Tenant
shall have the right to make periodic inspections of the construction, so
long as Tenant gives Landlord prior notification and complies with
Landlord's safety rules. Notwithstanding anything herein to the contrary,
payment of rental hereunder and Tenant's tenancy shall commence November 1,
1993 provided that all work required to be performed by Landlord has been
substantially completed except for punch list items.
2. Subject to the provisions of the Lease and except as otherwise provided in
this Lease to the contrary, if Landlord, for any reason whatsoever, shall
fail to complete a portion of its work in the Premises or to deliver
possession of the Premises on or before November 1, 1993, this Lease shall
not be void or voidable, nor shall Landlord be deemed to be in default
hereunder or in any way liable to Tenant for any loss or damage resulting
therefrom; provided, however, the Commencement Date of the Term and if
substantial completion of Landlord's work as hereinabove provide, and the
termination date of the Term shall be extended for an additional period
equal to the delay. In the event Landlord is unable to substantially
complete Landlord's Work and Tenant is unable to occupy Premises by
December 31, 1993, Tenant may terminate this Agreement, force majeure
excepted.
3. Landlord hereby covenants and agrees to complete the Tenant fit-up and
finish work (the "Landlord's Work") for the Premises in accordance with the
Plans and Specifications, provided, however, that Tenant shall be
responsible for and hereby covenants and agrees to pay any costs without
limitation incurred by Landlord in completing such Lease fit-up and finish
work due to any changes in Plans and Specification made after execution of
this Lease by Tenant. Landlord warrants that all of such build-out of the
Premises shall also comply with all laws, orders, ordinances and
regulations of federal, state, country and municipal authorities having
jurisdiction over the Premises and Landlord shall promptly comply with any
directive order or citation made pursuant to such laws during the term of
this lease.
4. By occupying the Premises, Tenant shall be deemed to have accepted the
Premises "as is" and to have acknowledged that the Premises are suited for
the uses intended by Tenant and that Landlord has complied with all of its
covenants and obligations with respect to completion of the Premises and
delivery thereof to Tenant; provided, however, (i) Tenant shall have five
(5) days after the Commencement Date in which to deliver its "punch list"
to Landlord and Landlord shall have fifteen (15) days of delivery of the
"punch list" to begin correcting any defects noted on Tenant's punch list
which denote items not completed in accordance with the Plans and
Specifications and diligently pursue their completion: and (ii) Landlord
shall warrant said construction against defects for one (1) year. In the
event of any dispute concerning work performed or required to be performed
in the Premises by Landlord, the matter in dispute shall be submitted to
the architect for the Premises for determination, and his determination
with respect thereto as evidenced by his certificate shall be binding on
Landlord and Tenant.
5. Within ten (10) days from the date of execution of the Lease, Landlord
shall provide Tenant with complete Plans and Specifications for the
Premises for Tenant's review and approval. Tenant shall return Plans and
Specifications approved within five (5) days of receipt of Plans and
Specifications.
<PAGE> 22
EXHIBIT "D"
CONTROL OF DANGEROUS/HAZARDOUS CHEMICALS AND MATERIALS
In consideration of existing and future legislation concerning the handling,
storage, use and disposition of dangerous/hazardous chemicals and materials,
Tenant acknowledges the risks and liabilities associated with same and agrees
to the following:
A. Tenant shall determine what laws, regulations and ordinance regarding the
handling, storage, use and disposition for dangerous/hazardous chemicals
and materials apply to Tenant's business with respect to the leased
premises. Tenant shall take all reasonable and necessary steps, including
any inspections, tests or studies, as required by such laws to cause prompt
and ongoing compliance therewith.
B. Tenant agrees to immediately notify Landlord and the appropriate
authorities of any spills, accidents, or improper discharges of any
dangerous hazardous chemicals and material. Further, in addition to and in
further support of and compliance with other hold harmless and
indemnification obligations, Tenant acknowledges and assumes total
responsibility for any and all dangerous/hazardous chemicals and materials
it may handle, store, use and dispose of in or about Tenant's lease
premises. Such responsibility shall include, but not be Limited to,
medical costs and personal injury awards (compensatory and/or punitive),
environmental cleanups and related costs, governmental fines against
Landlord and/or Tenant resulting from Tenant's willful and/or negligent
handling, storage, use, disposition of dangerous/hazardous chemicals and
materials, and/or Tenant's non-compliance with applicable law.
C. Tenant shall, upon Owner or governmental request, disclose the type and
quantity of dangerous/hazardous chemicals and material Tenant is/has
handled, stored, used, disposed of in or about Tenant's leased premises.
D. Tenant shall endeavor to:
1. Maintain and control all inventories of dangerous/hazardous chemicals
and material handled, stored, used, disposed of in or about Tenant's
leased premises.
2. Educate managers, employees, and shipping personnel on the property
handling, storage, use, disposition of dangerous/hazardous chemicals
and materials.
3. Develop a dangerous/hazardous chemicals and materials accident plan.
4. Isolate key use and storage areas of dangerous/hazardous chemicals and
materials from ground waters, surface waters, and soils.
5. Keep informed about existing and future governmental requirements
concerning dangerous/hazardous chemicals and materials and Tenant's
respective obligations.
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<PAGE> 23
EXHIBIT "'E"
SPECIAL STIPULATIONS TO
STANDARD INDUSTRIAL LEASE AGREEMENT
BETWEEN: NATIONAL LIFE INSURANCE COMPANY (LANDLORD)
AND SPECTRX, INC.
DATED: SEPTEMBER __, 1993
1. COMMON AREA MAINTENANCE: Tenant shall pay Landlord Three Hundred Nine and
16/100 Dollars, ($309.16) per month with the monthly fixed minimum rent
which is the Landlord's estimate of Tenant's share of the cost of common
Area Maintenance for 1992 in accordance with paragraph 5.2.
2. Tenant agrees to adhere to Plaza 85 Business Park Regulations as attached
hereto and made a part of this Lease.
3. Tenant agrees to adhere to Plaza 85 Business Park Signage Criteria as
attached hereto and made a part of this Lease.
4. Various construction materials may contain items that have been or may in
the future be determined to be hazardous (toxic) or undesirable and may
need to be specially treated/handled or removed. For example, some
transformers and other electrical components contain PCBs, and asbestos has
been used in components such as fire-proofing, heating and cooling systems,
air duct insulation, spray-on and tile acoustical materials, linoleum,
floor tiles, roofing, dry wall and plaster. Due to prior or current uses
of the Property or in the area, the Property may have hazardous or
undesirable metals, minerals, chemicals, hydrocarbons, or biological or
radioactive items in soil, water, building components above or below ground
containers or elsewhere in areas that may or may not be accessible or
noticeable. Such items may leak or other wise be released. Real estate
agents have no expertise in the detection or correction of hazardous or
undesirable items. Expert inspections are necessary. Current or future
laws may require clean up by past, present and/or future owners and/or
operators. It is the responsibility of the Seller/Landlord and
Buyer/Tenant to retain qualified experts to detect and correct such matters
and to consult with legal counsel of their choice to determine what
provisions, if any, they may wish to include in transaction documents
regarding the Property.
5. AMERICANS WITH DISABILITIES ACT DISCLOSURE: The United States Congress has
recently enacted the Americans With Disabilities Act. Among other things,
this act is intended to make many business establishments equally
accessible to persons with a variety of disabilities; modifications to real
property may be required. State and local laws also may mandate changes.
The real estate brokers in this transaction are not qualified to advise you
as to what, if any, changes may be required now, or in the future. Owners
and tenants should consult the attorneys and qualified design professionals
of their choice for information regarding these matters. Real estate
brokers cannot determine which attorneys or design professionals have the
appropriate expertise in this area.
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<PAGE> 24
6. Fixed Minimum Rent shall be increased by the following schedule:
<TABLE>
<CAPTION>
Months Per Square Foot Per Month
---------------- ----------------------- ------------------
<S> <C> <C>
1-12 $3.75 $3,050.94
13-24 $4.50 $3,661.13
25-36 $5.25 $4,271.31
37-60 $5.50 $4,474.71
</TABLE>
7. Tenant will have the right to terminate this Lease after the anniversary of
the Thirty Sixth (36th) full calendar month of this Lease, with One Hundred
Eighty (180) days prior written notice, provided Tenant is not in default
of this Lease. The earliest possible termination date would be the last
day of the Thirty-Sixth (36th) full calendar month of this Lease. The
penalty for such termination shall be the payment of all unamortized costs
associated with this Lease. These unamortized costs include tenant
improvements, commissions, design and legal fees. The estimated penalty
will be Thirty Two Thousand and no/100 Dollars ($32,000.00). This amount
will decrease by One/Twenty-Fourth (1/24th) for each month of the Term in
excess of Thirty-Six (36) months.
8. Insert the following after Paragraph 5.2(a). Increases in Landlord
controllable operating cost (excluding utilities, taxes and insurance) will
be capped at five percent (5%) per annum.
9. Lesser represents, covenants and agrees that the leased premises can be
used by Tenant as contemplated under this Lease and Tenant's ability to so
use the lease Premises is a condition based on precedent to this Lease.
Landlord has obtained or will have obtained, as a condition to the
effectiveness of this Lease, the certificate of occupancy.
10. To the best of Landlord's actual knowledge, Landlord represents that no
leak, spill, discharge, omission or disposal of hazardous toxic substances
has occurred at the leased premises and that the soil, groundwater, soil
vapor on or under the leased premises is free of toxic or hazardous
substances as of the date of this Lease.
Landlord agrees to indemnify, defend and hold Tenant and its officers,
employees and agents harmless from any claims, judgements, damages, fines,
penalties, costs, liabilities (including sums paid in settlement of claims)
or loss including attorneys' fees, consultant's fees, and experts' fees
which arise during or after the Term in connection with the presence or
suspected presence of toxic or hazardous substances on or at the leased
premises or in the soil, groundwater, or soil vapor on or under the leased
premises, except to the extent that such toxic or hazardous substances are
present as a result of the negligence or willful misconduct of Tenant.
Without limiting the generality of the foregoing, this indemnification does
specifically cover costs incurred in connection with any investigation of
site conditions or any cleanup, remedial, removal or restoration work
required by any federal, state, or local governmental agency or political
subdivision because of the presence or suspected presence of toxic or
hazardous substances on or at the leased premises or in the soil,
groundwater or soil vapor on or under the leased premises except to the
extent that such toxic or hazardous substances are present as the result of
negligence or willful misconduct of Tenant. Nothing contained herein is
intended to make Landlord responsible for affirmative testing of toxic or
hazardous materials.
11. Landlord will replace seasonal flower beds four (4) times per year on
either side of entrance to Premises.
12. Tenant will enter into a maintenance service contract for the HVAC System,
but will not replace a "failed" system unless failure is due to Tenant's
lack of maintenance.
13. In Paragraph 7.4, after second line "wear and tear" add "and casualty if
damage covered by insurance expected".
14. In Paragraph 7.5 (c), third line after "payment", add "However, if Landlord
approves any alterations by Tenant during the Term of the Lease, then
Landlord should notify Tenant upon approval of such alteration work if the
improvements must be removed upon termination of the Lease".
15. In Paragraph 8.3 (a), at the end of the paragraph add the sentence, "Tenant
shall comply with all reasonable insurance regulations but under no
circumstances shall any such requirement impair any rights or privileges
conferred upon Tenant
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<PAGE> 25
under the negotiated lease." Tenant shall provide the Landlord with an
original copy of the Certificate of Insurance, together with a copy of the
additional insured endorsement, for each policy required of tenant, naming
the Landlord and their agents as additional insured.
16. In Paragraph 8.5, all provisions set forth in this paragraph will be
reciprocal.
17. Base Year as it relates to Paragraph 10.1 shall be 1993.
18. In Paragraph 24.8 change the word twice to 1.5 times.
19. Upon execution of this Lease, Tenant will deposit first (1st) and sixtieth
(60th) month's base rental with Landlord. This prepayment of base rental
will be nonrefundable.
20. Renewal Option. Provide Tenant is not in default of the terms of the Lease
at the time of exercise of this option or on the commencement date of the
option period. Tenant shall have the right upon at least one hundred
eighty (180) days prior notice to extend this Lease one time for an
additional term of five (5) years. Base rent shall be equal to ninety-five
percent (95%) of the then current market value, but in no case less then
the prior year's base rental.
-23-
<PAGE> 26
AMENDMENT TO LEASE
THIS AGREEMENT, made and entered into this 11th day of March, 1996, by and
between Plaza 85, L.P., a Georgia Limited Partnership, (hereinafter called
Landlord) and SpectRx, Inc., (hereinafter called Tenant).
WITNESSETH
WHEREAS, the said Tenant and National Life Insurance Company, who have sold
their rights to Plaza 85, L.P., made and entered into a Lease Amendment dated
December 11, 1995 for premises consisting of approximately 16,255 square feet
located in Plaza 85 Business Park, 6015 Unity Drive, Suite D, and 6025 Unity
Drive, Suite A, Norcross, Georgia 30071 for a term commencing January 1, 1996
and ending December 31, 2000.
NOW, THEREFORE, for valuable consideration paid by each of the parties to the
other, receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree that the said lease shall be amended as follows:
1) The effective commencement date will be changed from January 1, 1996 to
April 1, 1996.
2) The effective ending date will be changed from December 31, 2000 to March
31, 2001.
3) The Rental Schedule for entire premises, 6015 D and 6025A, shall be as
follows:
<TABLE>
<CAPTION>
Term Annual Rate PSF Monthly Payment
----------------------- --------------------- ---------------------
<S> <C> <C>
04/01/96 - 12/31/96 $5.08 $6,874.96
01/01/97 - 12/31/97 $5.30 $7,179.71
01/01/98 - 12/31/98 $5.53 $7,484.61
01/01/99 - 12/31/99 $5.87 $7,958.00
01/01/00 - 03/31/01 $5.97 $8,093.25
</TABLE>
IT IS FURTHER UNDERSTOOD AND AGREED, that the Amendment as modified by the
Agreement between the parties hereto shall be and the same hereby is in all
other respects ratified, approved and confirmed.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
LANDLORD:
Plaza 85, L.P., a Georgia Limited Partnership
BY:
------------------------------------------
Robert C. Goddard, III
General Partner
TENANT:
SpectRx, Inc.
BY:
------------------------------------------
Keith Ignotz
-24-
<PAGE> 27
SECOND AMENDMENT TO LEASE
THIS AGREEMENT, made and entered into this ___ day of October 1996, by and
between Plaza 85, L.P., a Georgia Limited Partnership, (hereinafter called
Landlord) and SpectRx, Inc., (hereinafter called Tenant).
WITNESSETH
WHEREAS, the said Tenant and National Life Insurance Company, who have sold
their rights to Plaza 85, L.P., made and entered into a Lease dated September
21, 1993 for premises consisting of approximately 9,763 square feet located in
Plaza 85 Business Park, 6025 Unity Drive, Suites A, B & C, Norcross, Georgia
30071 for a term commencing November 1, 1993 and ending October 30, 1998 and
amended by the First Amendment dated December 11, 1995 to include an additional
6,492 for a total of 16,255 square feet and expire March 31, 2001.
NOW, THEREFORE, for valuable consideration paid by each of the parties to the
other, receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree that the said lease shall be amended as follows:
1) Beginning November 1, 1996 and ending December 31, 1999, Tenant will lease
an additional 5,120 square feet known as 6015 F Unity Drive, Norcross,
Georgia 30071.
2) The Rental Schedule shall be adjusted as follows:
<TABLE>
<CAPTION>
Monthly Payment for Monthly Payment for
Existing Space 6015 F
Approximately Approximately 5,120 Combined Monthly
Term 16,255 SF SF Payment
-------------------------- ---------------------- ----------------------- ----------------------
<S> <C> <C> <C>
01/01/96 - 12/31/96 $6,874.96 $2,240.00 $ 9,114.96
01/01/97 - 12/31/97 $7,179.71 $2,240.00 $ 9,419.71
01/01/98 - 12/31/98 $7,484.61 $2,329.60 $ 9,814.21
01/01/99 - 12/31/99 $7,958.00 $2,422.78 $10,380.78
01/01/00 - 03/31/01 $8,093.25 N/A $ 8,093.25
</TABLE>
3) Landlord will cut an 8' x 8' doorway as depicted in the attached Exhibit
"A", Landlord's Work. Other than this work, Tenant is taking space "as
is".
4) Landlord has inspected the roof of 6015 F and has made its best effort to
repair all leaks. Should Tenant find any leaks, Landlord will respond in a
timely manner.
-25-
<PAGE> 28
IT IS FURTHER UNDERSTOOD AND AGREED, that the said Amendment as modified by the
Agreement between the parties hereto shall be and the same hereby is in all
other respects ratified, approved and confirmed.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
LANDLORD:
Plaza 85, L.P.
By: BRANNEN/GODDARD - Plaza 85 L.P.
Its: General Partner
BY:
-------------------------------------
Robert C. Goddard, III
General Partner
TENANT:
SpectRx, Inc.
BY:
-------------------------------------
-26-
<PAGE> 29
THIRD AMENDMENT TO LEASE
THIS AGREEMENT, made and entered into this 12th day of November, 1996 by and
between Plaza 85, L.P., a Georgia Limited Partnership, (hereinafter called
Landlord) and SpectRx, Inc., (hereinafter called Tenant).
WITNESSETH
WHEREAS, the said Tenant and National Life Insurance, who have sold their
rights to Plaza 85, L.P., made and entered into a Lease dated September 21,
1993 for premises consisting of approximately 9,763 square feet located in
Plaza 85 Business Park, 6025 Unity Drive, Suites A, B & C, Norcross, Georgia
30071 for a term commencing November 1, 1993 and ending October 30, 1998 and
amended by the First Amendment dated December 11, 1995 to include an additional
6,492 for a total of 16,255 square feet and expire March 31, 2001, and the
Second Amendment to include an additional 5,120 square feet which expires on
December 31, 1999.
NOW, THEREFORE, for valuable consideration paid by each of the parties to the
other, receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree that the said lease shall be amended as follows:
1) Effective December 1, 1996 and ending June 30, 2000, Tenant will lease an
additional 8,700 square feet known as 6000 A Unity Drive, Norcross, Georgia
30071.
2) The Rental Schedule shall be adjusted as follows:
<TABLE>
<CAPTION>
Existing Rental Rental Schedule for Combined Monthly
Term Schedule 6000A Payment
------------------------- ---------------------- ----------------------- -----------------------
<S> <C> <C> <C>
12/01/96 - 12/31/96 $ 9,114.96 $2,849.25 $11,964.21
01/01/97 - 12/31/97 $ 9,419.71 $5,698.50 $15,118.21
01/01/98 - 12/31/98 $ 9,814.21 $5,926.44 $15,740.65
01/01/99 - 12/31/99 $10,380.78 $6,163.50 $16,544.28
01/01/00 - 06/30/00 $ 8,093.25 $6,410.04 $14,503.29
07/01/00 - 03/31/01 $ 8,093.25 N/A $ 8,093.25
</TABLE>
3) Tenant Improvements - Landlord will provide an improvement allowance $5.75
per square foot, or $50,025.00 for the improvements in accordance with
drawings prepared by Troy & Associates dated November 11, 1996, space
planning and construction fees included. The drawings are presently being
priced by S & E Contracting. Tenant shall pay for all costs in excess of
$50,025.000 except for the HVAC replacement costs of $10,885.00 for which
Tenant will pay only $3,265.50. Tenant's payment of improvements in excess
of $50,025.000 will be due within ten (10) days of Landlord furnishing
Tenant a copy of Contractor's estimate with Landlord's five percent (5%)
construction management fee included. Failure to pay such amount by the
due date will be treated as failure to pay rent and subject to the same
penalties and procedures outlined in the Lease Agreement.
4) Occupancy - Tenant may occupy the Premises upon completion of the
improvements and the execution of Tenant's Acceptance of Premises. The
completion date is estimated to be no later than December 13, 1996.
5) Security Deposit - Upon execution of this agreement, Tenant shall pay
Landlord $6,410.04 as a security deposit for the expanded Premises.
-27-
<PAGE> 30
IT IS FURTHER UNDERSTOOD AND AGREED, that the said Amendment as modified by the
Agreement between the parties hereto shall be and the same hereby is in all
other respects ratified, approved and confirmed.
IN WITNESS WHEREOF, the partes have executed this Agreement as of the day and
year first above written.
Landlord shall provide seasonal flowers in front of the building.
LANDLORD:
Plaza 85, L.P.
By: BRANNEN/GODDARD - Plaza 85 L.P.
Its: General Partner
BY:
-------------------------------------
Robert C. Goddard, III
General Partner
-28-
<PAGE> 31
TENANT ESTOPPEL CERTIFICATE
Plaza 85, L.P.
c/o Brannen/Goddard Company
3101 Towercreek Parkway, Suite 250
Atlanta, Georgia 30339
Bank South, N.A.
55 Marietta Street
Seventh Floor, Mail Code 69
Atlanta, Georgia 30303
Attn: D. Scott Dixon
RE: LEASE (AS AMENDED AS DESCRIBED HEREIN, THE "LEASE") BETWEEN
NATIONAL LIFE INSURANCE COMPANY AS ASSIGNED TO AND ASSUMED
BY PLAZA 85, L.P. AS LANDLORD ("LANDLORD") AND SPECTRX, INC.
AS TENANT, DATED SEPTEMBER 21, 1993 FOR APPROXIMATELY 9,763
SQUARE FEET OF SPACE KNOWN AS 6025-A/B/C UNITY DRIVE
("BUILDING"), IN THE PLAZA 85 BUSINESS PARK ("PARK"),
NORCROSS, GEORGIA.
Ladies and Gentlemen:
Tenant understands that Bank South, N.A. ("Lender") intends to make a
loan to Plaza 85, L.P. ("Owner"), which loan will be secured in part by a first
in priority deed to secure debt encumbering the Park. Tenant presently leases
premises within the Building pursuant to the Lease, and in connection with the
foregoing, Tenant does hereby certify to Lender and Owner as follows:
a. The Lease as described above in the reference line of
this Certificate, and has not been amended or modified in any way
except by the following instruments (describe by title, date, and
parties):
(If none, initial here: /s/ MAS)
-------
There are no amendments or modifications of any kind to the Lease
except as indicated above; there are no other promises, agreements,
understandings, or commitments between Owner (or any prior landlord) and Tenant
relating to the premises leased under the Lease; and Tenant has not given Owner
any notice of termination thereunder.
b. There has been and is now no subletting of the leased
premises, or any part thereof, or assignment by Tenant of the Lease,
or any rights therein, to any party.
c. The Lease is in full force and effect and free from
default by either party.
<PAGE> 32
d. The term of the Lease commenced on November 1, 1993,
and expires on October 31, 1998, unless renewed in accordance with the
provisions (if any) of the Lease.
e. The current monthly installment is $3,050.94.
f. As of the date hereof, Tenant has no outstanding
offsets or credits against, or deductions from, or "free rent" period
entitlements with respect to, its future rent obligations, except as
set forth below:
(If none, initial here: /s/ MAS)
-------
g. Tenant has paid to Owner (or to a prior landlord) a
security deposit of $0.00 (if none, insert "0"). Tenant made no
advance payment of rent other than for the current month.
h. There are no actions, whether voluntary or otherwise,
pending against Tenant under the bankruptcy, debtor reorganization,
moratorium or similar laws of the United States, any state thereof or
any other jurisdiction.
i. Tenant is in full and complete possession of its
leased premises in the Building and has accepted such leased premises,
including any work of Owner (or of a prior landlord) performed therein
pursuant to the terms and provisions of the Lease, is paying rent, and
is actively conducting its business therein. All improvement of any
kind required by the Lease to be installed or performed by Owner (or
by a prior landlord) are fully completed.
j. The undersigned agrees that upon notification by
Lender in writing that rental payments are to be made to Lender
because of a default under the loan with Owner, the undersigned will
cease making rental payments to Owner and will begin making such
rental payments directly to Lender.
-2-
<PAGE> 33
m. The undersigned representative of Tenant is duly
authorized and fully qualified to execute this instrument on behalf of
Tenant, thereby binding Tenant.
Tenant acknowledges and agrees that Lender and Owner and their
respective successors and assigns shall be entitled to rely on Tenant's
certification set forth herein.
IN WITNESS WHEREOF, Tenant has executed this instrument this 20th day
of September, 1994.
SPECTRX, INC.
By: /s/ Mark A. Samuels
------------------------------------
Name: Mark A. Samuels
----------------------------------
Title: President
---------------------------------
-3-
<PAGE> 1
EXHIBIT 11.1
SPECTRX, INC.
COMPUTATION OF PRO FORMA EARNINGS PER SHARE
(In thousands, except per share data)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
--------
PRIMARY AND FULLY DILUTED
<S> <C>
Pro forma net loss...................................... $ (3,178)
========
Weighted average Common Stock outstanding during
the period............................................ 1,532
Cheap Stock(1).......................................... 1,562
Dilutive effect of common stock equivalents............. 0
--------
Total................................................. 3,094
========
Per share amount........................................ (1.03)
========
</TABLE>
(1) Pursuant to Securities and Exchange Commission Accounting Bulletin No. 83,
common stock and common stock equivalents issued at prices below the
assumed initial public offering price per share ("cheap stock")
during the twelve months immediately preceding the initial filing date of
the Company's Registration Statement for its public offering have been
included as outstanding for all periods presented, regardless of whether
they are antidilutive.
<PAGE> 1
EXHIBIT 21.1
LIST OF SUBSIDIARIES OF THE COMPANY
The following is a list of the subsidiaries of SpectRx, Inc.:
FluorRx, Inc., a Delaware corporation.
<PAGE> 1
EXHIBIT 23.1
February 24, 1997
As independent public accountants, we hereby consent to the use of our report
(and to all references to our Firm) included in or made a part of this
registration statement.
/s/ Arthur Andersen LLP
Atlanta, Georgia
February 24, 1997
<PAGE> 1
EXHIBIT 23.3
CONSENT OF COUNSEL
We consent to the use of our name under the caption "Experts" in the
Prospectus, which constitutes a part of the Registration Statement for the
Common Stock of SpectRx, Inc. on Form S-1.
FLESHNER & KIM
By:/s/ Mark Fleshner
------------------------
February 25, 1997.
<PAGE> 1
EXHIBIT 23.4
CONSENT OF COUNSEL
We consent to the use of our name under the caption "Experts" in the
Prospectus, which constitutes a part of the Registration Statement for the
Common Stock of SpectRx, Inc. on Form S-1.
KILPATRICK STOCKTON, LLP
By:
----------------------
February 26, 1997.
<PAGE> 1
EXHIBIT 23.5
CONSENT OF COUNSEL
We consent to the use of our name under the caption "Experts" in the
Prospectus, which constitutes a part of the Registration Statement for the
Common Stock of SpectRx, Inc. on Form S-1.
THORPE, NORTH & WESTERN
By:/s/ M. Wayne Western
------------------------
February 25, 1997.
<PAGE> 1
EXHIBIT 23.6
CONSENT OF INDEPENDENT REGULATORY CONSULTANT
We consent to the use of our name under the caption "Experts" in the
Prospectus, which constitutes a part of the Registration Statement for the
Common Stock of SpectRx, Inc. on Form S-1.
MEDICAL DEVICE CONSULTANTS, INC.
By:/s/ James R. Veale, V.P.
-----------------------
February 25, 1997.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH REGISTRATION STATEMENT.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 4,721
<SECURITIES> 0
<RECEIVABLES> 1
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,812
<PP&E> 870
<DEPRECIATION> (274)
<TOTAL-ASSETS> 5,946
<CURRENT-LIABILITIES> 942
<BONDS> 0
0
5
<COMMON> 2
<OTHER-SE> 4,747
<TOTAL-LIABILITY-AND-EQUITY> 5,946
<SALES> 0
<TOTAL-REVENUES> 452
<CGS> 0
<TOTAL-COSTS> 3,562
<OTHER-EXPENSES> (64)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 132
<INCOME-PRETAX> 3,178
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,178
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,178
<EPS-PRIMARY> 1.03
<EPS-DILUTED> 1.03
</TABLE>
