EXHIBIT 10.16
INVESTMENT CONTRACT
Agreement concerning the Establishment of a Silent Partnership
between
SEQUENOM Instruments GmbH, Xxxxxxxxxxxxxx. 00X, 00000 Xxxxxxx
- hereinafter referred to as : Technology Company ("TC")
and
Technologie-Beteiligung-Gesellschaft m.b.H.
of Deutsche Xxxxxxxxxxxxxx, Xxxxxxxxxx. 0, 53170 Bonn
- Silent Partner (hereinafter: tbg) -
in the amount of
DM 2,000,000.-
for the Financing of the Project described in (S) 1, Section. 2.
Preamble
Within the scope of the DtA-Technology Programme, tbg undertakes investments for
the financing of projects in the early phase, of innovative projects and of
exit-financing projects according to the investment principles of this programme
which are an integral part of this--Agreement.
(S) 1
Objectives of the Partnership
1. According to the Articles of Incorporation in their valid version dated Nov.
10, 1994, the TC, which is registered under No. B 57315 in the Company Roll
of the District Court of Hamburg, operates a commercial enterprise for the
purposes of:
Development, production and marketing of devices for the sequencing of DNA,
sale of sequencing information, and development of medical diagnostics and
therapeutics.
2. Within the scope of this business objective, the TU is engaged in:
Automation of the newly developed technology process and proprietary chip
development.
(S) 2
Capital Injection
1. For the exclusive use of financing the innovative project described and
based upon the information provided by the TC in the Application for
Investment dated June 16/17, 1997 tbg
makes an investment in the amount of DM 2,000,000.--, provided that the TC
documents the following investment agreements:
Investment in the amount of DM 2,000,000.- by Sequenom Inc., II 555 Sorrento
Valley Road, San Diego, CA 9212 1, USA (hereinafter referred to as AC, also
in the case of multiple investors), and provided that the AC has concluded a
co-operation agreement with tbg.
The AC will consult with TVM Techno Venture Management, Xxxxxxxxx Xxx. 00,
00000 Xxxxxx - hereinafter referred to as TVM -- regarding management of the
TU.
Authorisation of tbg to draw down the fixed payments due tbg.
2. The injection by tbg shall be used for the co-financing of the project-
related planning described in Annex I which is an integral part of this
investment contract.
3. The TC is entitled to draw down the capital after the company becomes
operational (cf. (S)3, Section 1), provided that its immediate designated
utilisation and a proportional use of funds together with the other means of
financing foreseen in Annex I and total financing of the innovation project
are guaranteed.
The withdrawal must have appended a confirmation by the AC and TVM that the
prerequisites for the withdrawal have been met.
4. This Agreement shall expire in the event that the capital is not drawn down,
at least in part, latest by March 31, 1998.
5. tbg is entitled to withhold a processing fee in the amount of 1% of the
total injection specified in this Agreement. Such fee will be withheld from
the first partial withdrawal.
6. The TC shall establish a separate deposit account for the injection by tbg.
Withdrawals from this account by tbg are precluded.
(S) 3
Beginning and Lifetime of the Partnership
1. The Silent Partnership shall commence as soon as both parties have signed
this Contract.
2. The Silent Partnership shall terminate on Dec. 31, 2007.
3. tbg's capital and any outstanding profit shares shall be due for payment to
tbg upon termination of the Partnership.
4. In the event that the funds invested by the AC are repaid before Dec. 1,
2005, the investment made by tbg shall be repayable at the same time and to
the same extent. tbg is entitled to request a final remuneration with
reference to the part of its capital due for early repayment in accordance
with the respective enforcement of $8 Section 4.
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(S) 4
Management
1. tbg shall have no control in the management of the TC insofar as not
stipulated otherwise in the following.
2. The TC shall obtain the approval of tbg in respect of.
(a) any amendment to the Articles of Incorporation, in particular any
modification of the purpose of the company, acceptance of new
shareholders, or agreement of new investments;
(b) the appointment and dismissal of executive managers of the TC;
(c) the conclusion, amendment and termination of contracts governing the
granting or acquisition of licences, patents, prototypes, samples,
trademarks or know-how insofar as they relate to the innovation project
promoted by tbg;
(d) the conclusion, amendment and termination of major sales contracts;
(e) the partial or entire relocation, leasing, sale or closing down of the
operation;
(f) the conclusion and termination of control and profit pooling contracts.
(g) the abandonment or substantial modification of the innovation project
described in (S) 1 Section
(h) the entry into commitments insofar as these are not covered by the
project financing by tbg, for investments exceeding the amount of DM
100,000, or for leasing, rental or leasehold agreements involving
monthly payments of more than DM 10,000.
3. Approval in accordance with (S) 4, Section 2, shall be obtained directly
from tbg.
Insofar as tbg fails to give written notice of its refusal of approval
within a period of 14 days after receipt of the notification advising it of
the measure requiring approval, such approval shall be deemed as given.
(S) 5
Reporting and Control
1. The TC shall report to tbg semi-annually, by March 31 and September 30 of
each year, respectively, the financial situation of the TC and the status of
the innovation project described in (S) 1, Section 2 until such time when
tbg, waives such reports, because the AC exercises control of the TC also on
behalf of tbg. In addition, the TC shall file with tbg brief
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monthly status reports in the form appended hereto in Annex II, and at the
end of the financial year a respectively updated business plan for the year
following.
2. Regardless whether the AC exercises control in the TC also on behalf of tbg,
the TC shall notify tbg directly immediately of all measures exceeding the
scope of normal business transactions.
3. Furthermore, tbg is entitled to exercise its rights of control in accordance
with (S) 716 of the German Civil Code. This shall apply also after
termination of the Partnership to the extent required for the verification
of the funds to be distributed.
tbg is further entitled the review all the documentation of the TC
pertaining to the innovation project described in (S) 1, Section 2b. To
exercise its rights of control, tbg is entitled to avail itself of the
services of third parties.
5. According to (S) 91 of the Federal Budget Regulations (BHO), the TC is
subject to audit by the Auditor General's Department. The TC shall
furnish the Auditor General's Department and tbg with all documentation
deemed necessary by the Department of the Auditor General for the purpose
of audit.
(S) 6
Advisory Board
tbg may at any time request the establishment of an advisory board.
tbg shall participate in this board to an extent commensurate with the amount of
its capital.
The advisory board shall advise the TC concerning commercial and technical
issues, in particular with regard to the project described in (S) 1, Section 2b.
The board shall be entitled to the same rights to information and control as
they are granted to tbg under this Agreement.
(S) 7
Financial Year, Annual Accounts
1. The financial year of the Silent Partnership concurs with the financial year
of the TC ("investment Year"). The financial year of the TC shall end on
31 December of each year.
2. The TC shall prepare its annual financial statements (balance sheet, profit
and loss account, notes) in accordance with (S)(S) 238-289 of the Code of
Commercial Law within six months after the end of the financial year and
shall submit one signed original specimen together with the confirmation of
a certified public accountant or auditor.
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(S) 8
Profit and Loss Sharing
1. tbg shall receive on its capital, irrespective of the TC's annual earnings,
a minimum return of 7% p.a. This shall be payable retroactively every six
months, on May 31 and November 30 of each year.
2. Furthermore, tbg shall receive 9% of all annual profits achieved from the
date of draw-down of the investment.
For such period where tbg holds more than one investment in the TU, however,
tbg shall receive only 9% in total of annual profits achieved for all
investments in addition to the respective minimum payments, up to a maximum
of 7% p.a. of the sum of all investments in total.
In the event that additional capital is injected in the TC within the scope
of additional rounds of financing, tbg shall adjust its share in profits to
the effective capital situation at the time.
Such share in profits shall be payable within two weeks after finalisation
of the annual financial statement ((S) 8 Section 2).
3. The calculations as per Section 2 shall be based on annual profits prior to
the consideration of the profit share of tbg according to the preceding
Section 2.
a) The following shall be added to the annual profits:
- taxes paid on profits as well as possible managers' shares, insofar as
they reduced annual profits shown;
- Extraordinary expenditure insofar as it is incurred from business
transacted prior to the beginning of the Silent Partnership;
- Losses caused by the sale or destruction of company assets insofar as
the latter had already existed at the time of the beginning of the
Partnership.
b) The following shall be deducted from the annual profits:
- Funds from the release of tax-free reserves set up prior to the
beginning of the Silent Partnership;
- Compensation for services or interest credited to the TC's
shareholders, insofar as the TC is a partnership, without having
reduced the taxable profits of the Partnership;
- Extraordinary revenues insofar as they relate to business transacted
prior to the beginning of the Silent Partnership;
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- Grants, allowances and subsidies from public agencies insofar as these
contributed to profits;
- Revenues from the sale of property, plant and equipment insofar as such
goods had already existed at the time of the beginning of the
Partnership.
c) In the year in which the deposit is drawn down, the annual profit for the
calculation of the profit sharing in accordance with Section 2 shall be
deemed to have occurred evenly throughout the year.
4. tbg shall be entitled to demand at the end of the lifetime of the investment
a one-off remuneration of 35% of the total of the investment, plus an
additional 7% of the investment for each year after the end of the fifth
full year of the Partnership. Shares of profits paid annually in accordance
with (S) 8 Section 2 shall be set off against the final remuneration. Should
the sum of the profit shares exceed such final remuneration, no respective
payment shall be made.
tbg shall exercise this right only in the event that it deems such
remuneration justified in view of the overall financial situation of the TC,
especially in view of its profits achieved in the last three years prior to
the termination of the investment and the hidden reserves accumulated during
the lifetime of the investment.
5. tbg shall not share in any losses of the TC.
(S) 9
Taxes
The TC shall be responsible for the payment of the legally prescribed
withholding tax, plus the Solidarity levy, in respect of the remuneration for
the capital provided, and shall withhold from the respective payments to tbg the
withholding tax and the Solidarity levy and shall remit this directly to the
relevant tax office. Following such remittance, the TC shall furnish tbg within
two months of the due date of payments with the respective certificates in
accordance with (S) 45a, Section 2 of the Income Tax Law, using the blank forms
provided by tbg.
(S) 10
Dissolution of the Silent Partnership
1. The Silent Partnership shall be dissolved in the event that the TC is
liquidated. In that event the relevant investment shall be repaid.
2. (S) 3, Section 3 and (S) -8, Section 4 shall be applicable also in this
event.
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(S) 11
Notice
1. The TC is entitled to redeem the shares of tbg entirely or in part at 3
months' notice as per June 30 or December 31 of each year. Where such
redemption is effected before the end of the fifth full year of the
investment, the capital of tbg shall be paid back with a premium of 25%.
From the beginning of the sixth year of the investment, (S) 8, Section 4
shall apply. tbg may waive payment of the premium if the notice of
redemption is given for the reason that the promoted innovation project is
abandoned.
2. Furthermore, the Silent Partnership may be dissolved for important reason
with immediate effect by either of the Partners with written notice. In the
event that the capital has not yet been paid in either fully or in part, tbg
shall be released from its commitment to make an injection with effect from
the date of such notice.
tbg has the right to give notice for important reasons, in particular in the
event that
a) the TC made false representations in the Investment Application;
b) it becomes evident that the prerequisites upon which the investment was
undertaken did not exist, or that the prerequisites for continuing the
investment have are no longer fulfilled, in particular if the innovation
project described in (S) 1, Section 2b, proves non-feasible or is
abandoned by the TC or is substantially modified. In the event that the
innovation project described in (S) 1, Section 2, proves to be non-
feasible in technical or financial terms, tbg may waive repayment of the
investment wholly or in part if by such waiver the TC can continue its
operations;
c) any xxxx of exchange accepted by the TC is disputed, the TC stops
payments, or the TC instigates bankruptcy proceedings, or settlement
proceedings are opened in court, or insolvency is declared in any other
form;
d) the senior specialist or specialists possessing the know-know at the time
of the conclusion of the Investment Agreement is/are no longer full-time
members of the management of the TC;
e) one of the measures defined in (S) 4, Section 2 is implemented without
the prior consent of tbg.
(S) 12
Payments Due
All payments due shall incur interest at the rate of 4% p.a. from the effective
date of default until the time of receipt by tbg.
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(S) 13
General Provisions
1. Amendments or supplements to this Agreement must be in writing. Any
supplementary verbal agreements relating to this Agreement shall be invalid.
2. In the event that one provision of this Agreement becomes invalid, this
shall not affect the validity of any other provision. The TC and tbg
undertake to replace invalidated provisions by legally valid clauses that
reflect to the greatest possible extent the sense and purpose of the invalid
provisions.
3. Bonn shall be the legal venue for all disputes that may arise from this
Agreement or its execution.
Bonn, October 7, 1997 Hamburg, September 22, 1997
Technologie-Beteiligungs- SEQUENOM
Gesellschaft mbH der Instruments GmbH
Deutschen Ausgleichsbank
(signed) (signed) (signed: Xx. X. Xxxxx)
(Signatures illegible)
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Project Schedule (Annex 1)
Brief Status Report (Annex 11)
Principles of Investment of tbg
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COST AND FINANCING SCHEDULE
for the Period 09/01/97 - 12/31/99
---------------------------------------------------------------------------------------------------------------------
Project-related Expenditure Amount in DM (exc. VAT)
---------------------------------------------------------------------------------------------------------------------
I For applied research and development
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1. Investments reported as tangible assets
---------------------------------------------------------------------------------------------------------------------
1.1 Laboratory equipment and plant 1,087,000
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1.2 Machinery and plant for the production of prototypes
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1.3 Miscellaneous
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2. Non-investment research and development expenditure
---------------------------------------------------------------------------------------------------------------------
2.1 Personnel 1,352,000
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2.2 Materials 456,000
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2.3 Outside services (contracts/consulting) 1,160,000
---------------------------------------------------------------------------------------------------------------------
2.4 Patents and registrations
---------------------------------------------------------------------------------------------------------------------
2.5 Travel expenditure
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2.6 Miscellaneous
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II Investments for Market Entry
---------------------------------------------------------------------------------------------------------------------
TOTAL 4,055,000
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---------------------------------------------------------------------------------------------------------------------
Project-related Financing Amount in DM (exc. VAT)
----------------------------------------------------------------------------------------------------------------------
1. Own funds
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