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EXHIBIT 4.3
B.I. SYSTEMS CORPORATION
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
Dated as of May _, 1997
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TABLE OF CONTENTS
Page
SECTION 1 AUTHORIZATION AND SALE ....................................... 1
1.1 Authorization of the Series B Preferred Stock ................ 1
1.2 Purchase and Sale of Series B Preferred Stock ................ 1
SECTION 2 CLOSING DATE; DELIVERY ....................................... 1
2.1 Closing Date ................................................. 1
2.2 Delivery ..................................................... 1
2.3 Additional Closings .......................................... 2
SECTION 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY ................ 2
3.1 Organization and Standing; Charter and By-laws ............... 2
3.2 Capitalization ............................................... 2
3.3 Corporate Power; Authorization ............................... 3
3.4 Validity of Securities ....................................... 3
3.5 Litigation ................................................... 3
3.6 Employee Benefit Plans ....................................... 3
SECTION 4 REPRESENTATIONS, WARRANTIES OF THE PURCHASERS AND
RESTRICTIONS ON TRANSFER IMPOSED BY THE ACT .................. 4
4.1 Representations and Warranties ............................... 4
4.1.1 Authorization .......................................... 4
4.1.2 Investment ............................................. 4
4.1.3 Federal Securities Law ................................. 5
4.1.4 State Securities Laws .................................. 5
4.2 Transfer of Securities ....................................... 5
4.2.1 Legend ................................................. 5
4.2.2 Restrictions on Transfer ............................... 6
4.2.3 Termination of Restrictions and Removal of Legend....... 6
SECTION 5 CONDITIONS TO OBLIGATIONS OF THE PURCHASERS .................. 7
5.1 Representations and Warranties Correct; Performance of
Obligations .................................................. 7
5.2 Consents and Waivers ......................................... 7
5.3 Certificate of Incorporation.................................. 7
5.4 Minimum Proceeds ............................................. 7
5.5 Recapitalization ............................................. 7
SECTION 6 CONDITIONS TO OBLIGATIONS OF THE COMPANY ...................... 7
SECTION 7 RIGHT OF FIRST OFFER AND COVENANTS OF THE COMPANY ............ 8
7.1 Right of First Offer ......................................... 8
7.2 Covenants .................................................... 9
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7.3 Termination .................................................. 10
7.4 Right of First Refusal on Xxxxxxxx' Shares and the
Purchasers' Shares ........................................... 11
SECTION 8 REGISTRATION RIGHTS .......................................... 13
8.1 Definitions .................................................. 13
8.2 Company Registration ......................................... 13
8.3 Demand Registration .......................................... 14
8.4 Obligations of the Company ................................... 14
8.5 Furnish Information .......................................... 15
8.6 Underwriting Requirements .................................... 15
8.7 Delay of Registration ........................................ 16
8.8 Indemnification .............................................. 16
8.9 Reports Under Securities Exchange Act of 1934 ................ 18
8.10 Form S-3 Registration ........................................ 18
8.11 Expenses of Registration ..................................... 19
8.12 Assignment of Registration Rights ............................ 19
8.13 "Market Stand-Off" Agreement ................................. 19
8.14 Limitations on Subsequent Registration Rights ................ 20
8.15 Amendment of Registration Rights ............................. 20
8.16 Termination .................................................. 20
SECTION 9 BOARD OF DIRECTORS ........................................... 20
9.1 Composition of Board ......................................... 20
9.2 Removal of Directors ......................................... 21
9.3 Election of Directors ........................................ 21
9.4 Voting Agreement ............................................. 21
9.5 Termination .................................................. 21
SECTION 10 MISCELLANEOUS ................................................ 21
10.1 Waivers and Amendments ....................................... 21
10.2 Governing Law ................................................ 22
10.3 Successors and Assigns ....................................... 22
10.4 Entire Agreement ............................................. 22
10.5 Notices, Etc ................................................. 22
10.6 Delays or Omissions .......................................... 23
10.7 Severability ................................................. 23
10.8 Titles and Subtitles ......................................... 23
10.9 Counterparts ................................................. 23
10.10 Expenses ..................................................... 23
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EXHIBITS
A. Form of Amended and Restated Certificate of Incorporation
B. Description of Recapitalization
C. Form of Confidential Statement of Investor Suitability
SCHEDULES
1. Schedule of Purchasers
4.1.3 Definition of Accredited Investor
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SERIES B PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES B PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") is
dated as of the day of May, 1997 by and among B.I. Systems Corporation, a
Delaware corporation (the "Company"), the persons listed on Schedule 1 attached
hereto (each of whom is referred to herein individually as a "Purchaser" and
collectively as the "Purchasers") and, solely for the purposes of Section 7.4,
Section 9 and Section 10 of this Agreement, Xxxxxxx X. Xxxxxxxx ("Xxxxxxxx").
SECTION 1
AUTHORIZATION AND SALE
1.1 Authorization of the Series B Preferred Stock. The Company has
authorized the sale and issuance of up to 2,000,000 shares of its Series B
Preferred Stock (the "Series B Shares") to the Purchasers thereof as listed on
Schedule 1 attached hereto. The Series B Shares shall have the rights,
privileges and preferences set forth in the Company's Amended and Restated
Certificate of Incorporation attached as Exhibit A hereto (the "Certificate of
Incorporation").
1.2 Purchase and Sale of Series B Preferred Stock. Subject to the terms
and conditions hereof and in reliance upon the representations, warranties and
agreements contained herein, the Company agrees to issue and sell to the
Purchasers, and each of the Purchasers agrees to purchase from the Company, the
number of Series B Shares set forth opposite such Purchaser's name on Schedule 1
attached hereto, at a cash purchase price of $1.00 per share.
SECTION 2
CLOSING DATE; DELIVERY
2.1 Closing Date. The purchase and sale of the Series B Shares
hereunder shall occur at a closing (the "Closing") to be held at Xxxxxxxxx &
Xxxxxxx, 000 Xxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxxxxxxx, Xxxxxxxxxx, on May 7,
1997 or at such other time and place as shall be mutually agreed upon by the
Company and the Purchasers (the "Closing Date").
2.2 Delivery. Subject to the terms of this Agreement, at the Closing,
the Company will deliver to each of the Purchasers a certificate representing
the Series B Shares registered in such Purchaser's name equal to the number of
Series B Shares set forth opposite the name of such Purchaser on Schedule 1
attached hereto, against payment of the purchase price by (at the option of the
Company) either cashier's check payable in immediately available funds to the
order of the Company or by a wire transfer of funds to the order of the Company.
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2.3 Additional Closings. The Company may sell up to the balance of the
authorized shares of Series B Preferred Stock not sold at the Closing as it
shall elect, at a price not less than $1.00 per share. Upon execution of a
signature page counterpart and without need for an amendment hereto except to
add such purchaser's name to Schedule 1 hereto, any such purchaser shall become
a party to this Agreement, shall be deemed a "Purchaser" for purposes of this
Agreement and shall have the rights and obligations hereunder.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as otherwise expressly indicated in the Schedules attached
hereto, the Company hereby represents and warrants to the Purchasers as follows:
3.1 Organization and Standing; Charter and By-laws. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and the Company is authorized to exercise all of its
corporate powers, rights and privileges. True and accurate copies of the
Certificate of Incorporation and the by-laws of the Company, each as it will be
in effect at the Closing, have been delivered to the Purchasers.
3.2 Capitalization. The authorized capital stock of the Company on the
date of the Closing will consist of 15,000,000 shares of $.001 par value common
stock ("Common Stock") and 4,000,000 shares of $.001 par value Preferred Stock
(the "Preferred Stock"), 2,000,000 of which have been designated Series B
Preferred Stock and 50,000 of which have been designated Series M Preferred
Stock. Assuming the completion of the recapitalization described in Exhibit B
attached hereto (the "Recapitalization"), no Preferred Stock will be outstanding
at the date of the Closing. The Series B Shares will have the rights,
preferences and privileges set forth in the Certificate of Incorporation. Upon
completion of the Recapitalization, there will be 31,280 shares of Common Stock
issued and outstanding. The Company has reserved 6,060,000 shares of Common
Stock for issuance upon conversion of the Series B Preferred Stock, 270,027
shares of Common Stock for issuance upon conversion of the Series M Preferred
Stock and 1,590,000 shares of Common Stock for issuance to employees,
consultants and directors under its 1994 Omnibus Equity Incentive Plan (the
"Stock Plan") pursuant to which, prior to the Recapitalization, options to
acquire an aggregate of 194,500 shares were outstanding. The Company intends to
offer the holders of such options the right to exchange their existing options
for new options which, upon completion of the Recapitalization, will entitle
them to acquire the number of shares of Common Stock specified in their existing
option agreement, but at an exercise price of $0.33 per share. The Stock Plan
was adopted by the Board of Directors and stockholders of the Company in July
1994 and amended in April 1997. Except as set forth herein or as described in
the description of the Recapitalization and except for the proposed sale of the
Series M Preferred Stock, there are no outstanding rights, options, warrants,
preemptive rights, conversion rights or agreements for the purchase, acquisition
or receipt from the Company of any shares of capital stock or any other
securities of the Company. The
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Company is not a party to any existing agreement with any person or entity which
requires the Company to purchase from such person or entity any of its capital
stock, any securities convertible into or exchangeable or exercisable for any of
its capital stock, or any right, options or warrants for its capital stock. All
outstanding securities of the Company, including the Series B Shares, have been
issued in accordance with all applicable state and federal securities laws.
3.3 Corporate Power; Authorization. The Company has all requisite legal
and corporate power to enter into this Agreement, to issue and sell the Series B
Shares as provided hereunder, and to carry out and perform its obligations under
the terms of this Agreement. All corporate action on the part of the Company and
its officers, directors and stockholders that is necessary for the
authorization, execution and delivery of this Agreement by the Company, for the
performance of the Company's obligations hereunder and for the issuance and
delivery of the Series B Shares has been taken; and this Agreement constitutes a
legal and binding obligation of the Company, enforceable against the Company in
accordance with its terms, subject to: (i) judicial principles respecting or
limiting the availability of specific performance, injunctive relief and other
equitable remedies; and (ii) bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect generally relating to or
affecting creditors' rights.
3.4 Validity of Securities. The Series B Shares, when issued, sold and
delivered in accordance with the terms of this Agreement, will be duly and
validly issued, fully paid and nonassessable and will be free and clear of any
liens, encumbrances or restrictions of any kind; provided, however, that the
Series B Shares may be subject to restrictions on transfer under state and
federal securities laws. The Common Stock issuable upon conversion of the Series
B Shares has been duly and validly reserved and, upon issuance in accordance
with the terms of this Agreement and the Certificate of Incorporation, will be
duly and validly issued, fully paid and nonassessable and will be free and clear
of any liens, encumbrances or restrictions of any kind; provided, however, that
the Common Stock may be subject to restrictions on transfer under state and
federal securities laws.
3.5 Litigation. There is no action, suit or proceeding pending or, to
the knowledge of the Company, threatened against the Company or related to the
business conducted by the Company. 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.
3.6 Employee Benefit Plans. Except for the Company's 401(k) Plan,
short-term and long-term disability plans, prescription drug plan and medical,
dental and life insurance plans, the Company does not have any Employee Benefit
Plan as defined in the Employee Retirement Income Security Act of 1974.
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SECTION 4
REPRESENTATIONS, WARRANTIES OF THE PURCHASERS
AND RESTRICTIONS ON TRANSFER IMPOSED BY THE ACT
4.1 Representations and Warranties. Each Purchaser hereby represents
and warrants to the Company, severally and not jointly, and only as to itself,
as follows:
4.1.1 Authorization. (a) All action on the part of such
Purchaser necessary for the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby has been
taken and, assuming due execution and delivery by the Company, this Agreement
constitutes a legal, valid, binding and enforceable obligation of such
Purchaser, subject to: (i) judicial principles respecting or limiting the
availability of specific performance, injunctive relief, and other equitable
remedies; and (ii) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect generally relating to or affecting
creditors' rights.
(b) If the Purchaser is an entity, trust, pension fund or XXX
account (an "Entity"), the Entity and the person signing on its behalf represent
and warrant that: (i) such Entity is an existing entity, and has not been
organized or reorganized for the purpose of making this investment (or if not
true, such fact shall be disclosed to the Company in writing along with
information concerning the beneficial owners of the Entity), (ii) the
undersigned has the authority to execute this Agreement and the Confidential
Statement of Investor Suitability attached as Exhibit C hereto and any other
documents in connection with an investment in the Series B Shares on the
Entity's behalf, and (iii) the Entity has the power, right and authority to
invest in the Series B Shares and enter into the transactions contemplated
hereby, and the investment is suitable and appropriate for the Entity and its
beneficiaries (given the risks and illiquid nature of the investment).
4.1.2 Investment.
(a) Such Purchaser has been advised that the Series B Shares have
not been registered under the Securities Act of 1933, as amended (the "Act"), or
registered or qualified under any applicable state securities laws on the ground
that no distribution or public offering of the Series B Shares is to be
effected, and that in this connection the Company is relying in part on the
representations of such Purchaser set forth in this Section 4;
(b) Such Purchaser has been further advised that no public market
now exists for any of the securities issued by the Company and that a public
market may never exist for the Series B Shares;
(c) Such Purchaser is purchasing the Series B Shares for its own
account and not for any other person;
(d) By reason of its business or financial experience, such
Purchaser has the capacity to protect its own interest in connection with the
transactions contemplated
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hereunder, is able to bear the risks of an investment in the Company, and could
afford a complete loss of such investment;
(e) Such 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 Series B Shares; and
(f) Such Purchaser has had the opportunity to ask questions
regarding the Company and the Company has provided information in response to
the questions.
4.1.3 Federal Securities Law. In order to enable the Company to
determine whether the sale of the Series B Shares is exempt from registration
under the Act, such Purchaser represents that it is an Accredited Investor (as
defined in Schedule 4.1.3 hereof), has completed truthfully the appropriate
items in the Confidential Statement of Investor Suitability attached as Exhibit
C hereto, and is acquiring the Series B Shares for its own account, for
investment, and not with a view to, or for sale in connection with, any
distribution thereof.
4.1.4 State Securities Laws. The address of such Purchaser set
forth on Schedule 1 attached hereto is the Purchaser's true and correct
residence or place of business.
4.2 Transfer of Securities. Neither the Series B Shares nor the shares
of Common Stock issuable upon conversion of the Series B Shares shall be
transferable except upon the conditions specified in this Section 4.2, which
conditions are intended to insure compliance with the provisions of the Act with
respect to the transfer of such securities.
4.2.1 Legend. Unless and until otherwise permitted by this Section
4.2, each certificate representing (i) the Series B Shares or (ii) the Company's
Common Stock issued upon conversion of the Series B Shares, will be endorsed
with a legend substantially in the following form:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT
BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS (A) COVERED BY AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND ANY APPLICABLE STATE SECURITIES LAWS, OR (B) THE COMPANY
HAS BEEN FURNISHED WITH AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY
TO THE EFFECT THAT SUCH SALE, PLEDGE OR TRANSFER IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID
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SECURITIES ACT AND ANY APPLICABLE
STATE SECURITIES LAWS."
4.2.2 Restrictions on Transfer. The Series B Shares and the Common
Stock issuable upon the conversion of the Series B Shares shall not be sold,
assigned, pledged or transferred, and the Company shall not be required to
register any such sale, assignment, pledge or transfer, unless and until one of
the following events shall have occurred:
(a) the Company shall have received an opinion of counsel, in
form and substance reasonably acceptable to the Company and its counsel, stating
that the contemplated transfer is exempt from registration under the Act as then
in effect, and the Rules and Regulations of the Securities and Exchange
Commission (the "Commission") thereunder and any applicable state securities
laws;
(b) the Company shall have been furnished with a letter from the
Commission in response to a written request in form and substance acceptable to
counsel for the Company setting forth all of the facts and circumstances
surrounding the contemplated sale, assignment, pledge or transfer, stating that
the Commission will take no action with regard to the contemplated sale,
assignment, pledge or transfer; or
(c) the Series B Shares, or the Common Stock issuable upon
conversion of the Series B Shares, are transferred pursuant to a registration
statement which has been filed with the Commission and has become effective.
Within five business days after delivery to the Company and its counsel
of an opinion described in clause (a) above, the Company either shall deliver to
the proposed transferor a statement to the effect that such opinion is not
satisfactory in the reasonable opinion of its counsel (and shall specify in
detail the legal analysis supporting any such conclusion) or shall authorize the
Company's transfer agent to make the requested transfer. The restrictions set
forth in this Section 4.2.2 shall not apply to transfers by a Purchaser which is
a partnership to a current or former general or limited partner of such
partnership provided that the partner agrees in writing to be subject to the
terms hereof to the same extent as if he, she or it were a party hereto.
4.2.3 Termination of Restrictions and Removal of Legend. The
restrictions on transfer imposed by this Section 4.2 shall cease and terminate
as to the Series B Shares and the Common Stock issuable upon conversion of the
Series B Shares, when (i) such securities (as applicable) shall have been
effectively registered under the Act and sold by the holder thereof in
accordance with such registration, or (ii) an acceptable opinion as described in
Section 4.2.2(a) or a "no action" letter described in Section 4.2.2(b) states
that all future transfers of such securities by the transferor or the
contemplated transferee would be exempt from registration under the Act. When
the restrictions on transfer contained in this Section 4.2 have terminated as
provided above, the holder of the securities as to which such restrictions shall
have terminated or the transferee of such
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holder shall be entitled to receive promptly from the Company, without expense
to him, new certificates not bearing the legends set forth in Section 4.2.1
hereof.
SECTION 5
CONDITIONS TO OBLIGATIONS OF THE PURCHASERS
The obligation of the Purchasers to purchase the Series B Shares at the
Closing is subject to each of the following conditions having been fulfilled on
or prior to the Closing Date or waived by the Purchasers in accordance with the
provisions of Section 9.1 hereof:
5.1 Representations and Warranties Correct; Performance of Obligations.
The representations and warranties made by the Company in Section 3 hereof 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 Closing
Date; and the Company shall have performed all obligations and conditions herein
required to be performed or observed by it on or prior to the Closing Date.
5.2 Consents and Waivers. The Company shall have obtained any and all
consents, permits and waivers and made all filings necessary or appropriate for
consummation of the transactions contemplated by this Agreement.
5.3 Certificate of Incorporation. The Certificate of Incorporation
shall have been filed with the Secretary of State of the State of Delaware.
5.4 Minimum Proceeds. There shall be issued at the Closing, Series B
Shares with an aggregate purchase price of at least $850,000.
5.5 Recapitalization. The Recapitalization shall have been completed
such that immediately prior to or simultaneously with the Closing the Company
shall have no outstanding Series A Preferred Stock and the Company shall have no
further obligations pursuant to its 15.0% Subordinated Debentures or the
promissory note issued to Millipore Corporation.
SECTION 6
CONDITIONS TO OBLIGATIONS OF THE COMPANY
The Company's obligation to issue, sell and deliver the Series B Shares
at the Closing is subject to the following conditions having been fulfilled on
or prior to the Closing Date or waived by the Company in accordance with the
provisions of Section 9.1 hereof: The representations and warranties made by the
Purchasers in Section 4 hereof 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 Closing Date and the conditions set forth in
Sections 5.2, 5.3, 5.4 and 5.5 hereof shall have been satisfied.
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SECTION 7
RIGHT OF FIRST OFFER AND COVENANTS OF THE COMPANY
7.1 Right of First Offer.
(a) Subject to the terms and conditions specified in this Section
7.1, the Company hereby grants to each Purchaser a right to participate in
future sales by the Company of its Shares (as hereinafter defined). For purposes
of this Section 7.1 and Section 7.4, Purchaser includes any partners or retired
partners (including spouses and ancestors, lineal descendants and siblings of
such partners or spouses who acquire Series B Shares or Common Stock issued upon
conversion thereof by gift, will or intestate succession) of a Purchaser. A
Purchaser shall be entitled to apportion the right of first offer hereby granted
it among itself and its partners in such proportions as it deems appropriate.
(b) Each time the Company proposes to offer any shares of, or
securities convertible into or exercisable for any shares of, any class of its
capital stock ("Shares"), the Company shall first make an offering of a portion
of such Shares (as determined in subsection (2) below) to each Purchaser in
accordance with the following provisions:
(1) The Company shall deliver a written notice ("Notice") to
the Purchasers stating (i) its bona fide intention to offer such
Shares, (ii) the number of such Shares to be offered, and (iii) the
price and terms, if any, upon which it proposes to offer such
Shares.
(2) Within 10 calendar days after receipt of the Notice, any
Purchaser may elect to purchase or obtain, at the price and on the
terms specified in the Notice, up to that portion of such Shares
which equals the proportion (such Purchaser's "Proportion") that
the number of shares of Common Stock held by such Purchaser
(including for such calculation any shares issuable upon conversion
of any capital stock convertible into Common Stock) bears to the
total number of shares of Common Stock of the Company then
outstanding held by the Purchasers and other persons who have been
granted a right of first offer (assuming for such calculation any
shares issuable upon conversion of any capital stock convertible
into Common Stock).
(3) The Company may during the 10-day period following the
expiration of the 10-day period provided in subsection (2) hereof,
offer the remaining unsubscribed portion of such Shares which the
Purchasers have not elected to purchase to any person or persons at
a price not less than, and upon terms no more favorable to the
offeree than those specified in the Notice. If the Company does not
enter into an agreement for the sale of the Shares within 90 days
of the expiration of such 10-day period, or if such agreement is
not
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consummated within 120 days following the expiration of such 10-day
period, the right provided hereunder shall be deemed to be revived
and such Shares shall not be offered unless first reoffered to the
Purchasers in accordance herewith.
(4) The right of first offer in this Section 7.1 shall not be
applicable (i) to the issuance or sale of shares of Common Stock
(as adjusted to reflect any stock splits, combinations or other
events involving the Common Stock) to employees, consultants or
members of the Board of Directors pursuant to employee or director
stock plans which are approved in writing by the Company's Board of
Directors, (ii) to the Public Offering (as defined in Section 7.3
hereof) or to any offering of Shares after consummation of the
Public Offering, (iii) to the issuance of securities pursuant to
the conversion or exercise of presently outstanding convertible or
exercisable securities, (iv) to any Common Stock issued upon
conversion of the Series B Preferred Stock, the Series M Preferred
Stock or other series of Preferred Stock issued pursuant to the
Certificate of Incorporation, (v) to securities issued in
connection with any acquisition or business combination transaction
approved by the Board of Directors of the Company, or (vi) to
securities issued in connection with equipment lease financings or
other financings with commercial lenders or in strategic
transactions involving the Company and other entities including
joint ventures or marketing, distribution or development
arrangements, in each case provided that any issuance pursuant to
subsection (vi) has been approved by the Board of Directors of the
Company.
7.2 Covenants.
(a) Taxes. The Company will promptly pay and discharge, or cause to
be paid and discharged, when due and payable, all lawful taxes, assessments, and
governmental charges or levies imposed upon the income, profits, property, or
business of the Company; provided, however, that any such tax, assessment,
charge, or levy need not be paid if the validity thereof shall currently be
contested in good faith by appropriate proceedings and if the Company shall have
set aside on its books adequate reserves with respect thereof.
(b) Maintain Properties. The Company will keep its properties in
good repair, working order, and condition, reasonable wear and tear excepted,
and from time to time will make all necessary and proper repairs, renewals,
replacements, additions, and improvements thereto.
(c) Maintain Corporate Existence. The Company shall maintain in
full force and effect its corporate existence, rights, and franchises and all
material licenses and other material rights to use processes, licenses,
trademarks, trade names, or copyrights
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owned or possessed by it and deemed by the Company to be necessary to the
conduct of its business.
(d) Insurance. The Company will maintain insurance of the types and
in the amounts generally deemed adequate for its business.
(e) Without the approval in writing of the Company's Board of
Directors, the Company will not make or incur any expenditure (including,
without limitation, capital expenditures, acquisitions and capitalized leases)
or guarantee, assume or otherwise become directly or indirectly liable for any
indebtedness (including capitalized leases) which, individually or in
combination with related expenditures, guarantees or assumptions subject to a
common commitment, exceed $250,000.
(f) Without the written consent of the holders of Series B Shares
and shares of Common Stock issued upon conversion of Series B Shares equivalent
to more than 66-2/3% of the total number of Series B Shares (treated as if
converted to Common Stock) and shares of Common Stock issued upon conversion of
Series B Shares, the Company will not (i) issue additional Shares except (A) up
to 2,000,000 Series B Shares issued pursuant to this Agreement, and (B) up to
50,000 shares of Series M Preferred Stock issued to Millipore Corporation, and
(C) Shares to which Section 7.1 is not applicable pursuant to clause (v) or
clause (vi) of Section 7.1(b)(4), but not more than 1,590,261 Shares
(appropriately adjusted for any stock splits, stock dividends, combinations and
similar events) or, if less, 20% of the then-outstanding Shares (outstanding
Preferred Stock being counted as if converted to Common Stock and other
outstanding convertible securities, warrants and options being counted as if
converted to, or exercised for, Common Stock), and (D) Shares to which Section
7.1 is not applicable pursuant to any of clauses (i) through (iv) of Section
7.l(b)(4); or (ii) merge or consolidate with or into any other entity or
recapitalize or effect a share exchange, except as permitted by the preceding,
clause (i); or (iii) grant any person preemptive rights or the right to purchase
Shares other than pursuant to employee or director stock plans which are
approved in writing by the Company's Board of Directors.
7.3 Termination. The right of first offer set forth in Section 7.1,
the covenants set forth in Section 7.2 hereof and the right of first refusal set
forth in Section 7.4 hereof shall terminate upon the earlier to occur of (i) the
closing of a public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offer and sale of the
Company's Common Stock where the gross proceeds to the Company are not less than
$7,500,000, where the public offering price is not less than $0.75 per share
(adjusted to reflect any stock splits, combinations or similar events after the
date hereof) and which results in the Company's Common Stock being traded on an
exchange or quoted on the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") or quoted on the NASDAQ National Market System
(the "Public Offering") and (ii) the closing of the Company's sale of all or
substantially all of its assets or the acquisition of the Company by another
entity by means of merger or consolidation resulting in the exchange of the
outstanding shares of the Company's capital
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stock for securities or consideration issued, or caused to be issued, by the
acquiring entity or its subsidiary.
7.4 Right of First Refusal on Xxxxxxxx' Shares and the Purchasers'
Shares.
7.4.1 If Xxxxxxxx or any Purchaser wishes to transfer any
securities of the Company issued to such person at any time (each such person, a
"Selling Stockholder") except in a Permitted Transfer, the Selling Stockholder
shall do so only for cash, unsecured promissory notes, cash equivalents, or a
combination of the foregoing, and shall first give written notice (the "Offer
Notice") to the Company, identifying the securities proposed to be transferred
(the "Offered Securities"), identifying the proposed transferee, and stating the
price at which, and other material terms on which, the Selling Stockholder
wishes to transfer the Offered Securities, including the date of the proposed
transfer.
7.4.2 Delivery of an Offer Notice to the Company shall constitute
an offer to transfer the Offered Securities, in whole but not in part (the
"Offer"), first to the Company, and then to the Purchasers, pursuant to this
Section 7.4, at the price and on the other material terms described in the Offer
Notice.
7.4.3 Within seven calendar days after it receives an Offer Notice,
the Company will deliver a copy of the Offer Notice to each Purchaser.
7.4.4 The Company may elect, by written notice delivered to the
Selling Stockholder not later than fourteen calendar days after the Company
receives the Offer Notice, to accept the Offer with respect to all of the
Offered Securities.
7.4.5 If the Company does not elect to accept an Offer, then within
seven calendar days after the expiration of the period specified in Section
7.4.4, the Company will notify each Purchaser of the Purchaser's rights under
Section 7.4.6.
7.4.6 If the Company does not elect to accept an Offer within the
period specified in Section 7.4.4, then each of the Purchasers may elect to
accept the Offer with respect to all or any portion of the Offered Securities,
but at least the Purchaser's Proportion of the Offered Securities, by written
notice delivered to the Company not later than twenty-one calendar days after
the Purchaser received the Offer Notice.
7.4.7 If Purchasers which accept the Offer ("Participants") elect,
in the aggregate, to accept all of an Offer, then the Participants shall
participate in the purchase of the Offered Securities in the following
proportions:
(a) first, each Participant shall purchase the Participant's
Proportion of the Offered Securities, and
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(b) then, if there are any Offered Securities remaining
unpurchased, those Participants who elected to purchase more than
their Proportion shall purchase the remaining Offered Securities in
the relative proportions of the amounts by which each of them elected
to purchase more than his, her or its Proportion,
or in such other proportions on which the Participants shall agree.
7.4.8 If the Company or Participants elect to accept an Offer in
its entirety, then the Selling Stockholder shall transfer the Offered Securities
to the Company or the Participants, as the case may be, and the Company or the
Participants, as the case may be, shall acquire the Offered Securities, at the
price and on the other material terms described in the Offer Notice. The
consummation of the transfer shall take place at the chief executive offices of
the Company, on the date specified for the proposed transfer in the Offer Notice
(but not earlier than sixty-three calendar days after the Company shall have
received the Offer Notice), or at such other location or date on which the
participants in the transaction agree in writing.
7.4.9 If neither the Company nor Participants accept an Offer in
its entirety, then the Selling Stockholder may transfer the Offered Securities
(subject to the provisions of this Agreement other than this Section 7.4 and to
any other agreements binding on the Selling Stockholder) to the transferee named
in the Offer Notice, at any time within the period of 120 calendar days
beginning on the date the Company received the Offer Notice. The provisions of
this Section 7.4 shall again apply to any transfer of Offered Securities not
transferred within such period.
7.4.10 A "Permitted Transfer" is a transfer of securities to a
Permitted Transferee if, prior to the consummation of the transfer, the
Permitted Transferee shall have agreed in writing to be bound as a party to this
Agreement by all the terms of this Agreement applicable to the Selling
Stockholder. A "Permitted Transferee" means any of:
(a) the spouse or a lineal ancestor or descendant (whether
natural or adopted) of the transferor;
(b) a trust all the beneficiaries (primary and contingent)
of which are either the transferor or the spouse or a lineal ancestor
or descendant (natural or adopted) of the transferor; or
(c) a partner in a transferor which is a partnership, or a
stockholder of a transferor which is a limited liability company, which
person receives the transfer as part of a distribution among partners,
stockholders, or members, as the case may be, of the transferor.
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SECTION 8
REGISTRATION RIGHTS
The Company covenants and agrees as follows:
8.1 Definitions. For purposes of this Section 8:
(a) The term "register", "registered," and "registration" refer to
a registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document;
(b) The term "Registrable Securities" means (i) the Common Stock
issuable or issued upon conversion of the Series B Preferred Stock or the Series
M Preferred Stock and (ii) any Common Stock of the Company issued as (or
issuable upon the conversion or exercise of any warrant, right or other security
which is issued as) a dividend or other distribution with respect to, or in
exchange for or in replacement of, such Series B Preferred Stock or Series M
Preferred Stock, other Preferred Stock or Common Stock; provided, however, that
Common Stock or other securities shall only be treated as Registrable Securities
if and so long as (1) they have not been sold to or through a broker or dealer
or underwriter in a public distribution or a public securities transaction, and
(2) they have not been sold in a transaction exempt from the registration and
prospectus delivery requirements of the Act under Section 4(l) thereof so that
all transfer restrictions and restrictive legends with respect thereto are
removed upon the consummation of such sale;
(c) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities;
(d) The term "Holder" means any person who is the record owner of
Registrable Securities or the Series B Shares or the Series M Shares, or any
assignee thereof in accordance with Section 8.12 hereof; and
(e) The term "SEC" means the Securities and Exchange Commission or
any other federal agency at the time administering the Act.
8.2 Company Registration. If (but without any obligation to do so) the
Company proposes to register any of its stock or other securities under the Act
in connection with the public offering of such securities solely for cash (other
than a registration relating solely to the sale of securities to participants in
a Company stock plan, or a registration on any form which does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of the Registrable Securities or a SEC
Rule 145 transaction), the Company shall, at such time, promptly give each
Holder written notice of such registration. Upon the written request of
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each Holder given within fifteen (15) days after mailing of such notice by the
Company in accordance with Section 10.5, the Company shall, subject to the
provisions of Sections 8.4, 8.5, 8.6 and 8.7, cause to be registered under the
Act all of the Registrable Securities that each such Holder has requested to be
registered. Notwithstanding the foregoing, after the Company's initial public
offering, the Company will not be required to give notice to the Holders of
Registrable Securities if the underwriters managing the proposed offering have
advised the Company in writing that in their judgment market conditions will not
allow the inclusion of any secondary shares in such offering. In the event the
managing underwriters and the Company subsequently determine to add any
secondary shares in the offering, such notice shall be provided, and each Holder
shall have the registration rights provided in this Section 8.
8.3 Demand Registration. Subject to the terms of this Agreement, in
the event that the Company shall receive from the Holders of Series B Shares (or
Common Stock issued upon conversion of Series B Shares) representing at least
thirty percent (30%) of the Registrable Securities then outstanding, the Holders
of Series M Preferred Stock), at any time after six (6) months after the
effective date of the registration statement covering the Company's initial
public offering, a written notice that it or they intend to offer or cause to be
offered for public sale at least twenty-five percent (25%) of the Registrable
Securities then outstanding (or any lesser percentage if the aggregate offering
price to the public is greater than $5,000,000), the Company will so notify all
Holders. Upon written request of any Holder given within fifteen (15) days after
the receipt by such Holder from the Company of such notification, the Company
will use its best efforts to cause such of the Registrable Securities as may be
requested by any Holder (including the Holder giving the initial notice of
intent to offer) to be registered under the Securities Act as expeditiously as
possible (a "Demand Registration"). The Company shall not be required to effect
more than one (1) Demand Registration. If (i) in the good faith judgment of the
Board of Directors of the Company, a Demand Registration would be materially
detrimental to the Company and the Board of Directors of the Company concludes,
as a result, that it is essential to defer the filing of such registration
statement at such time, and (ii) the Company shall furnish to each Holder a
certificate signed by the President of the Company stating that, in the good
faith judgment of the Board of Directors of the Company, it would be materially
detrimental to the Company for such registration statement to be filed in the
near future, then the Company shall have the right to defer such filing for the
period during which such Demand Registration would be materially detrimental,
provided that the Company may not defer the filing for a period of more than
ninety (90) days after receipt of the request for a Demand Registration, and
more than once in any 12-month period.
8.4 Obligations of the Company. Whenever required under Section 8.2 or
8.3 to effect the registration of any Registrable Securities, the Company shall,
as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective for
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up to 90 days or until all of the securities registered thereunder are sold,
whichever occurs sooner.
(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
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.
8.5 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 8 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities.
8.6 Underwriting Requirements. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 8.2 or 8.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by the persons
entitled to select the underwriters, and then only in such quantity as the
underwriters determine in their sole discretion will not jeopardize the success
of the offering by the Company. If the total amount of securities, including
Registrable Securities, requested by Holders to be included in such offering
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exceeds the amount of securities sold other than by the Company that the
underwriters determine in their sole discretion is compatible with the success
of the offering, then the Company shall be required to include in the offering
only that number of such securities, including Registrable Securities, which the
underwriters determine in their sole discretion will not jeopardize the success
of the offering (the securities so included to be apportioned pro rata among all
selling stockholders according to the total amount of securities owned by each
selling stockholder or in such other proportions as shall mutually be agreed to
by such selling stockholders). For purposes of the preceding parenthetical
concerning apportionment, for any selling stockholder which is a holder of
Registrable Securities and which is a partnership or corporation, the partners,
retired partners and stockholders of such holder, or the estates and family
members of any such partners and retired partners and any trusts for the benefit
of any of the foregoing persons shall be deemed to be a single "selling
stockholder" and any pro-rata reduction with respect to such "selling
stockholder" shall be based upon the aggregate amount of shares owned by all
entities and individuals included in such "selling stockholder," as defined in
this sentence.
8.7 Delay of Registration. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 8.
8.8 Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 8:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Act or the Securities Exchange Act of 1934, as amended (the
"1934 Act"), against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the Act, or the 1934 Act or
other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"Violation"): (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (ii) 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 (iii) any violation or alleged violation by the
Company of the Act, the 1934 Act, any state securities law or any rule or
regulation promulgated under the Act, or the 1934 Act or any state securities
law; and the Company will pay to each such Holder, underwriter or controlling
person, as incurred, any legal or other expenses reasonably incurred by one law
firm retained by them (or such additional law firms retained by a Holder or
Holders if such Holder or Holders reasonably believe there exists a conflict of
interest among them) in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that the indemnity
agreement contained in this subsection 8.8(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company
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(which consent shall not be unreasonably withheld), nor shall the Company be
liable in any, such case for any loss, claim, damage, liability or action to the
extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly
for use in connection with such registration by any such Holder, underwriter or
controlling person.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder, against any losses, claims,
damages or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Act, or the 1934 Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Holder expressly
for use in connection with such registration; and each such Holder will pay, as
incurred, any legal or other expenses reasonably incurred by any person intended
to be indemnified pursuant to this subsection 8.8(b), in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this subsection
8.8(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Holder, which consent shall not be unreasonably withheld; provided, that,
in no event shall any indemnity under this subsection 8.8(b) exceed the net
proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 8.8 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 8.8, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
8.8, but the failure to deliver written notice to the indemnifying party will
not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 8.8.
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(d) The obligations of the Company and Holders under this
Section 8.8 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 8, and otherwise.
8.9 Reports Under Securities Exchange Act of 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration, the
Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(c) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144 (at
any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), (ii) a copy of
the most recent annual or quarterly report of the Company and such other reports
and documents so filed by the Company, and (iii) such other information as may
be reasonably requested in availing any Holder of any rule or regulation of the
SEC which permits the selling of any such securities without registration or
pursuant to such form.
8.10 Form S-3 Registration. In case the Company shall receive from any
Holder or Holders of the Registrable Securities then outstanding a written
request or requests that the Company effect a registration on Form S-3 for a
public offering the aggregate offering price of which would exceed $1,000,000,
the Company will:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such Holder's
or Holders' Registrable Securities as are specified in such request, together
with all or such portion of the Registrable Securities of any other Holder or
Holders joining in such request as are specified in a written request given
within fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this Section 8.10:
(i) if Form S-3 is not available for such offering by the Holders; (ii) if the
Company shall furnish to the Holders a certificate signed by the President of
the Company stating that in the good
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faith judgment of the Board of Directors of the Company it would be detrimental
to the Company and its stockholders for such Form S-3 Registration to be
effected at such time, in which event the Company shall have the right to defer
the filing of the Form S-3 registration statement for a period of not more than
ninety (90) days after receipt of the request of the Holder or Holders under
this Section 8.10; (iii) if the Company has, within the twelve (12) month
period preceding the date of such request, already effected two registrations
for the Holders pursuant to Section 8.2, 8.3 or this Section 8.10; or (iv) in
any particular jurisdiction in which the Company would be required to qualify
to do business or to execute a general consent to service of process in
effecting such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders.
8.11 Expenses of Registration. The Company shall bear and pay all
expenses incurred in connection with any registration, filing or qualification
of Registrable Securities with respect to a total of three registrations,
whether pursuant to Section 8.2, 8.3 or 8.10 or a combination thereof,
including (without limitation) all registration, filing, and qualification fees,
printers and accounting fees relating or apportionable thereto and the fees and
disbursements of one counsel for the selling Holders selected by them (which the
Company may request be the Company's counsel if such counsel is reasonably
acceptable to such selling Holders), but excluding underwriting discounts and
commissions and stock transfer taxes relating to Registrable Securities.
8.12 Assignment of Registration Rights. The rights to cause the Company
to register Registrable Securities pursuant to this Section 8 may only be
assigned to a purchaser, assignee or transferee of the underlying Registrable
Securities.
8.13 "Market Stand-Off" Agreement. Each Purchaser hereby agrees that
for a period of 180 days following the effective date of the first registration
statement of the Company covering common stock filed on Form S-1 under the Act
and for any registration effected pursuant to Sections 8.2, 8.3 or 8.10
(provided the Holders are given written notice of the offering at least fifteen
(15) days prior to the Company's filing with the SEC of a registration statement
relating thereto), it shall not, unless otherwise agreed by the Company and the
managing underwriters, directly or indirectly sell, offer to sell, contract to
sell (including, without limitation, any short sale), grant any option to
purchase or otherwise transfer or dispose of (other than to donees who agree to
be similarly bound) any securities of the Company held by it at any time during
such period except Common Stock included in such registration; provided,
however, that all officers and directors of the Company and all other persons
with registration rights (whether or not pursuant to this Agreement) enter into
similar agreements.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Purchaser (and
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the shares or securities of every other person subject to the foregoing
restriction) until the end of such period.
8.14 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 to include such
securities in any registration filed under Section 8.2, 8.3 or 8.10 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.
8.15 Amendment of Registration Rights. Any provision of this Section 8
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.
8.16 Termination. The rights provided in this Section 8 shall terminate
on the fifth anniversary of the closing of the Company's initial public offering
pursuant to which the Company registers shares of Common Stock under the Act and
following shortly thereafter or concurrently therewith registers its Common
Stock under the 1934 Act.
SECTION 9
BOARD OF DIRECTORS
9.1 Composition of Board. The Company, each of the Purchasers and
Xxxxxxxx agree that, so long as the Voting Agreement set forth in this Section
remains in effect, each of them shall take all action necessary from time to
time (including, without limitation, the voting of securities of the Company,
the execution of written consents, the calling of special meetings, the removal
of directors, the filling of vacancies on the Board, the waiving of notice and
attendance at meetings) to maintain the membership of the Board as follows:
(a) The chief executive officer of the Company shall serve as
a director of the Company;
(b) As long as it owns stock of the Company, American
Healthcare Fund II, L.P. shall have the right to designate one person to serve
as a director of the Company;
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(c) As long as either Xxxxxxx Xxxxxxxxx ("Xxxxxxxxx") or
Xxxxxx Xxxxxxx ("Xxxxxxx") owns stock of the Company, Xxxxxxxxx and Xxxxxxx
shall each have the right to designate one person to serve as a director of the
Company; and
(d) The remaining directors shall be designated by the
unanimous consent of the directors designated under clause (a), (b) and (c) of
this Section 9.1.
The person or persons entitled to name a director pursuant to clause (b), (c) or
(d) of this Section 9.1, as the case may be, are referred to in this Section as
the "Principals" with respect to that director. Notwithstanding the foregoing,
the right of each Principal to name a director pursuant to clause (b) or (c)
above shall terminate if such Principal owns Shares equivalent to less than
fifty percent (50%) of the aggregate number of Shares held by such Principal
(Preferred Stock being counted as if converted to Common Stock) immediately
after the last Closing pursuant to Section 2.1 or 2.3 of this Agreement.
9.2 Removal of Directors. If Principals give notice at any time to the
Company, the other Purchasers and Xxxxxxxx that the individual then serving as a
director of the Company at such Principals' designation is no longer their
designee, then the Company, the Purchasers and Xxxxxxxx shall take all action
necessary to remove the director so designated.
9.3 Election of Directors. If an individual serving at any time as a
director of the Company dies, or resigns, or is removed as a director of the
Company, then the Company, the Purchasers and Xxxxxxxx shall take all action
necessary to elect as a director of the Company any individual newly designated
by the Principals with respect to the director who died, or resigned, or was
removed.
9.4 Voting Agreement. These Sections 9.1 through 9.4 are intended to be
a voting agreement within the meaning of Section 218 of the Delaware General
Corporation Law.
9.5 Termination. The rights and obligations provided in this Section 9
shall terminate upon the closing of the Company's initial public offering
pursuant to which the Company registers shares of its Common Stock under the
Act.
SECTION 10
MISCELLANEOUS
10.1 Waivers and Amendments. Except as to Section 8 in which case the
provisions of Section 8.15 shall apply, with the written consent of the record
or beneficial holders of more than 66-2/3 % of the aggregate of (i) the then
outstanding number of shares of the Series B Shares (treated as if converted to
Common Stock) and (ii) all shares of Common Stock obtained upon conversion of
the Series B Shares, the obligations of the
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Company and the rights of the holders of Series B Shares and the Common Stock
obtained upon conversion of the Series B Shares under this Agreement 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; provided, however, that no such waiver or supplemental
agreement shall reduce the aforesaid percentages which are required to consent
to any waiver or supplemental agreement, without the unanimous consent of the
record or beneficial holders of all of the then outstanding number of shares of
the Series B Shares or the shares of Common Stock obtained upon conversion of
the Series B Shares. Upon the effectuation of each such waiver, consent,
agreement of amendment or modification, the Company promptly shall give written
notice thereof to the record holders of the then outstanding Series B Shares and
the shares of Common Stock obtained upon conversion of the Series B Shares. This
Agreement or any provision hereof may not be changed, waived, discharged or
terminated orally, but only by a statement in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought, except to the extent provided in this Section 10.1; provided, however,
that the conditions to Closing contained in Section 5 of this Agreement may only
be waived by the Purchaser for itself.
10.2 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.
10.3 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.
10.4 Entire Agreement. This Agreement 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.
10.5 Notices, Etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed effectively given
upon personal delivery or upon the seventh day following mailing by registered
air mail, postage prepaid, addressed (a) if to the Purchasers, as indicated on
Schedule 1 attached hereto, or at such other address as it shall have furnished
to the Company, (b) if to the Company, to B.I. Systems Corporation, 000 Xxxx
Xxxxx, Xxx Xxxxx, Xxxxxxxx, 00000, and addressed to the attention of the
corporate secretary, or at such other address as the Company shall have
furnished to the Purchasers, or (c) if to any other holder of the Series B
Shares or of Common Stock issued upon conversion of the Series B Shares at such
address as such holder shall have furnished to the Company in writing, or, until
such holder so furnishes an address to the Company, then to and at the address
of the last holder of such Series B Shares or shares of Common Stock issued upon
conversion of the Series B Shares, who so
22
27
furnished an address to the Company. In addition, any notice delivered to an
address outside the United States shall be duplicated by counterpart telex
notice (if available).
10.6 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any holder of any securities issued or sold or to be
issued or sold hereunder, 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 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 Severability. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, it shall be modified in such manner as to be
valid, legal, and enforceable but so as to most nearly retain the intent of the
parties, and the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
10.8 Titles and Subtitles. The titles and subtitles of this Agreement
are intended for reference and shall not by themselves determine the
construction or interpretation of this Agreement.
10.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.10 Expenses. The Company and each Purchaser shall pay its own costs
and expenses in connection with the negotiation, execution, delivery and
performance of this Agreement.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
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28
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed themselves or by their respective representatives thereunto duly
authorized as of the day and year first above written.
B.I. SYSTEMS CORPORATION
By:
-----------------------------------------
Xxxxxxx X. Xxxxxxxx
President and Chief Executive Officer
--------------------------------------------
Xxxxxxx X. Xxxxxxxx, in his individual
capacity but only as to Section 7.4, Section 9
and Section 10 of this Agreement
THE PURCHASERS SIGNATURES ARE ON
THE ATTACHED PURCHASER SIGNATURE PAGES.
SIGNATURE PAGE TO SERIES B PREFERRED
STOCK PURCHASE AGREEMENT
24
29
PURCHASER SIGNATURE PAGE
Please indicate the number of Series B Shares which you would like to purchase.
-----------
(Please note: As described in the Description of Recapitalization attached
hereto as Exhibit B, each existing stockholder of the Company is being offered
the right to purchase a specified percentage of the shares of Series B Preferred
offered hereby (each, an "Allocation"). If all existing stockholders do not
purchase the full amount of their Allocation, you may be able to purchase more
than your Allocation. Accordingly, the number of shares which you indicate above
may be greater than, equal to or less than your Allocation, but, if such number
is greater than your Allocation, there can be no assurance that you will be able
to purchase all of such shares.)
PURCHASER:
-----------------------------------------
SIGNATURE
Name:
------------------------------------
(Please Print)
Title, if any:
---------------------------
(Please Print)
ADDRESS:
-----------------------------------------
-----------------------------------------
-----------------------------------------
Attn:
------------------------------------
Tax ID No. or Social Security
No., as applicable:
----------------------
25
30
PURCHASER SIGNATURE PAGE
Please indicate the number of Series B Shares which you would like to purchase.
-----------
(Please note: As described in the Description of Recapitalization attached
hereto as Exhibit B, each existing stockholder of the Company is being offered
the right to purchase a specified percentage of the shares of Series B Preferred
offered hereby (each, an "Allocation"). If all existing stockholders do not
purchase the full amount of their Allocation, you may be able to purchase more
than your Allocation. Accordingly, the number of shares which you indicate above
may be greater than, equal to or less than your Allocation, but, if such number
is greater than your Allocation, there can be no assurance that you will be able
to purchase all of such shares
PURCHASER:
AMERICAN HEALTHCARE FUND II, L.P.
a Delaware limited partnership
By: Capital Health Venture Partners, its
general partner
By:
--------------------------------------
Xxx X. Xxxxxxxx, General Partner
ADDRESS:
-----------------------------------------
-----------------------------------------
-----------------------------------------
Attn:
------------------------------------
Tax ID No. or Social Security
No., as applicable:
----------------------
25
31
FIRST AMENDMENT TO
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO SERIES B PREFERRED STOCK PURCHASE AGREEMENT
(the "Amendment") is dated as of April 23, 1999, and is made by GENOMIC
SOLUTIONS INC., a Delaware corporation (the "Company"), pursuant to Section 8.15
of the Series B Preferred Stock Purchase Agreement dated as of May 7, 1997 (the
"Agreement"), by and between the Company, certain persons (the "B Investors")
and for certain specified purposes, Xxxxxxx X. Xxxxxxxx ("Xxxxxxxx").
Capitalized terms not otherwise defined in this Amendment shall have the
meanings set forth in the Agreement.
RECITALS:
A. The Company, the B Investors and Xxxxxxxx entered into the
Agreement, pursuant to which the B Investors acquired the Series B Shares and
which provides for certain rights, privileges and restrictions applicable to the
Series B Shares.
B. The Company has authorized an additional borrowing of $6,000,000
from certain lenders (the "Lenders") in exchange for the issuance by the Company
to the Lenders of subordinated promissory notes in the aggregate amount of
$6,000,000 providing for, among other things, quarterly interest payments at 12%
per annum and a five-year maturity, together with warrants to acquire up to
1,400,000 Shares of Common Stock with certain registration rights (the
"Warrants)
C. Under Section 8.15 of the Agreement, any provision of Section 8 of
the Agreement may be amended with the written consent of the Company and the
holders of a majority of the shares of the Common Stock of GSI issuable or
issued upon conversion of the Series B Preferred Stock and the Series M
Preferred Stock.
D. The Company and a majority of the shares of the Common Stock of GSI
issuable or issued upon conversion of the Series B Preferred Stock and the
Series M Preferred Stock have consented in writing to amend Sections 8.1 and 8.2
of the Agreement to provide for and accommodate certain rights, privileges and
restrictions with respect to the Warrants.
NOW, THEREFORE, for and in consideration of the foregoing Recitals and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the Agreement is hereby amended as follows:
SECTION 8.1 (F) IN THE FORM SET FORTH BELOW IS HEREBY ADDED TO SECTION
8.1:
"(f) The term "Warrantholders" means, collectively, those
persons who are the record owners of the warrants issued on April 23, 1999, by
the Company to certain purchasers pursuant to a Business Loan Agreement dated
April 23, 1999, by and between the Company and such purchasers (the "Loan
Agreement"), and any and all additional warrants issued thereafter pursuant to
the terms and provisions of the Loan Agreement or such warrants."
32
SECTION 8.2 IS HEREBY DELETED IN ITS ENTIRETY AND REPLACED WITH THE
FOLLOWING SECTION 8.2:
"8.2 Company Registration.
(a) Subject to Section 8.2(b) below, if (but without any
obligation to do so) the Company proposes to register any of its stock
or other securities under the Act in connection with the public
offering of such securities solely for cash (other than a registration
relating solely to the sale of securities to participants in a Company
stock plan, or a registration on any form which does not include
substantially the same information as would be required to be included
in a registration statement covering the sale of the Registrable
Securities or a SEC Rule 145 transaction), the Company shall, at such
time, promptly give each Holder written notice of such registration.
Upon the written request of each Holder given within fifteen (15) days
after mailing of such notice by the Company in accordance with Section
10.5, the Company shall, subject to the provisions of Sections 8.4,
8.5, 8.6 and 8.7, cause to be registered under the Act all of the
Registrable Securities that each such Holder has requested to be
registered. Notwithstanding the foregoing, after the Company's initial
public offering, the Company will not be required to give notice to the
Holders of Registrable Securities if the underwriters managing the
proposed offering have advised the Company in writing that in their
judgment market conditions will not allow the inclusion of any
secondary shares in such offering. If the managing underwriters and the
Company subsequently determine to add any secondary shares in the
offering, such notice shall be provided, and each Holder shall have the
registration rights provided in this Section 8.
(b) The registration rights of the Holders pursuant to Section
8.2(a) above are subject to the demand registration rights of the
Warrantholders, as more particularly described in the Registration
Rights Agreement dated April 23, 1999, by and between the Company and
the Warrantholders. The Company shall notify the Holders of any such
registration unless the underwriters managing the proposed offering
have advised the Company in writing that the inclusion of Registrable
Securities in such registration will reduce the amount of shares of
Common Stock requested by the Warrantholders to be included in such
registration. The Company shall be required to include the Registrable
Securities in any such demand registration only to the extent that such
inclusion will not reduce the amount of shares of Common Stock
requested by the Warrantholders to be included in the registration.
Thereafter, to the extent that the total amount of Registrable
Securities requested by the Holders to be included in such offering
exceeds the amount of securities that the underwriters determine may be
included in the offering, the Registrable Securities will be
apportioned among the Holders according to the total amount of
securities owned by each Holder or in such other proportions as shall
mutually be agreed to by such Holders.
Except as expressly set forth in this Amendment, the Agreement shall
remain in full force and effect as executed and is hereby ratified and
confirmed. If there is any inconsistency or
33
conflict between this Amendment and the Agreement, the provisions of this
Amendment shall govern and control.
This Amendment may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. Copies (facsimile, photostatic or otherwise) of
signatures to this Amendment shall be deemed to be originals and may be relied
on to the same extent as the originals.
This Amendment shall be binding upon, and shall inure to the benefit
of, the parties hereto and their respective successors and assigns.
IN WITNESS WHEREOF, the Company has caused this Amendment to be
executed by its authorized representative as of the day and year first above
written.
GENOMIC SOLUTIONS INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
--------------------------------------
Xxxxxxx X. Xxxxxxxx
Its: President and
Chief Executive Officer
34
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF B.I. SYSTEMS CORPORATION
a Delaware Corporation
B.I. SYSTEMS CORPORATION, a corporation organized and existing
under the laws of the State of Delaware, hereby certifies that:
ONE: The corporation's original Certificate of Incorporation was
filed with the Secretary of State of Delaware on June 27, 1994. The
corporation's Amended and Restated Certificate of Incorporation was filed with
the Secretary of State of the State of Delaware on July 19, 1994.
TWO: This Amended and Restated Certificate of Incorporation
restates and integrates and further amends the provisions of the Certificate of
Incorporation of this corporation and has been duly adopted in accordance with
Section 245 of the General Corporation Law of the State of Delaware. This
Amended and Restated Certificate of Incorporation shall become effective on the
date of filing of this Amended and Restated Certificate of Incorporation with
the Secretary of State of the State of Delaware.
THIRD: The text of the Certificate of Incorporation is hereby
amended and restated in its entirety as follows:
ARTICLE I.
The name of this corporation is B.I. Systems Corporation.
ARTICLE II.
The address of the registered office of the corporation in the
State of Delaware is Corporation Trust Center, 0000 Xxxxxx Xxxxxx, xx xxx Xxxx
xx Xxxxxxxxxx, Xxxxxx of New Castle, and the name of its registered agent at
that address is The Corporation Trust Company.
ARTICLE III.
The name and mailing address of the incorporator of the corporation
is: J. Xxxxxxx Xxxxxxxxx, c/x Xxxxxxxxx & Xxxxxxx, 000 Xxxxxxx Xxxxxx, Xxxxx
0000, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000.
ARTICLE IV.
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of Delaware.
35
ARTICLE V.
A. Classes of Stock. This corporation is authorized to issue
two classes of stock to be designated, respectively, "Common Stock" and
"Preferred Stock." The total number of shares which the corporation is
authorized to issue is Nineteen Million (19,000,000) of which Fifteen Million
(15,000,000) shares shall be Common Stock, par value $.001 per share, and Four
Million (4,000,000) shares shall be Preferred Stock, par value $.001 per share.
Each outstanding share of Common Stock as of the date of
effectiveness of this Amended and Restated Certificate of Incorporation shall be
converted into and reconstituted as .0103 shares of Common Stock (thereby
effecting a 1-for-97.103 reverse stock split). No fractional shares shall be
issued upon such conversion and reconstitution, and the number of shares of
Common Stock to be issued shall be rounded down to the nearest whole share.
B. Rights, Preferences and Restrictions of Preferred Stock.
The Preferred Stock authorized by these Articles of Incorporation shall be
divided into series. The first series of stock shall consist of Two Million
(2,000,000) shares and is designated "Series B Preferred Stock." The second
series shall consist of Fifty Thousand (50,000) shares and is designated "Series
M Preferred Stock." The rights, preferences, privileges and restrictions granted
to and imposed on the Series B Preferred Stock and the Series M Preferred Stock
are as set forth below in this Article V(B). Any shares of authorized and
unissued shares of Preferred Stock which have not been designated in a series
may be issued from time to time in one or more series. The Board of Directors of
the corporation (the "Board of Directors") is hereby authorized to provide for
the issuance of all or any of the authorized and unissued shares of the
Preferred Stock (which have not been designated in a series) in one or more
series, and to fix the number of shares and to determine or alter for each such
series, such voting powers, full or limited, or no voting powers, and such
designations, preferences and relative, participating, optional or other rights,
and such qualifications, Limitations or restrictions thereof, as shall be stated
and expressed in the resolution or resolutions adopted by the Board of Directors
providing for the issuance of such shares (a "Preferred Stock Designation") and
as may be permitted by the General Corporation Law of the State of Delaware.
Subject to compliance with applicable protective voting rights which have been
or may be granted to the Preferred Stock or series thereof in a Preferred Stock
Designation or the corporation's Certificate of Incorporation ("Protective
Provisions"), the rights, privileges, preferences and restrictions of any such
additional series may be subordinated to, pari passu with (including, without
limitation, inclusion of provisions with respect to liquidation and acquisition
preferences, redemption and/or approval of matters by vote or written consent),
or senior to any of those of any present or future class or series of Preferred
Stock or Common Stock. Subject to compliance with applicable Protective
Provisions, the Board of Directors is also authorized to increase or decrease
the number of shares of any series, prior or subsequent to the issuance of that
series, but not below the number of shares of such series then outstanding. In
case the number of shares of any series shall be so decreased, the shares
constituting such decrease shall resume the status which they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.
2
36
1. Dividend Provisions. The holders of shares of Series B Preferred
Stock and Series M Preferred Stock shall not be entitled to receive any
dividends.
2. Liquidation Preference.
a. In the event of any liquidation, dissolution or winding up of
this corporation, either voluntary or involuntary, subject to the rights of
series of Preferred Stock which may from time to time come into existence, the
holders of Series B Preferred Stock shall be entitled to receive, prior and in
preference to any distribution of any of the assets of this corporation to the
holders of Common Stock by reason of their ownership thereof, an amount per
share equal to (i) $1.00 for each outstanding share of Series B Preferred Stock
(the "Original Series B Issue Price"), as adjusted to reflect any share split,
dividend, combination, reclassification or similar event involving the Series B
Preferred Stock plus (ii) an amount per share equal to eight (8) percent of the
Original Series B Issue Price compounded annually. The holders of Series M
Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets of this corporation to the holders of Common
Stock by reason of their ownership thereof, an amount per share equal to $6.00
for each outstanding share of Series M Preferred Stock (the "Original Series M
Issue Price"), as adjusted to reflect any share split, dividend, combination,
reclassification or similar event involving the Series M Preferred Stock. If
upon the occurrence of such event, the assets and funds thus distributed among
the holders of the Series B Preferred Stock and Series M Preferred Stock shall
be insufficient to permit the payment to such holders of the full aforesaid
preferential amounts, then, subject to the rights of series of Preferred Stock
which may from time to time come into existence, the entire assets and funds of
the corporation legally available for distribution shall be distributed ratably
among the holders of the Series B Preferred Stock and Series M Preferred Stock
in proportion to the preferential amount each such holder is otherwise entitled
to receive.
b. After the completion of the distribution required by
subparagraph (a) of this Section 2 and any other distribution which may be
required with respect to series of Preferred Stock which may from time to time
come into existence, the assets of this corporation available for distribution
to stockholders shall be distributed among the holders of Common Stock pro rata
based on the number of shares of Common Stock held by each.
c. Whenever the distribution provided for in this Section 2 shall
be payable in property other than cash, the value of such distribution shall be
the fair market value of such property as determined in good faith by the Board
of Directors.
d. Any acquisition of the corporation by means of merger or other
form of corporate reorganization in which outstanding shares of the corporation
are exchanged for securities or other consideration issued by the acquiring
corporation or its subsidiary (other than a mere reincorporation transaction),
or a sale, conveyance or disposition of all or substantially all of the assets
of this corporation or the effectuation by the corporation of a transaction or
series of related transactions in which more than 50% of the voting power of the
corporation is disposed of (other than the Public Offering as defined
3
37
herein), shall be deemed to be a liquidation, dissolution or winding up within
the meaning of this Section 2.
3. Conversion. The holders of the Series B Preferred Stock and Series M
Preferred Stock shall have conversion rights as follows (the "Conversion
Rights"):
a. Right to Convert.
(i) Each share of Series B Preferred Stock and Series M Preferred
Stock shall be convertible, at the option of the holder thereof, at any time
after the date of issuance of such share, at the office of this corporation or
any transfer agent for the Series B Preferred Stock or Series M Preferred Stock,
into such number of fully paid and nonassessable shares of Common Stock as is
determined by dividing the Original Series B Issue Price or Series M Issue
Price, as applicable, by the Conversion Price at the time in effect for such
share. The initial Conversion Price per share for shares of Series B Preferred
Stock shall be thirty three cents ($0.33). The initial Conversion Price per
share for shares of Series M Preferred Stock shall be one dollar and one hundred
and eleven hundredths of a cent ($1.111). The Conversion Price for the Series
B Preferred Stock and the Series M Preferred Stock shall be subject to
adjustment as set forth in subsection 3(c).
(ii) Each share of Series B Preferred Stock and Series M Preferred
Stock shall automatically be converted into shares of Common Stock at the
applicable Conversion Price at the time in effect for such Series B Preferred
Stock or Series M Preferred Stock, respectively, immediately upon the
consummation of the corporation's sale of its Common Stock in a firm commitment
underwriting pursuant to a registration statement on Form S-1, Form SB-1, Form
SB-2, or their then equivalents, filed under the Securities Act of 1933, as
amended (the "Public Offering").
b. Mechanics of Conversion. Before any holder of Series B Preferred Stock
or Series M Preferred Stock shall be entitled to convert the same into shares of
Common Stock, he or she shall surrender the certificate or certificates
therefor, duly endorsed, at the office of this corporation or of any transfer
agent for the Series B Preferred Stock or the Series M Preferred Stock, as
applicable, and shall give written notice by mail, postage prepaid, to this
corporation at its principal corporate office, of the election to convert the
same and shall state therein the name or names in which the certificate or
certificates for shares of Common Stock are to be issued. This corporation
shall, as soon as practicable thereafter, issue and deliver at such office to
such holder of Series B Preferred Stock or Series M Preferred Stock, or to the
nominee or nominees of such holder, a certificate or certificates for the number
of shares of Common Stock to which such 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 Series B Preferred
Stock or Series M Preferred Stock to be converted, and the person or persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such shares
of Common Stock as of such date. If the conversion is in connection with an
underwritten offering of securities registered pursuant to the Securities Act of
1933, as amended, the conversion may, at the option of any holder
4
38
tendering Series B Preferred Stock or Series M Preferred Stock for conversion,
be conditioned upon the closing with the underwriter of the sale of securities
pursuant to such offering, in which event the person(s) entitled to receive the
Common Stock issuable upon such conversion of the Series B Preferred Stock or
Series M Preferred Stock shall not be deemed to have converted such stock until
immediately prior to the closing of such sale of securities.
c. Conversion Price Adjustments of Preferred Stock. If at any time or
from time to time after the date of effectiveness of this Amended and Restated
Certificate of Incorporation there shall be a recapitalization of the Common
Stock (including, without limitation, any stock split or stock dividend)
provision shall be made so that the holders of the Series B Preferred Stock and
Series M Preferred Stock shall thereafter be entitled to receive upon conversion
of the Series B Preferred or Series M Preferred Stock, as applicable, the number
of shares of stock or other securities or property of the Company or otherwise,
to which a holder of Common Stock deliverable upon conversion would have been
entitled on such recapitalization. In any such case, appropriate adjustment
shall be made in the application of the provisions of this Section 3 with
respect to the rights of the holders of the Series B Preferred Stock and Series
M Preferred Stock after the recapitalization to the end that the provisions of
this Section 3 (including adjustment of the Conversion Price then in effect and
the number of shares purchasable upon conversion of the Series B Preferred Stock
and Series M Preferred Stock) shall be applicable after that event as nearly
equivalent as may be practicable.
d. No Impairment. This corporation will not, by amendment of its
Certificate of Incorporation or 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 this
corporation, but will at all times in good faith assist in the carrying out of
all the provisions of this Section 3 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 the Series B Preferred Stock and Series M Preferred Stock against
impairment.
e. No Fractional Shares and Certificate as to Adjustments.
(i) No fractional shares shall be issued upon conversion of the Series
B Preferred Stock or the Series M Preferred Stock, and the number of shares of
Common Stock to be issued shall be rounded to the nearest whole share. Whether
or not fractional shares are issuable upon such conversion shall be determined
on the basis of the total number of shares of Series B Preferred Stock or Series
M Preferred Stock, as applicable, the holder is at the time converting into
Common Stock and the number of shares of Common Stock issuable upon such
aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment of the
Conversion Price of Series B Preferred Stock or Series M Preferred Stock
pursuant to this Section 3, this 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
5
39
Series B Preferred Stock or Series M Preferred Stock, as applicable, a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. This corporation
shall, upon the written request at any time of any holder of Series B Preferred
Stock or Series M Preferred Stock, furnish or cause to be furnished to such
holder a like certificate setting forth (A) such adjustment and readjustment,
(B) the Conversion Price at the time in effect, and (C) 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 a share of Series B Preferred Stock or Series
M Preferred Stock, as applicable.
f. Notices of Record Date. In the event of any taking by this
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 other right, this
corporation shall mail to each holder of Series B Preferred Stock and Series M
Preferred Stock, at least 20 days prior to the date specified therein, a notice
specifying the date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right.
g. Reservation of Stock Issuable Upon Conversion. This 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 the Series B Preferred Stock and Series M 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 the Series B Preferred Stock and
Series M 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 the Series B Preferred Stock and Series M
Preferred Stock, in addition to such other remedies as shall be available to the
holder of such Preferred Stock, this 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 as shall be
sufficient for such purposes.
h. Notices. Any notice required by the provisions of this Section 3 to
be given to the holders of shares of Series B Preferred Stock or Series M
Preferred Stock shall be deemed given if deposited in the United States mail,
postage prepaid, and addressed to each holder of record at his address appearing
on the books of this corporation.
4. Mandatory Redemption. The shares of Series M Preferred Stock shall be
subject to mandatory redemption as set forth below in this Section 4.
a. Redemption Events. Except as prohibited by applicable Delaware
corporate law and the corporation's then existing agreements with its lenders
and provided the corporation has generated net income for its most recent
quarterly interim period, the corporation shall redeem all outstanding shares of
Series M Preferred Stock on the date which is five (5) years from the date of
effectiveness of this Amended and Restated
6
40
Certificate of Incorporation. The corporation shall effect the redemption by
paying in cash, out of any source of funds legally available therefor, an amount
per share of Series M Preferred Stock equal to the Original Series M Issue Price
(the "Redemption Price").
b. Redemption Notice. At least thirty (30) but no more than sixty (60)
days prior to the date fixed for redemption of the Series M Preferred Stock (the
"Redemption Date"), the corporation shall mail, postage prepaid, written notice
thereof (the "Redemption Notice"), to each holder of record (at the close of
business on the business day next preceding the day on which notice is given) of
shares of Series M Preferred Stock, at the address last shown on the records of
the corporation for such holder or if no address appears or is given at the
place where the principal executive office of the corporation is located,
specifying the number of shares to be redeemed from such holder, the Redemption
Date, the Redemption Price, the place at which payment may be obtained, and
calling upon such holder to surrender to the corporation, in the manner and at
the place designated, its certificate or certificates representing all of such
holders shares of Series M Preferred Stock.
C. Surrender of Certificates; Payment. Except as prohibited by
applicable Delaware corporate law, on or before the Redemption Date, each holder
of shares of Series M Preferred Stock to be redeemed on such Redemption Date
shall surrender the certificate or certificates representing such shares to the
corporation, in the manner and at the place designated in the Redemption Notice,
and thereupon the Redemption Price for such shares shall be payable to the order
of the person whose name appears on such certificate or certificates as the
owner thereof, and each surrendered certificate shall be cancelled and retired.
In the event that, due to restrictions imposed by applicable Delaware corporate
law, fewer than all of the shares represented by such certificate are redeemed,
a new certificate representing the unredeemed shares shall be issued forthwith.
d. Rights Subsequent to Redemption. If the Redemption Notice shall
have been duly given, and if on the Redemption Date the Redemption Price
therefor is either paid or made available for payment through the deposit
arrangement specified in subparagraph (a) below, then notwithstanding that the
certificates evidencing any of the shares of Series M Preferred Stock so called
for redemption shall not have been surrendered, all rights with respect to such
shares shall forthwith terminate after such Redemption Date, except for the
right of the holders to receive the Redemption Price without interest upon
surrender of their certificate or certificates therefor, and such shares shall
not thereafter be transferred on the books of the corporation or be deemed to be
outstanding whatsoever. If the funds of the corporation legally available for
redemption of shares of Series M Preferred Stock on the Redemption Date are
insufficient to redeem the total number of shares of Series M Preferred Stock to
be redeemed on such date, those funds which are legally available will be used
to redeem the maximum possible number of such shares ratably among the holders
of such shares to be redeemed based upon their holdings of Series M Preferred
Stock. The shares of Series M Preferred Stock not redeemed shall remain
outstanding and entitled to all the rights and preferences provided herein. At
any time thereafter when additional funds of the corporation are legally
available for the redemption of shares of Series M Preferred Stock such funds
will immediately be used to redeem the balance of the shares which the
7
41
corporation has become obliged to redeem on the Redemption Date, but which it
has not redeemed.
e. Deposit of Funds. On or prior to the Redemption Date, the
corporation shall deposit in a trust fund with any bank or trust company having
a capital and surplus of at least $100,000,000, a sum equal to the aggregate
Redemption Price of all shares of Series M Preferred Stock, with irrevocable
instructions and authority to the bank or trust company to pay, on and after the
Redemption Date, the Redemption Price to the respective holders upon the
surrender of their stock certificates. From and after the date of such deposit
(but not prior to the Redemption Date), the shares so called for redemption on
the Redemption Date shall be deemed to have been redeemed. The deposit shall
constitute full payment of the shares to their holders, and from and after the
Redemption Date the shares redeemed on the Redemption Date shall be deemed to be
no longer outstanding, and the holders thereof shall cease to be stockholders
with respect to such shares and shall have no rights with respect thereto except
the rights to receive, from the bank or trust company, payment of the Redemption
Price, without interest, upon surrender of their certificates therefor. Any
funds so deposited and unclaimed at the end of one year from the Redemption Date
shall be released or repaid to the corporation, after which the holders of
shares called for redemption shall be entitled to receive payment of the
Redemption Price only from the corporation.
5. Voting Rights.
The holder of each share of Series B Preferred Stock shall have the right
to one vote for each share of Common Stock into which such Series B Preferred
Stock could then be converted (with any fractional share determined on an
aggregate conversion basis being rounded to the nearest whole share), and with
respect to such vote, such holder shall have full voting rights and powers equal
to the voting rights and powers of the holders of Common Stock, and shall be
entitled, notwithstanding any provision hereof, to notice of any stockholders'
meeting in accordance with the bylaws of this corporation, and shall be
entitled to vote (except as otherwise expressly provided herein or as required
by law), together with holders of Common Stock as a single class, with respect
to any question upon which holders of Common Stock have the right to vote.
Election of directors need not be by written ballot, unless the bylaws of the
corporation shall so provide.
Except as required by law, the holders of Series M Preferred Stock shall
have no voting rights.
6. Protective Provisions.
a. Subject to the rights of series of Preferred Stock which may from time
to time come into existence, so long as shares of Series B Preferred Stock are
outstanding, this corporation shall not without first obtaining the approval (by
vote or written consent, as provided by law) of the holders of a majority of the
then outstanding shares of Series B Preferred Stock:
8
42
(i) alter or change the rights, preferences or privileges of the
shares of Series B Preferred Stock in a manner that adversely affects the
holders of the Series B Preferred Stock; or
(ii) increase the authorized number of shares of Series B Preferred
Stock.
b. Subject to the rights of series of Preferred Stock which may from time
to time come into existence, so long as shares of Series M Preferred Stock are
outstanding, this corporation shall not without first obtaining the approval (by
vote or written consent, as provided by law) of the holders of a majority of the
then outstanding shares of Series M Preferred Stock:
(i) alter or change the rights, preferences or privileges of the
shares of Series M Preferred Stock in a manner that adversely affects the
holders of the Series M Preferred Stock; or
(ii) increase the authorized number of shares of Series M Preferred
Stock.
7. Status of Converted Stock. In the event any shares of Series B Preferred
Stock or Series M Preferred Stock shall be converted pursuant to Section 3
hereof, the shares so converted shall be cancelled and shall not be issuable by
the corporation. The Certificate of Incorporation of this corporation shall be
appropriately amended to effect the corresponding reduction in the corporation's
authorized capital stock.
C. Common Stock.
1. Dividend Rights. Subject to the prior rights of holders of all classes
of stock at the time outstanding having prior rights as to dividends, the
holders of the Common Stock shall be entitled to receive, when and as declared
by the Board of Directors, out of any assets of the corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
2. Liquidation Rights. Upon the liquidation, dissolution or winding up of
the corporation, the assets of the corporation shall be distributed as provided
in Section 2 of this Article V.
3. Voting Rights. The holder of each share of Common Stock shall have the
right to one vote, and shall be entitled to notice of any stockholders' meeting
in accordance with the by-laws of this corporation, and shall be entitled to
vote upon such matters and in such manner as may be provided by law.
9
43
ARTICLE VI.
1. Number of Directors. The number of directors which shall constitute the
whole Board of Directors of this corporation shall be as specified in the
by-laws of this corporation.
2. Limited Liability. To the fullest extent permitted by the General
Corporation Law of the State of Delaware (as such law currently exists or may
hereafter be amended so long as any such amendment authorizes action further
eliminating or limiting the personal liabilities of directors), 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.
Any repeal or modification of this paragraph by the stockholders of the
corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the corporation with
respect to any act or omission occurring prior to the time of such repeal or
modification.
ARTICLE VII.
Meetings of stockholders may be held within or without the State of
Delaware as the by-laws may provide. The books of the corporation may be kept,
subject to any provision 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 by-laws of the corporation. Stockholders shall not
be entitled to request the election of directors by written ballot unless a
by-law of the corporation shall authorize such a vote by written ballot.
ARTICLE VIII.
Except as otherwise provided in this Certificate of Incorporation, 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 on stockholders herein are
granted subject to this reservation. In furtherance and not in limitation of the
powers conferred by statute, except as otherwise provided in this Certificate of
Incorporation, the Board of Directors is expressly authorized to make, repeal,
alter, amend and rescind from time to time any or all of the by-laws of the
corporation; including by-law amendments increasing or reducing the authorized
number of directors.
IN WITNESS WHEREOF, the undersigned has executed this certificate on
May 7, 1997.
/s/ Xxxxxxx X. Xxxxxxxx
-------------------------------------
Xxxxxxx X. Xxxxxxxx
President and Chief Executive Officer
10
44
March 18, 1997
To: Bio Image Shareholders
From: Xxx Xxxxxxx and Xxxx Xxxxxxxxx
Re: Bio Image
--------------------------------------------------------------------------------
We would like to inform you of two important events that have transpired at Bio
Image. First, we have hired a new President and Chief Executive Officer, Xxxx
Xxxxxxxx, who brings a significant track record of success in life sciences
software and imaging. Second, we have embarked on a financing and
recapitalization of the company that will position it to restore revenue growth
and an increase in value to its investors.
Within the next two weeks you will be receiving legal documentation from our
counsel relating to the equity financing and recapitalization. This letter to
you, along with the enclosed business plan prepared by Xxxx Xxxxxxxx, is
intended to bring you up to date on the events leading up to the financing and
recapitalization, and provide a perspective on why we continue to be
enthusiastic about the investment opportunity provided by Bio Image.
BACKGROUND
Following our acquisition of Bio Image from Millipore in 1994 several factors
combined to cause poor financial performance by the business. First, the
company's development of PC-based software took much longer than expected. Bio
Image's image analysis software, written in Unix and requiring expensive
engineering workstations to operate, became difficult to sell in the U.S. in the
face of lower cost PC-based alternatives. Second, a major portion of the
company's revenue stream under Millipore was lost as Bio Image took a
software-only strategy and exited the hardware side of electrophoresis imaging
systems. The shift to a software only strategy also hurt sales as customers
desired turnkey systems and were resistant to integrating disparate system
components. The result was a significant revenue shortfall versus plan.
Exacerbating the impact of the revenue shortfall on the bottom line was the
expense impact of replacing the direct sales channel that was left behind upon
separation from Millipore. The result was a relatively small business having a
high-cost worldwide direct sales force without enough product in the bag to
cover operating expense. In fiscal 1996 (FYE July,) revenue dropped to $3.1MM
from $5.2MM, producing an operating loss of ($859M) in FY 1996 versus operating
income of $560M in FY 1995.
45
Bio Image has now achieved conversion of products to PC environments that
represent approximately 75% of its historical software volume, and has leveled
out at a $2.5 to $3MM annual revenue rate. While operating expenses have been
significantly reduced, the business continues to operate at a loss. The cash
shortfall since early 1996 has been covered by a revolving line from NBD Bank
and loans totaling $400M from Capital Health Venture Partners and Xxxxxxxxx &
Xxxxxxx.
In early 1996, the board concluded that Bio Image's software-only strategy was
insufficient to compete effectively in the life sciences systems market,
resulting in a plan to either merge with other firms in this field to achieve
xxxxxxxx xxxx or find a buyer for Bio Image altogether. This process led to
discussions with over 20 firms and in-depth negotiations with three life
sciences instrument companies that expressed interest in acquiring Bio Image.
Two of the finalists were unwilling to offer adequate consideration for Bio
Image's software assets; the third was ultimately rejected by us due to concerns
about this company's capitalization.
In December, 1996 we were approached by Xxxx Xxxxxxxx, who was Chief Operating
Officer of IRIS a AMEX-listed manufacturer of clinical imaging systems. Xxxx had
become aware of Bio Image through our marketing process, and was intrigued with
the company's software assets and its market opportunity. Though relatively
xxxxx, Xxxx had racked-up excellent track records at Boehringer Mannheim
Diagnostics and IRIS. In each situation, his responsibilities included strategic
development, product development, sales and marketing, and operations. At each
company, revenues and earnings grew significantly under his direction, derived
from both internal product development and acquisition of other businesses.
Besides viewing Bio Image as a business vehicle he could grow to sizable value,
Xxxx was also attracted by its Xxx Arbor location. A Michigan native, Xxxx and
his wife had concluded that Los Angeles was an unsuitable location for raising
their young family.
Xxxx joined Bio Image as its President and CEO on February 1, 1997. Since that
date, Xxxx has spent a considerable amount of time speaking with Bio Image's
customers, staff, distribution partners, and vendors of related products. His
observations and strategies towards bringing Bio Image to a successful operating
position are expressed in the enclosed business plan. Beyond your review of this
plan, we encourage you to call Xxxx directly (800-BIO-IMAG, ext. 202) and
discuss his perspective on the opportunity. Speaking for ourselves, we believe
that Xxxx has the capability to bring the leadership, drive and execution in
product development, sales and acquisitions to make Bio Image a very successful
organization.
RESTRUCTURING
Bio Image's capitalization at the time of its purchase from Millipore included
debt of $2,050,000, $300,000 of convertible preferred stock and common stock
purchased for an aggregate of $200,000. Since that time, interest exceeding
$575,000 has accrued on the debt and bank debt of $820,000 has been incurred. In
the face of the company's reduced
46
operating performance, the current capital structure is untenable. Without a
change of the capital structure, the company is not financeable. Consequently,
it is essential that Bio Image restructure its capital obligations in order to
complete a financing that enables Xxxx Xxxxxxxx and his management team to
reestablish the Company's growth and profitability.
To accomplish the restructuring, Capital Health Venture Partners, Bio Image's
largest owner of the Company's sub debt and preferred, has devised and
negotiated terms by which the company's current investor obligations are
converted to common stock and a financing (targeted at $1.1 million with a range
of $1 million to $2 million) is offered pro rata to current stakeholders. The
restructuring begins with a 1:97 reverse stock split, which diminishes the
ownership of the common stock holders (Xxx Xxxx, Mackowski, Shepler, and Welsh)
from 3,037,500 shares (61.5% fully diluted) to 31,281 shares (0.5% fully diluted
after the $1.1 million financing). Two share pools are then established: 1)
540,000 shares to allocate among all existing investors; and 2) 3,333,333 shares
to be sold in the $1.1 million financing. Pro-rata allocation of the financing
and restructuring pools are determined by calculating dollars invested, giving a
preference to the bridge loans made in 1996 and 1997.
All existing investors in Bio Image, with the exception of the prior common
stock holders, will have the opportunity to increase their ownership position in
the company through investment at their full pro-rata allocation. As further
detailed in the attached schedules, investors are being asked to make an
additional investment of approximately 40% of their initial investment in the
company. Based on a $1.1 million financing and pro-rata participation, an
investor would own a fully-diluted percentage of the company that is 50% higher
than his or her pre-restructuring ownership position. For example, an investor
who originally invested $60,000 to purchase sub debt and preferred stock having
a 1.0% ownership position in Bio Image would, upon subscription for his/her full
pro rata of $24,000 (of a $1,100,000 financing), own 1.5% of the company.
Because of the large proportion of shares reserved for the financing,
non-participation in the financing will cause significant dilution to an
investor's ownership position: using the same example as above, the prior 1%
holder would have a 0.2% fully diluted position if he or she did not participate
in a $1.1 million financing.
In addition to the sub debt, preferred and common classes being restructured, it
is important that the NBD bank debt and Millipore's debt also be amended. To
this end, NBD has agreed to extend Bio Image's bank facility one year with no
principal reduction, despite the fact that the permitted borrowings under the
credit line are significantly below the outstanding, balance. Millipore has
verbally agreed to convert their $965,000 secured debt obligation to a
non-dividend paying preferred stock with a face amount of $300,000 convertible
into 270,000 shares (representing a fully diluted ownership position of 4.7%
after the restructuring and a $ 1,100,000 financing.)
47
FINANCING
An equity financing is necessary to provide Bio Image with capital for growth.
In reviewing the Bio Image situation with prospective financing sources, it
became clear that the pre-financing valuation needed to be extraordinarily
attractive. To meet this objective, Bio Image's current financing is based upon
a pre-money equity valuation of $792,000. Given historical valuations of life
science systems and software companies of one to five times revenues, we believe
a pre-money equity valuation of 25% of last year's revenues is a compelling
investment opportunity.
Capital Health Venture Partners has committed to taking its full pro rata of
$353,000 and Xxxxxxxxx & Xxxxxxx is subscribing for its full pro rata totaling
$362,000. The amount of each investor's pro rata is contained in the addendum
attached. In the offering documents to be distributed shortly, investors will be
asked to indicate their amount of participation in the financing. Individual
investment indications may be equal to, below, or above one's pro-rata. While
there is no requirement that any shareholder invest, please keep in mind that
not doing so will lead to significant percentage dilution due to the terms of
the financing.
Despite the difficulties faced by Bio Image up to this point, we believe that
this investment represents an excellent upside opportunity. We strongly
encourage you to review the enclosed material and to call us at (000) 000-0000
or Xxxx Xxxxxxxx (800) BIO IMAGE with any questions you may have or for further
perspective on the situation. Regardless of your ultimate decision on the new
investment, we wish to close the financing and restructuring as quickly as
possible - please let us know the best way to reach you during the week of March
24.
48
[TO BE COMPLETED BY
ALL INVESTORS]
B.I. SYSTEMS CORPORATION
CONFIDENTIAL STATEMENT OF INVESTOR SUITABILITY
In order to comply with the requirements of federal and state
securities laws, securities of the Company may be sold only to persons or
entities meeting the suitability standards established by B.I. Systems
Corporation (the "Company").
The purpose of this Confidential Statement of Investor Suitability
(this "Statement") is to obtain information from each prospective investor
relating to the investor's knowledge and experience in financial and business
matters and to the investor's ability to bear the economic risks of the proposed
investment. Such information is required in order to determine whether or not
the suitability standards have been met by the prospective investor. Please
answer questions concerning prior business and financial experience and
investment decision-making in detail.
By signing this Statement you agree that it may be shown to such
authorized persons as the Company may deem appropriate to establish that the
offer and/or sale of this investment in the Company will not result in any
violation of any laws or regulations of any jurisdiction.
A separate Statement must be completed for each co-owner of securities,
except that spouses may complete a joint Statement.
You make the following representations with the intent that they may be
relied upon by the Company and other persons designated by the Company.
(Please Print or Type. Attach additional
sheets if necessary to answer fully any question.)
I. BIOGRAPHICAL INFORMATION (If Joint Subscriber, provide information for
both.)
A. Name(s): Birthdate
------------------------------- ------------------------
(Print)
Birthdate
------------------------------- ------------------------
(Print)
B. State of Residency:
-------------------------------------------------------
C. Employer or business association and position:
---------------------------
D. Business address and telephone no.:
--------------------------------------
--------------------------------------------------------------------------------
49
E. Business and/or professional education and degrees:
School Location Degree Year Rec'd
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
F. Employment during the past five years:
Employer Position,
or other nature of
association responsibility From To
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
II. ACCREDITED INVESTOR STATUS
Please check or initial all that apply:
- the investor is a natural person whose net worth, or joint net worth
with spouse, at the time of purchase, exceeds $1,000,000 (including the
value of home, home furnishings and automobiles).
- the investor is a natural person whose individual gross income
(excluding that of spouse) exceeded $200,000 in the last two calendar
years, and who reasonably expects individual gross income exceeding
$200,000 in the current calendar year; or for such periods, the
combined income of the investor with spouse exceeded and is expected to
exceed $300,000.
- the investor is a trust, and the grantor
- (i) has the power to revoke the trust at any time and regain title to
the trust assets; and
- (ii) has an individual (or, together with his spouse a joint) net worth
in excess of $1,000,000, or had and expects to have a gross income (not
including spouse's income) for the last two years and the current year
in excess of $200,000, or for such periods, had and expects to have all
gross income including that of a spouse in excess of $300,000.
- the investor (or beneficiary if XXX or pension money is invested) is an
executive officer of the Company.
2
50
- the investor is a corporation, partnership, or Massachusetts or similar
business trust, not formed for the specific purpose of acquiring the
securities offered, with total assets in excess of $5,000,000.
- the investor is otherwise an accredited investor as follows (if
applicable, please review Schedule 4.1.1. of the Series B Preferred
Stock Purchase Agreement and describe qualification for accredited
status):
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
III. PRIOR INVESTMENT EXPERIENCE OF INVESTOR
A. Indicate by check xxxx which of the following categories best
describes the extent of your prior experience in the areas of
investment listed below:
More than
5 years 2 to 5 years 1 year No
Experience Experience Experience Experience
Corporate Stocks ---------- ---------- ---------- ----------
Corporate Bonds ---------- ---------- ---------- ----------
Real Estate ---------- ---------- ---------- ----------
Limited Partnerships ---------- ---------- ---------- ----------
Stock in Privately ---------- ---------- ---------- ----------
Held Companies ---------- ---------- ---------- ----------
B. Do you make your own investment decisions with respect to the
investments listed above?
Yes No
-------- --------
C. What are the principal sources of your investment knowledge or
advice? (check all that apply)
First hand experience Financial publications
---- ----
Broker(s) Investment Adviser(s)
---- ----
Attorney(s) Accountant(s)
---- ----
3
51
D. Please briefly describe any additional investment experience in
business ventures, experience with the Company or any other
investment experience which would indicate your ability to evaluate
an investment in this business venture.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
IV. OTHER MATTERS
1. Do any significant contingent liabilities exist for which you may be
obligated?
Yes No
------- ------
If yes, please indicate type and amount:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2. Are you involved in any litigation which if an adverse decision
occurred would affect your financial condition adversely?
Yes No If yes, provide details:
------- ------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
3. Is this a suitable and appropriate investment for you?
Yes No
------- ------
VI. SIGNATURE PAGE
The signature pages for this document are located on pages 6 (for
individuals) and 7 (for non-individuals).
4
52
[TO BE COMPLETED AND SIGNED BY
ALL INDIVIDUAL INVESTORS]
SIGNATURE PAGE
(FOR INDIVIDUALS)
This page constitutes the signature page for INDIVIDUALS for the
Confidential Statement of Investor Suitability. Execution of this Signature Page
constitutes execution of such document.
IN WITNESS WHEREOF, the undersigned has executed the Confidential
Statement of Investor Suitability this day of April, 1997.
---------------------------------- --------------------------------
Signature of Investor Signature of Spouse
(or Joint Investor, if any)
---------------------------------- --------------------------------
Print Name of Investor Print Name of Spouse
(or Joint Investor, if any)
---------------------------------- --------------------------------
Social Security Number Social Security Number of Spouse
(or Joint Investor, if any)
Address: Address:
-------------------------- -----------------------
-------------------------- -----------------------
-------------------------- -----------------------
5
53
[TO BE COMPLETED AND SIGNED BY ALL
INVESTORS THAT ARE NOT INDIVIDUALS]
SIGNATURE PAGE
(FOR NON-INDIVIDUALS)
This page constitutes the signature page for the Confidential Statement
of Investor Suitability. Execution of this Signature Page constitutes execution
of such document.
IN WITNESS WHEREOF, the undersigned has executed the Confidential
Statement of Investor Suitability this day of April, 1997.
Address:
---------------------------------- ----------------------------------
Print Name of Entity ----------------------------------
----------------------------------
---------------------------------- ----------------------------
Describe Entity (i.e., corporation, Tax Identification Number
trust, LLC, partnership, etc.)
By:
------------------------------ -----------------------------------
Name: State of Organization
-------------------------
Title:
------------------------
6
54
SCHEDULE 1
(Series B Preferred Stock Purchase Agreement)
Purchaser's Number of
Name and Address Series B Shares
---------------- ---------------
55
SCHEDULE 4.1.3
Definition of Accredited Investor
(1) Any bank as defined in Section 3(a)(2) of the Act or any savings and loan
association or other institution as defined in Section 3(a)(5)(A) of the Act
whether acting in its individual or fiduciary capacity; any broker dealer
registered pursuant to Section 15 of the Securities Exchange Act of 1934; any
insurance company as defined in Section 2(13) of the Act; any investment company
registered under the Investment Company Act of 1940 or a business development
company as defined in Section 2(a)(48) of that Act; any Small Business
Investment Company licensed by the U.S. Small Business Administration under
Section 301(c) or (d) of the Small Business Investment Act of 1958; any plan
established and maintained by a state, its political subdivisions, or any agency
or instrumentality of a state or its political subdivisions, for the benefit of
its employees, if such plan has total assets in excess of $5,000,000; any
employee benefit plan within the meaning of the Employee Retirement Income
Security Act of 1974, if the investment decision is made by a plan fiduciary, as
defined in Section 3(21) of such Act, which is either a bank, savings and loan
association, insurance company, or registered investment adviser, or if the
employee benefit plan has total assets in excess of $5,000,000, or, if a
self-directed plan, with investment decisions made solely by persons that are
accredited investors;
(2) Any private business development company as defined in Section 202(a)(22) of
the Investment Advisers Act of 1940;
(3) Any organization described in Section 501(c)(3) of the Internal Revenue
Code, corporation, Massachusetts or similar business trust, or partnership, not
formed for the specific purpose of acquiring the securities offered, with total
assets in excess of $5,000,000;
(4) Any director or executive officer of the Company;
(5) Any trust with total assets in excess of $5,000,000, not formed for the
specific purpose of acquiring the securities offered, whose purchase is directed
by a sophisticated person as described in Rule 506(b)(2)(ii) of the Act;
(6) Any natural person whose individual net worth, or joint net worth with that
person's spouse, at the time of purchase of the Series B Shares exceeds
$1,000,000;
(7) Any natural person who had an individual income in excess of $200,000 in
each of the two most recent years or joint income with that person's spouse in
excess of $300,000 in each of those years and has a reasonable expectation of
reaching the same level in the current year; or
(8) Any entity in which all of the equity owners are accredited investors.
