1
EXHIBIT 10.3
BUSINESS LOAN AGREEMENT
dated
April 23, 1999
among
GENOMIC SOLUTIONS, INC.
"Parent"
and
GENOMIC SOLUTIONS, LTD.
GENOMIC SOLUTIONS, K.K.
"Subsidiaries"
and
WHITE PINES LIMITED PARTNERSHIP I
PACIFIC CAPITAL, X.X.
XXXXX VENTURE CAPITAL ASSOCIATES, L.P.
AMERICAN HEALTHCARE FUND II
IAN R. N. BUND XXXXX XXXXXX PROTOTYPE
PS PLAN ACCOUNT #000-00000-00000
XXXXX CONSULTING ASSOCIATES, INC.
VOLUNTEER HEALTHCARE ASSOCIATES, L.L.C
MCDONALD INVESTMENTS INC. CUSTODIAN
FBO S. XXXXXXXX XXXXXXXX III XXX
ROLLOVER ACCOUNT #00000000
J. XXXXXXX XXXXXXXXX
XXXXXX X. XXXXXXX
XXXX X. XXXXXXXXX
GROVE INVESTMENT PARTNERS
XXXXXX X. XXXXXX LIVING TRUST U/A/D SEPTEMBER 9, 1997
XXXX X. XXXXXX
MCDONALD INVESTMENTS INC. CUSTODIAN
FBO XXXXXX X. XXXXX XXX ROLLOVER ACCOUNT #00000000
NATIONAL CITY BANK OF MI/IL CUSTODIAN
FBO XXXXXXX X. XXXXXX XXX ROLLOVER
ACCOUNT DATED JUNE 12, 1991 #MI-1491-00-4
XXXXXXX AND ASSOCIATES PROFIT SHARING PLAN
X/X/X XXXXXXX 0, 0000
XXXXXXX X. XXXXXXXX
"Lenders"
2
TABLE OF CONTENTS
Page
1. LOAN AGREEMENT 2
(a) Present Loan 2
(b) Conditions - Present Loan 2
2. EXECUTION OF NOTES 3
3. EQUITY - INITIAL ISSUANCE 3
(a) Warrants - Noncancellable 3
(b) Warrants - Cancellable Upon $5.00
Liquidity Event 3
(c) Warrants - Cancellable Upon Premium
Liquidity Event 4
(d) Modification of Anti-Dilution Provisions 5
4. INTENTIONALLY OMITTED 5
5. SECURITY, ASSURANCES AND INSURANCE 5
(a) Collateral 5
(b) Pledge 6
(c) Subsidiaries' Security 6
(d) Insurance - Property 6
(e) Insurance - Life 6
(f) Further Assurances 6
6. CONDITIONS OF LOAN 7
(a) Approval of Lender's Counsel 7
(b) Representations and Warranties 7
(c) Compliance 7
(d) Evidence of Corporate Action 7
(e) Opinion of Borrower's Counsel 7
(f) SBA Forms 7
(g) Certificates 7
(h) Bylaws 8
(i) Insurance 8
(j) Due Diligence 8
(k) Arrangements with Senior Lender 8
(1) Subordination 8
(m) Receipt of Executed Documents 8
(n) Consents 9
7. REPRESENTATIONS AND WARRANTIES 9
(a) Organization and Standing; Charter
and Bylaws 9
(b) Capitalization 10
(c) Corporate Power; Authorization 11
(d) Validity of Securities 11
(e) Consents and Waivers 12
-i-
3
Page
(f) Litigation 12
(g) Shareholder Lists and Agreements;
Officers and Directors 12
(h) Subsidiaries 12
(i) Financial Statements 13
(j) Absence of Undisclosed Liabilities 13
(k) Absence of Certain Developments 14
(1) Title to Assets 14
(m) Real Property 14
(n) Tax Matters 15
(o) Contracts and Commitments 15
(p) Proprietary Rights; Employee Restriction 15
(q) Effect of Transactions 16
(r) Insurance 17
(s) Securities Act Registration 17
(t) Business; Compliance with Laws 17
(u) Books and Records 17
(v) Employee Benefit Plans 17
(w) Small Business Matters 17
(x) Information Supplied to the Lenders 18
(y) Employees 18
(z) Business Operations 19
(aa) Collectibility of Accounts Receivable 19
(bb) Inventory 19
8. AFFIRMATIVE COVENANTS 19
(a) Financial Statements 19
(b) Payment of Taxes 20
(c) Insurance 20
(d) Notice of Adverse Events 21
(e) Maintenance 21
(f) Board of Directors 21
(g) Environmental Compliance/Notices/Indemnity 21
(h) Maintain Corporate Existence and
Due Qualification 21
(i) Compliance With All Laws 22
(j) Information From Senior Lender 22
(k) Reports 22
(1) Compliance Certificate 22
(m) Use of Proceeds 22
(n) Compliance with ERISA 22
(o) Patent Applications 23
(p) Disclosure 23
(q) Reinstatement of Security Interests 23
9. NEGATIVE COVENANTS 23
(a) Financial Covenants 24
(b) Liens and Indebtedness 24
(c) Dividends, Distributions; Capital Structure 24
-ii-
4
Page
(d) Stock 24
(e) Leases 25
(f) Environmental 25
(g) Transactions with Insiders or Related
Companies 25
(h) Nature of Business 25
(i) Change In Management 25
10. EVENTS OF DEFAULT 25
(a) Failure to Pay Amounts Due 26
(b) Misrepresentation; False Financial
Information 26
(c) Noncompliance with Lender Agreements 26
(d) Other Creditor Events 26
(e) Judgments; Attachments; Tax Liens 26
(f) Indictment 26
(g) Business Suspension, Bankruptcy 26
(h) Material Adverse Change 27
(i) Hazardous Material 27
(j) Use Of Xxxxxxxx 00
00. REMEDIES ON DEFAULT 27
(a) Acceleration 27
(b) Remedies Cumulative 27
(c) No Waiver 27
12. OTHER CONSIDERATION TO LENDERS 28
(a) Closing Fee 28
(b) Expenses 28
(c) Repurchase of Securities Upon
Declination of Sale of Borrower 28
13. REPRESENTATIONS AND WARRANTIES OF LENDER 29
(a) Investment 29
(b) Transfers 29
(c) Accredited Investor 29
(d) Restrictive Legend 29
(e) Sophistication 30
(f) Legal Investment 30
14. MISCELLANEOUS 30
(a) Rights Cumulative; Waivers 30
(b) Notices 30
(c) Reimbursement For Expenses 31
(d) Binding Effect 31
(e) Generally Accepted Accounting Principles 32
(f) No Partnership Or Joint Venture Established 32
-iii-
5
Page
(g) Governing Law; Jurisdiction 32
(h) Further Action 32
(i) Writings Constitute Entire Agreement;
Modifications Only In Writing 32
(j) Survival Of Terms, Representations
and Warranties 33
(k) Jury Trial Waivers 33
(1) Indemnification 33
(m) Lender's Assignment 33
(n) Brokers 34
(o) Counsel for Certain Lenders 34
15. CONSTRUCTION AND INTERPRETATION 34
EXHIBITS
Exhibit Description of First Referred to
No. Exhibit in Section
A Promissory Note 2
B-1 Warrants (Noncancellable) 3(a)
B-2 Warrants (Cancellable @ $5.00) 3(b)
B-3 Warrants (Cancellable > $5.00) 3(c)
C Security Agreement 5(a)
D Subordination Agreement 5(a)
E Opinion of Borrower's Counsel 6(e)
F Registration Rights Agreement 6(m)(iii)
G Amendment to Shareholders Agreement 6(m)(iv)
H Assignment and Pledge Agreement 5(b)
SCHEDULES
Schedule
No. Description of Schedule
7(b) Agreements Relating to Capital Stock
7(g) Shareholders, Officers and Directors
7(h) Subsidiaries
7(i) Financial Statements
7(k) Recent Developments
7(l) Liens and Encumbrances
7(o) Contracts
7(p) Intellectual Property Rights
7(x) Business Plan
7(z) Business Names; Addresses
-iv-
6
BUSINESS LOAN AGREEMENT
Agreement made and entered into this 23rd day of April, 1999, by and among
Genomic Solutions, Inc., a Delaware corporation, 0000 Xxxxxxx Xxxxx, Xxxxx X,
Xxx Xxxxx, Xxxxxxxx 00000 (hereinafter referred to as "Parent"), Genomic
Solutions, Ltd., a United Kingdom corporation, Xxxx 0, Xxxxx Xxxxx, Xxxxxx Xxx
Xxxx, Xxxxx Socon, St. Neots, Cambridgshire, England PE193TP (sometimes
hereinafter referred to as "Genomic UK"), Genomic Solutions, K.K., a Japanese
corporation, Gotanda Chuo Xxxx. 0X, 0-0, Xxxxxxxxxxxxxx 0-xxxxx, Xxxxxxxxx-xx,
Xxxxx 000-0000, Xxxxx (sometimes hereinafter referred to as "Genomic Japan")
(Genomic UK and Genomic Japan each sometimes hereinafter being referred to as a
"Subsidiary" and sometimes hereinafter collectively referred to as the
"Subsidiaries", and each of Parent, Genomic UK and Genomic Japan sometimes
hereinafter referred to as "Borrower", a "Borrower" or the "Borrower" and
collectively sometimes referred to as the "Borrowers"), White Pines Limited
Partnership I, a Michigan limited partnership, 0000 Xxxxxxxx Xxxx, Xxxxx X, Xxx
Xxxxx, Xxxxxxxx 00000 (hereinafter referred to as "WPLP), Pacific Capital, L.P.,
a Delaware limited partnership, 0000 Xxxxxxxx Xxxx, Xxxxx X, Xxx Xxxxx, Xxxxxxxx
00000 (hereinafter referred to as "Pacific"), Chase Venture Capital Associates,
L.P., a California limited partnership, 000 Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxx
Xxxx, Xxx Xxxx 00000 (hereinafter referred to as "Chase"), American Healthcare
Fund II, a Delaware limited partnership, 0000 Xxxxxxxx Xxxxxx, Xxxxx 000,
Xxxxxxx, Xxxxxxxx 00000 (hereinafter referred to as "American"), Ian R. N. Bund
Xxxxx Xxxxxx Prototype PS Plan Account #000-00000-00000, X.X. Xxx 0000,
Xxxxxxxxxx Xxxxx, Xxxxxxxx 00000 (hereinafter referred to as "Bund"), Xxxxx
Consulting Associates, Inc., an Ohio corporation, 0000 Xxxxxxxx Xxxxx, Xxxxxx,
Xxxx 00000 (hereinafter referred to as "Xxxxx"), Volunteer Healthcare
Associates, L.L.C., a Tennessee limited liability company, 0 Xxxxxxxx Xxxxx,
Xxxxx 000, Xxxxxxxxx, Xxxxxxxxx 00000 (hereinafter referred to as "Volunteer"),
McDonald Investments Inc. Custodian FBO S. Xxxxxxxx XxXxxxxx III XXX Rollover
Account #00000000, 0000 Xxx Xxxxxx Xxxx, Xxxxx 000, Xxxxxxxxxx Xxxxx, Xxxx 00000
(hereinafter referred to as "XxXxxxxx"), J. Xxxxxxx Xxxxxxxxx, 000 Xxxx Xxxxxx,
Xxxxx 000, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000 (hereinafter referred to as
"Xxxxxxxxx-CA"), Xxxxxx X. Xxxxxxx, 000 Xxxx Xxxxxx, Xxxxx 000, Xxx Xxxxxxxxx,
Xxxxxxxxxx 00000 (hereinafter referred to as "Xxxxxxx"), Xxxx X. Xxxxxxxxx, 0000
Xxxxxxxx Xxxx, Xxxxx Xxxxx Xxxxx, Xxxxxxx 00000 (hereinafter referred to as
"Xxxxxxxxx-FL"), Grove Investment Partners, an Illinois partnership, 000 Xxxxx
Xxxx, Xxxxxxxxxx, Xxxxxxxx 00000 (hereinafter referred to as "Grove") Xxxxxx X.
Xxxxxx Living Trust u/a/d September 9, 1997, 000 Xxxxx Xxx Xxxxx, #0000, Xxx
Xxxxxxxx, Xxxxxxx 00000 (hereinafter referred to as "Xxxxxx"), Xxxx X. Xxxxxx,
00000 Xxx Xxxxx Xxxxx, Xxxxxxxx, Xxxxxxxx 00000 (hereinafter referred to as
"Xxxxxx"), McDonald Investments Inc. Custodian FBO Xxxxxx X. Xxxxx XXX Rollover
Account #00000000, 0000 Xxx Xxxxxx Xxxx, Xxxxx 000, Xxxxxxxxxx Xxxxx, Xxxx 00000
(hereinafter referred to as "Xxxxx"), National City Bank of
1
7
MI/IL, Custodian FBO Xxxxxxx X. Xxxxxx XXX Rollover Account dated June 12, 1991
Account #MI-1491-00-4, 101 National City Bank, 000 X. Xxxx Xxxxxx, Xxx Xxxxx,
Xxxxxxxx 00000 (hereinafter referred to as "Xxxxxx"), Xxxxxxx and Associates
Profit Sharing Plan u/a/d January 1, 1991, 000 Xxxx Xxxxxxx Xxxxxx, Xxx Xxxxx,
Xxxxxxxx 00000 (hereinafter referred to as "Xxxxxxx") and Xxxxxxx X. Xxxxxxxx,
00000 Xxxxxxxxx Xxxx Xxxx, Xxxxxxx, Xxxxxxxx 00000 (hereinafter referred to as
"Xxxxxxxx") (WPLP, Pacific, Chase, American, Bund, Xxxxx, Volunteer, XxXxxxxx,
Xxxxxxxxx-CA, Xxxxxxx, Xxxxxxxxx-FL, Grove, Kalish, Marler, Boyle, Amster,
Xxxxxxx and Xxxxxxxx each being sometimes hereinafter referred to as "Lender", a
"Lender" or the "Lender" and collectively as "Lenders").
1. LOAN AGREEMENT.
(a) Present Loan. Borrowers agree to borrow from each Lender, and each
Lender agrees to lend to the Borrowers on the date hereof, subject to the terms
and conditions set forth in this Agreement and all exhibits attached hereto
(hereinafter collectively "Loan Documents"), the amount set forth below opposite
the name of such Lender:
Lender Amount
WPLP $1,112,000
Pacific 1,738,000
Chase 2,308,495
American 400,000
Bund 38,250
Xxxxx 10,000
Volunteer 15,000
XxXxxxxx 5,000
Xxxxxxxxx-CA 200,000
Xxxxxxx 10,000
Xxxxxxxxx-FL 51,505
Grove 30,000
Xxxxxx 25,000
Xxxxxx 1,000
Xxxxx 10,000
Xxxxxx 26,500
Xxxxxxx 11,750
Xxxxxxxx 7,500
----------
$6,000,000
(each of the above amounts as to each respective Lender is hereinafter referred
to as the "Loan").
(b) Conditions - Present Loan. The obligation of Lender to advance any
sum pursuant to "(a)" is contingent upon, since the date of this Agreement until
the date of any advance; (1) no material adverse change shall have occurred in
the financial condition of Borrowers or in the physical condition of the assets
serving as collateral; (2) no event shall have occurred or condition exist which
constitutes or with the passage
2
8
of time or the giving of notice would constitute, any event of default; and (3)
Lender's receipt of a certificate dated the date of the request for advance, and
signed by the President of Parent stating that: a) the Borrowers have complied
and are then in compliance with all the terms and covenants of this Agreement
which are binding upon them; b) there exists no event of default as defined
herein and no event which, with the giving of notice or the lapse of time, or
both, would constitute such an event of default; and c) the representations and
warranties contained herein are true with the same effect as though such
representations and warranties were made at the time of request for advance.
2. EXECUTION OF NOTES. The obligation to repay the Loan of each Lender
shall be evidenced by Borrowers' Promissory Note in the form set forth in
Exhibit A attached hereto (each Promissory Note executed and delivered to a
Lender hereinafter being referred to as a "Note" and collectively as the
"Notes").
3. EQUITY-INITIAL ISSUANCE.
(a) Warrants-Non-Cancellable. Parent shall issue to each Lender at the
time of closing the Loan, in consideration for the granting of the Loan,
and payment by Lenders concurrently with execution and delivery of this
Agreement of $.0001 per share of common stock, negotiable Warrants to
acquire the following shares of common stock of Parent:
Lender Warrants
------ --------
WPLP 110,273
Pacific 172,351
Chase 228,927
American 39,666
Bund 3,793
Xxxxx 992
Volunteer 1,487
XxXxxxxx 496
Xxxxxxxxx-CA 19,833
Xxxxxxx 992
Xxxxxxxxx-FL 5,108
Grove 2,975
Xxxxxx 2,479
Xxxxxx 99
Xxxxx 992
Xxxxxx 2,628
Xxxxxxx 1,165
Xxxxxxxx 744
-------
595,000
The Warrants issued shall be in the form set forth in Exhibit B-1 attached
hereto.
(b) Warrants-Cancellable Upon $5.00 Liquidity Event. Parent shall
issue to each Lender at the time of closing the Loan, in consideration for the
granting of the Loan, and payment
3
9
by Lenders concurrently with execution and delivery of this Agreement of $.0001
per share of common stock, negotiable Warrants, subject to cancellation and
surrender in accordance with the terms thereof, to acquire the following shares
of common stock of Parent:
Lender Warrants
------ --------
WPLP 129,734
Pacific 202,767
Chase 269,324
American 46,667
Bund 4,463
Xxxxx 1,166
Volunteer 1,750
XxXxxxxx 583
Xxxxxxxxx-CA 23,334
Xxxxxxx 1,166
Xxxxxxxxx-FL 6,009
Grove 3,500
Xxxxxx 2,917
Xxxxxx 116
Xxxxx 1,166
Xxxxxx 3,092
Xxxxxxx 1,371
Xxxxxxxx 875
-------
700,000
The Warrants issued shall be in the form set forth in Exhibit B-2 attached
hereto.
(c) Warrants-Cancellable Upon Premium Liquidity Event. Parent shall
issue to each Lender at the time of closing the Loan, in consideration for the
granting of the Loan, and payment by Lenders concurrently with execution and
delivery of this Agreement of $.0001 per share of common stock, negotiable
Warrants, subject to cancellation and surrender in accordance with the terms
thereof, to acquire the following shares of common stock of Parent:
Lender Warrants
------ --------
WPLP 19,460
Pacific 30,415
Chase 40,399
American 7,000
Bund 669
Xxxxx 175
Volunteer 000
XxXxxxxx 00
Xxxxxxxxx-XX 3,500
Xxxxxxx 175
Xxxxxxxxx-FL 901
Grove 525
Xxxxxx 437
Xxxxxx 18
4
10
Xxxxx 175
Xxxxxx 463
Xxxxxxx 206
Xxxxxxxx 131
-------
105,000
The Warrants issued shall be in the form set forth in Exhibit B-3 attached
hereto.
(d) Modification of Anti-Dilution Provisions. Unless within thirty
days after the date hereof the definition of "Excluded Stock" contained in the
Certificate of Incorporation of Parent as applicable to each of the Series B
Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock and
the Series M Preferred Stock shall be amended to include within such definition
at least the shares of common stock excluded from the definition of "Additional
Shares of Common Stock" by subsection (G)(i) of the Warrants, or the holders of
at least 66-2/3% of the outstanding shares of Series B Preferred Stock, Series
C Preferred Stock, Series D Preferred Stock and Series M Preferred Stock, each
voting as a separate class, shall declare the shares of common stock described
in subsection G(i) of the Warrants to be "Excluded Stock" for purposes of
determining whether any adjustments shall be made to the applicable Conversion
Prices by reason of the issuance of additional securities of Parent, subsection
G(i) of each Warrant issued pursuant to this Agreement shall be deleted, or
shall be amended to exclude from the definition of "Additional Shares of Common
Stock" only that lesser number of shares of common stock subject to the stock
option plans of Parent which may be hereafter included in the definition of
"Excluded Stock" as applicable to each of the Series B Preferred Stock, the
Series C Preferred Stock, the Series D Preferred Stock and the Series M
Preferred Stock. In the event of any such deletion or amendment to subsection
(G)(i) of the Warrants, Parent shall, at its sole expense, execute and deliver
to Lenders new Warrants in exchange for the Warrants initially issued pursuant
to this Agreement.
4. There is no Section 4.
5. SECURITY, ASSURANCES AND INSURANCE. To secure the faithful performance
of this Agreement and the repayment of the indebtedness created hereunder,
Borrowers shall do the following:
(a) Collateral. Parent gives, assigns, and conveys to each Lender, as
collateral, a security interest pursuant to the Security Agreement in the form
set forth in Exhibit C attached hereto in all accounts receivable, inventory,
equipment, furniture, fixtures, notes receivable, and all other tangible and
intangible assets and after-acquired property (all assets) of Parent subject
only to a prior security interest of Comerica Bank and the terms of a
subordination agreement satisfactory to Lender, or of a successor bank which
replaces Comerica Bank under similar credit facilities, provided that any such
successor
5
11
enters into a subordination agreement substantially in the form of the
Subordination Agreement attached hereto as Exhibit D (Comerica Bank and any such
successor bank each being sometimes hereinafter referred to as the "Senior
Lender").
(b) Pledge. Parent shall pledge all of its right, title and interest
in its 100% ownership interest in the Subsidiaries pursuant to the Pledge
Agreement in the form attached hereto as Exhibit H.
(c) Subsidiaries' Security. Each Subsidiary with property located in
any state of the United States gives, assigns, and conveys to each Lender, as
collateral, a security interest pursuant to the Security Agreement in the form
set forth in Exhibit C attached hereto in all accounts receivable, inventory,
equipment, furniture, fixtures, notes receivable, and all other tangible and
intangible assets and after-acquired property (all assets) of such Subsidiary
subject only to a prior security interest of the Senior Lender. Each Subsidiary
with property located outside the United States shall execute such documentation
as may be necessary to grant to Lenders an interest equivalent to a security
interest or chattel mortgage as may be possible under the laws of each
jurisdiction in which any property of such Subsidiary may be located.
(d) Insurance-Property. Each Borrower shall maintain, without expense
to Lenders, a policy or policies of insurance with respect to the collateral, in
an amount which is at least equal to the fair market value thereof, naming the
Lender as an insured party as its interest may appear and said policy shall
contain a provision requiring that the insurer provide at least thirty (30) days
notice to the Lender prior to cancellation of said insurance. The Borrower shall
deliver a certificate of such insurance to the Lender.
(e) Insurance-Life. Borrowers shall maintain, without expense to
Lenders, $2,000,000 term life insurance on the life of each of Xxxxxxx X.
Xxxxxxxx, Xxxxxx X. Xxxxxxxxxx and Xxxxxx X. Xxxxxxxxx with Lenders as
beneficiaries. Any insurance proceeds shall be applied in payment of the Notes
and any other amounts which may be due Lenders under the Loan Documents. If any
insurance proceeds remain after payment of the Notes and any other amounts due
Lenders under the Loan Documents, Lenders shall promptly pay over such remaining
amount of insurance proceeds to Borrower.
(f) Further Assurances. On demand of the Lender, the Borrowers shall
furnish further assurances of title, execute any written agreement, or do any
other acts, execute any instrument or statement required by law or otherwise, in
order to perfect and continue the security interest of the Lender in the
collateral, including without limitation, that Parent shall amend the Pledge
Agreement contemplated by Section 5(b) above to subject to the terms and
provisions of such Pledge Agreement any
6
12
interest Parent may hereafter acquire in any corporation, partnership, limited
liability company or other entity, and cause any such corporation, partnership,
limited liability company or other entity in which Parent has a majority
interest to comply with the provisions of Section 5(c) hereof.
6. CONDITIONS OF LOAN. The obligation of each Lender to make the Loan is
subject to the following conditions precedent:
(a) Approval Of Lender's Counsel. All legal matters incident to the
Loan shall be satisfactory to all counsel for the Lender.
(b) Representations And Warranties. All representations and warranties
by the Borrowers which are contained in this Agreement and the statements
contained in the Exhibits, Schedules and Loan Documents or any instrument, list,
certificate or writing delivered to the Lender pursuant to this Agreement shall
be, in all respects, true and correct on and as of the loan closing date as
though such representations and warranties were made at and as of the loan
closing date, and the Lender shall have not discovered any material misstatement
or omission in the representations and warranties made in this Agreement.
(c) Compliance. Borrowers shall have performed and complied in all
material respects with all of their obligations under this Agreement which are
to be performed or complied with by the Borrowers prior to or on the Loan
closing date.
(d) Evidence Of Corporate Action. The Lender shall have received
certified copies of all corporate or other required action taken by each
Borrower to authorize this Agreement, the Loan Documents and the borrowing
hereunder, and such other documents as the Lender may reasonably require
relating to the existence of the Borrowers, the authority for and the validity
of this Agreement, the Note and the Warrants, and any other matters relevant
hereto, all in form and substance satisfactory to Lender's counsel, and
indicating the name and title of the officer or officers of each Borrower
authorized to sign this Agreement and the Loan Documents.
(e) Opinion Of Borrower's Counsel. The Lender shall have received a
favorable written opinion of counsel for the Borrowers, dated the date of the
Loan in the form of Exhibit E which is attached hereto.
(f) SBA Forms. Parent shall have executed and delivered to Lenders SBA
Form 1031, Part A of which shall have been completed by Parent, and SBA Forms
652-D and 480.
(g) Certificates. The Lender shall have received from each Borrower a
certificate of good standing and a certified copy of the Articles or Certificate
of Incorporation for such Borrower (as amended). All shall be certified by the
appropriate
7
13
governmental agency as being true, correct and complete as of the date of such
certification.
(h) Bylaws. The Lender shall have received from each Borrower a copy
of the Bylaws of such Borrower and all amendments thereto, certified by the
Secretary of such Borrower as being true, correct and complete as of the date of
such certification.
(i) Insurance. Evidence satisfactory to the Lender that the Borrowers
have obtained the insurance policies required by the Lender including but not
limited to liability insurance and worker's compensation insurance with limits
and carriers reasonably satisfactory to the Lender, and the life insurance
contemplated by Section 5(e) hereof.
(j) Due Diligence. Lender has reached no adverse findings as a result
of their continued due diligence investigation of each Borrower, its management,
its future financing needs, and its industry, or any environmental review as of
the closing date.
(k) Arrangements With Senior Lender. The Senior Lender shall have
amended the loan agreements with Parent to extend the due date of such
indebtedness to July 1, 2000 and to modify various financial covenants contained
in such loan agreements in a manner reasonably satisfactory to Lenders.
(1) Subordination. Any stock redemption agreements between Parent and
any of its shareholders shall be subordinate to all obligations created pursuant
to this Loan Agreement including, but not limited to the Note and the Warrants
and such subordination shall be consented to by the shareholders of Parent. Any
debt owed by any Borrower to any of its shareholders (other than by Subsidiaries
to Parent), directors, or officers including all future indebtedness shall be
subordinated to all obligations created by the Loan documents including but not
limited to the Note and Warrants, pursuant to a subordination agreement
reasonably satisfactory to Lenders.
(m) Receipt Of Executed Documents. The Lender shall have received each
of the following, in form and substance satisfactory to the Lender and its
respective counsel:
(i) the Note duly executed by the Borrowers and the Warrants duly
executed by Parent;
(ii) the Security Agreement duly executed by Parent, and as
applicable, each Subsidiary, together with:
(a) evidence of the due execution and delivery of, and the
recordation, filing and other action in such jurisdictions as the Lender may
deem necessary or appropriate with respect to the Security Agreement, Financing
Statements and similar documents which the Lender deems necessary or desirable
8
14
to create, preserve or perfect the liens, security interests and other rights
intended to be granted to the Lender thereunder.
(b) a schedule setting forth all real property owned or
leased by any Borrower, together with copies of the related leases, certified as
true and correct as of the effective date by a duly authorized officer of
Borrower.
(iii) the Registration Rights Agreement duly executed by Parent in
the form of Exhibit F which is attached hereto;
(iv) an amendment to the Shareholders Agreement dated
December 24, 1997, as amended May 27, 1998, duly executed by appropriate
shareholders and Parent in the form of Exhibit G which is attached hereto;
(v) Acceptable subordination agreements executed by appropriate
shareholders, directors, officers and Borrowers;
(vi) Satisfactory Uniform Commercial Code search;
(vii) the Pledge Agreement duly executed by Parent;
(viii) Acceptable nondisclosure agreements executed by such key
management, operating and technical personnel as Lenders may reasonably require;
(ix) each Borrower shall execute and deliver such other
instruments and certificates as the Lender may reasonably request to effect the
closing.
(n) Consents. All consents, approvals, permits, licenses,
authorizations, agreements and other items required, or deemed by the Lender to
be required for the carrying out of the transactions contemplated in this
Agreement, shall have been obtained in form and substance reasonably
satisfactory to the Lender.
7. REPRESENTATIONS AND WARRANTIES. Each Borrower, jointly and severally,
represents and warrants to Lender, all of which representations and warranties
shall be continuing and shall survive the execution of this Agreement until all
of the indebtedness is fully paid to Lender and Borrowers' obligations under
this Agreement and the related documents are fully performed as follows:
(a) Organization and Standing; Charter and Bylaws. Parent is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and Parent is authorized to exercise all of its
corporate powers, rights and privileges. Genomic UK is a corporation duly
organized, validly existing and in good standing under the laws of the United
Kingdom, and Genomic UK is authorized to exercise all of its
9
15
corporate powers, rights and privileges. Genomic Japan is a corporation duly
organized, validly existing and in good standing under the laws of Japan, and
Genomic Japan is authorized to exercise all of its corporate powers, rights and
privileges. Each Borrower has all required corporate power and authority to own
its property and to carry on its business as presently conducted or
contemplated. True and accurate copies of the Articles or Certificate of
Incorporation and the Bylaws of each Borrower, as in effect on the date hereof,
have been delivered to the Lenders.
(b) Capitalization. The authorized capital stock of Parent on the date
hereof consists of 40,000,000 shares of Common Stock, par value $.001 per share
("Common Stock") and 10,000,000 shares of Preferred Stock, par value $.001 per
share (the "Preferred Stock"). On the date hereof, 2,925,777 shares of Common
Stock are outstanding. Of the authorized Preferred Stock, 1,100,000 shares have
been designated Series D Preferred Stock, 4,070,339 shares have been designated
Series C Preferred Stock, 1,680,880 shares have been designated Series B
Preferred Stock and 50,000 have been designated Series M Preferred Stock. On the
date hereof, 1,100,000 shares of Series D Preferred Stock are outstanding,
4,070,339 shares of Series C Preferred Stock are outstanding, 1,680,880 shares
of Series B Preferred stock are outstanding and 50,000 shares of Series M
Preferred Stock are outstanding. The several classes and series of capital stock
have the rights, preferences and privileges set forth in the Certificate of
Incorporation. Parent has reserved 1,100,000 shares of Common Stock for issuance
upon conversion of the Series D Preferred Stock, 4,070,339 shares of Common
Stock for issuance upon conversion of the Series C Preferred Stock, 5,093,576
shares of Common Stock for issuance upon conversion of the Series B Preferred
Stock, and 270,027 shares of Common Stock for issuance upon conversion of the
Series M Preferred Stock. As of the date of this Agreement, the Conversion Price
of the Series B Preferred Stock is $.33 per share of common stock, the
Conversion Price of the Series C Preferred Stock is $1.75 per share of common
stock, the Conversion Price of the Series D Preferred Stock is $6.00 per share
of common stock and the Conversion Price of the Series M Preferred Stock is
$1.111 per share of common stock, and there has been no event, including the
issuance of any shares of common stock of Parent, or securities convertible into
or exercisable for shares of common stock of Parent, which could result in any
adjustment in any of the foregoing Conversion Prices pursuant to the provisions
of the Certificate of Incorporation of Parent. As a result of Parent's merger
with B.I. Systems Corporation, a Delaware corporation ("BISC"), Parent
assumed the 1994 Omnibus Equity Incentive Plan of BISC (the "BISC Plan") which
was adopted by the Board of Directors and shareholders of BISC in July 1994 and
amended in April 1997. On January 15, 1998, Parent's Board of Directors adopted
the Genomic Solutions Inc. Non-Employee Stock Option Plan (the "Non-Employee
Plan") and the 1998 Genomic Solutions Inc. Stock Option Plan (the "Employee
Plan"). On the date of the Closing, options to acquire 768,770
10
16
shares of Common Stock are outstanding pursuant to the BISC Plan, options to
acquire 1,153,250 shares of Common Stock are outstanding pursuant to the
Employee Plan and options to acquire 240,000 shares of Common Stock are
outstanding pursuant to the Non-Employee Plan. Parent has reserved 2,162,020
shares of Common Stock for issuance upon exercise of these options. Except as
set forth herein and in Schedule 7(b), there are no outstanding rights, options,
warrants, preemptive rights, conversion rights or agreements for the purchase,
acquisition or receipt from Parent of any shares of capital stock or any other
securities of Parent. Parent is not a party to any existing agreement with any
person or entity which requires Parent 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 Parent, including the Notes and
Warrants, have been issued in accordance with all applicable state and Federal
securities laws.
(c) Corporate Power; Authorization. Parent has all requisite legal and
corporate power to enter into this Agreement, to issue and sell the Notes and
Warrants as provided hereunder, and to carry out and perform its obligations
under the terms of the Loan Documents. Each Subsidiary has all requisite legal
and corporate power to enter into this Agreement, to issue and sell the Notes as
provided hereunder, and to carry out and perform its obligations under the terms
of this Agreement. All corporate action on the part of each Borrower and its
officers, directors and shareholders that is necessary for the authorization,
execution and delivery of this Agreement and the Loan Documents by such
Borrower, for the performance of the Borrower's obligations thereunder and for
the issuance and delivery of the Notes, and as to Parent the Warrants, has been
taken; and this Agreement, the Notes, Warrants, Security Agreement, Pledge
Agreement and all other Loan Documents constitute a legal and binding obligation
of each Borrower a party thereto, enforceable against each Borrower 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. No Borrower is in violation of any term of its
Articles or Certificate of Incorporation or Bylaws, or in violation of any term
of any judgment, decree, order, statute, rule or government regulation
applicable to such Borrower or to which the Borrower is a party. No Borrower is
in violation of any term of any agreement or instrument applicable to such
Borrower or to which the Borrower is a party where such violation is likely to
be materially adverse to such Borrower's financial condition, business or
operations.
(d) Validity of Securities. The Notes and Warrants, when issued, sold
and delivered in accordance with the terms of
11
17
this Agreement, will be duly and validly issued, and will be free and clear of
any liens, encumbrances or restrictions of any kind; provided, however, that the
Notes and Warrants may be subject to restrictions on transfer under state and
federal securities laws and the Warrants are subject to the Shareholders
Agreement dated as of December 24, 1997 (the "Shareholders Agreement"), among
the Parent and the Shareholders (as defined therein). The Common Stock issuable
upon exercise of the Warrants has been duly and validly reserved and, upon
issuance in accordance with the terms of the Warrants, will be duly and validly
issued, fully paid and non-assessable 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 and the Shareholders Agreement.
(e) Consents and Waivers. Each Borrower has obtained any and all
consents, permits and waivers and made all filings necessary or appropriate for
consummation of the transactions contemplated by this Agreement.
(f) Litigation. There is no action, suit or proceeding pending or, to
the knowledge of any Borrower, threatened against any Borrower or related to the
business conducted by such Borrower. No Borrower is 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 any Borrower currently pending or which any Borrower intends to
initiate.
(g) Shareholder Lists and Agreements; Officers and Directors. Set
forth on Schedule 7(g) is a true and complete list of all shareholders of Parent
and persons holding options or warrants to acquire shares of Parent, showing the
number of shares of capital stock held, or acquirable upon exercise of the
option or warrant, by each such person in each case as of the date of this
Agreement. Schedule 7(g) also sets forth the names of the officers and directors
of each Borrower and all indebtedness of the officers, directors, shareholders
and any of their respective close relatives, to the Borrowers. Except as set
forth on Schedule 7(g), none of the officers or directors or significant
employees of any Borrower or their respective close relatives, owns directly or
indirectly, individually or collectively, any interest in any entity which is a
competitor, customer or supplier of (or has any existing contractual
relationship with) any Borrower other than ownership of less than one percent
(1%) of any publicly traded securities of any entity or of an interest in any
entity through ownership of publicly traded shares of any mutual fund.
(h) Subsidiaries. Except as set forth on Schedule 7(h), Parent has
no subsidiaries and does not own, directly or indirectly, any interest in any
corporation, association or business entity. All outstanding shares of capital
stock of each
12
18
class of each Subsidiary is owned beneficially and of record by Parent.
(i) Financial Statements.
(a) Schedule 7(i) attached hereto contains true, correct and
complete copies of:
(i) the audited consolidated and consolidating balance sheet
of the Borrowers, as of December 31, 1998, and the related statements of
operations, stockholders' equity (deficit) and cash flows of the Borrowers for
the period covered thereby, including the footnotes thereto (all of foregoing
being hereinafter collectively called the "Annual Financial Statements"); and
(ii) the interim unaudited consolidated and consolidating
balance sheet of the Borrowers (the "Interim Balance Sheet") as of February 28,
1998 (the "Interim Balance Sheet Date"), and the interim statements of
operations of the Borrowers for the two (2) month period then ended (all of the
foregoing, including the Interim Balance Sheet, being hereinafter collectively
referred to as the "Interim Financial Statements" and together with the Annual
Financial Statements collectively, the "Financial Statements").
(b) The Financial Statements taken as a whole (A) fairly present
in all material respects (subject, in the case of the Interim Financial
Statements, to normal, recurring year-end adjustments which are not material
individually or in the aggregate) the financial position of the Borrowers as of
the dates indicated and the results of operations of the Borrowers for the
periods indicated, (B) (x) have been prepared in accordance with Generally
Accepted Accounting Principles ("GAAP") consistently applied throughout the
periods covered thereby (subject, in the case of the Interim Financial
Statements, to normal, recurring year-end adjustments which are not material
individually or in the aggregate) or (y) to the extent not prepared in
accordance with GAAP, then footnotes to the Financial Statements will be
provided describing in reasonable detail the differences, if any, between the
accounting principles pursuant to which such Financial Statements were in fact
prepared and GAAP and (C) are in accordance with the books and records of the
Borrowers which have been maintained in a manner consistent with historical
practice. All reserves established and set forth in the Interim Balance Sheet
are reasonable and adequate.
(j) Absence of Undisclosed Liabilities. The Borrowers have no
liabilities or obligations of any nature, whether matured or unmatured, known or
unknown, or fixed or contingent, except (a) to the extent expressly reflected or
reserved against on the Interim Balance Sheet or expressly disclosed in the
notes thereto; and (b) liabilities and obligations arising since the Interim
Balance Sheet Date in the ordinary course of business
13
19
consistent with past practice (other than any such liability or obligation
arising from breach of contract, breach of warranty, tort, infringement, or
violation of any legal requirement).
(k) Absence of Certain Developments. Except as reflected in the
Financial Statements or in Schedule 7(k), since the Interim Balance Sheet
Date, there has been (i) no material adverse change in the condition (financial
or otherwise) of the Borrowers or in the assets, liabilities, or properties of
the Borrowers; (ii) no declaration, setting aside or payment of any dividend or
other distribution with respect to, or any direct or indirect redemption or
acquisition of, any of the capital stock of Parent; (iii) no waiver of any
valuable right of the Borrowers or cancellation of any debt or claim held by the
Borrowers; (iv) no loan by any Borrower to any officer, director, employee or
shareholder of a Borrower, or any agreement or commitment therefor; (v) no
increase, direct or indirect, in the compensation paid or payable to any
officer, director, employee or agent of any Borrower; (vi) no material loss,
destruction or damage to any property of a Borrower, whether or not insured;
(vii) no labor disputes involving a Borrower and no material change in the
personnel of a Borrower or the terms and conditions of their employment; and
(viii) no acquisition or disposition of any assets (or any contract or
arrangement therefor), nor any other transaction by a Borrower otherwise than
for fair value in the ordinary course of business.
(1) Title to Assets. Each Borrower has good and marketable title to
all of the assets reflected as being owned by such Borrower on the Interim
Balance Sheet or acquired subsequent thereto (except for inventory sold or
otherwise disposed of in the ordinary course of business for fair value and
accounts and notes receivable paid in full since the date of the Interim Balance
Sheet), free and clear of all encumbrances, except for those encumbrances set
forth on Schedule 7(l) and Permitted Liens. Such assets are in good operating
condition and repair (normal wear and tear excepted), are adequate and suitable
for the uses for which they are used in such Borrower's business, are not
subject to any condition which interferes with the economic value or use
thereof, and constitute all assets necessary to permit each Borrower to carry on
its business after the consummation of the transactions contemplated by this
Agreement as generally conducted by such Borrower prior thereto. The term
"Permitted Liens" means (i) liens arising by operation of law in the ordinary
course of business that, individually and in the aggregate, do not in any
material respect interfere with the use of any of the assets subject thereto;
(ii) minor imperfections of title which do not materially detract from the value
of the property affected or materially impair the operations of any Borrower;
(iii) liens for taxes not yet due and payable; and (iv) landlords liens, if any,
relating to leases.
(m) Real Property. Borrowers do not own directly or indirectly any
real property.
14
20
(n) Tax Matters. Each Borrower has filed all federal, state and local
income, excise or franchise tax returns, real estate and personal property tax
returns, sales and use tax returns and other tax returns required to be filed by
it and has paid all taxes owed by it, except taxes which have not yet accrued or
otherwise become due or for which adequate provision has been made in the
pertinent Financial Statements. The provision for taxes on the Interim Balance
Sheet is sufficient as of its date, for the payment of all accrued and unpaid
federal, state, county and local taxes of any nature of each Borrower whether or
not assessed or disputed. All taxes and other assessments and levies which any
Borrower is required to withhold or collect have been withheld and collected and
have been paid over when due to the proper governmental authorities. With regard
to the income tax returns of the Borrowers, no Borrower has received notice of
any audit or of any proposed deficiencies from any taxing authority and no
controversy with respect to taxes of any type is pending or, to the knowledge of
any Borrower, threatened. There are in effect no waivers of applicable statutes
of limitations with respect to any taxes owed by any Borrower for any year.
(o) Contracts and Commitments. Except as set forth in Schedule 7(o),
no Borrower (i) is a party to any contract, obligation or commitment which
involves a potential commitment in excess of $100,000 or which is otherwise
material and not entered into in the ordinary course of business; and (ii) has
any employment contracts; stock redemption or purchase agreements; financing
agreements; licenses; distributor or sales representative agreements; agreements
with officers, directors, employees or shareholders of such Borrower (other than
between Parent and a Subsidiary) or persons or organizations related to or
affiliated with any such persons; leases; agreements relating to product
development; or pension, profit-sharing, retirement or stock option plans. Each
agreement or understanding set forth on Schedule 7(o) is in full force and
effect and constitutes a valid and binding obligation of the Borrower and to the
best knowledge of such Borrower, the other party thereto. Each Borrower has in
all material respects performed the obligations required to be performed by it
except for obligations not yet due to be performed and each Borrower is and has
not been in default or received notices that it is in default in any material
respect under any such agreement or understanding. There exists no known event
or condition which, after notice or lapse of time, or both, would constitute
such a default. There are no material defaults by any other party to any such
agreement or understanding as to which any notice of default has been given.
Each Borrower has made available to the Lenders correct and complete copies of
all documents set forth on such Schedule.
(p) Proprietary Rights; Employee Restriction. Borrowers have disclosed
on Schedule 7(p), all copyright registrations, trademark registrations and
applications for
15
21
registration, patents and patent applications, trademarks, trade secrets or
other proprietary rights (collectively, "Intellectual Property Rights") used or,
to the best of Borrowers' knowledge, to be used in Borrowers' business as
presently conducted or contemplated and all licenses, assignments and leases
relating to Intellectual Property Rights of others embodied in products of the
Borrowers. Borrowers have exclusive ownership of or license to use, all
Intellectual Property Rights identified in Schedule 7(p) and, to the best
knowledge of Borrowers have obtained any licenses, releases or assignments to
use all third parties' Intellectual Property Rights embodied in products of the
Borrowers. To the best knowledge of the Borrowers, neither the present nor
contemplated business activities or products of the Borrowers infringe any
Intellectual Property Rights of others. No Borrower has received any notice or
other claim from any person asserting that any of such Borrower's present or
contemplated activities infringe or may infringe any Intellectual Property
Rights of such person. Each Borrower has the right to use, free and clear of
claims or rights of others, all trade secrets, customer lists, manufacturing
processes, hardware designs, programming processes, software and other
information required for or incident to its products or its business as
presently conducted or contemplated. Each Borrower has taken all commercially
reasonable steps to establish and preserve its ownership of all copyright, trade
secret and other proprietary rights with respect to its products and technology,
except such rights as such Borrower has reasonably determined are not material
to such Borrower's continuing business operations. No Borrower is aware of any
infringement by others of its copyrights or other Intellectual Property Rights
to which it has exclusive use in any of its products, technology or services, or
any violation of the confidentiality of any of its proprietary information. No
Borrower is making unlawful use of any confidential information or trade secrets
of any past or present employees of such Borrower. Except as set forth in
Schedule 7(p), neither any Borrower nor, to each Borrower's knowledge, any of
the key employees of such Borrower have any agreements or arrangements with
former employers of such employees relating to confidential information or trade
secrets of such employers. The activities of each Borrower's employees on behalf
of such Borrower do not violate any agreements or arrangements known to such
Borrower which any such employees have with former employers.
(q) Effect of Transactions. The execution, delivery and performance by
Borrowers of this Agreement and the documents executed and delivered in
connection therewith will not conflict with or result in any default under any
material contract obligation or commitment of any Borrower, or any charter
provision, bylaw or corporate restriction of any Borrower, or the creation of
any lien, charge or encumbrance of any nature upon any of the properties or
assets of any Borrower, except pursuant to this Agreement. Each Borrower's
execution and delivery of this Agreement and the documents executed and
delivered in
16
22
connection therewith and its performance of the transactions contemplated
thereby will not violate any instrument, agreement, judgment, decree, order,
statute, rule or regulation of any federal, state or local government or agency
applicable to such Borrower.
(r) Insurance. Each Borrower maintains valid and effective insurance
policies, issued by financially sound and reputable insurers, to insure it
against all risks usually insured against by persons or entities conducting
businesses similar to that of such Borrower in the locality in which such
businesses are conducted. Each Borrower has paid all due premiums with respect
to all policies of insurance currently maintained by such Borrower.
(s) Securities Act Registration. Assuming that the representations and
warranties of the Lenders contained herein are true, the offer, sale and
delivery of the Notes and Warrants in the manner contemplated by this Agreement
are each exempt from registration under the Securities Act and are exempt or
will be exempt under applicable state securities or Blue Sky laws regulating the
issuance or sale of securities upon the timely filing of notices with the
appropriate states.
(t) Business; Compliance with Laws. Each Borrower (i) is in compliance
with, in all respects all legal requirements applicable to it and its business
and (ii) has all material federal, state, local and foreign governmental
licenses and permits (collectively, "Permits") used or necessary in the conduct
of its business. Such Permits are in full force and effect, no violations with
respect to any thereof are recorded, no legal proceeding is pending or, to the
best knowledge of each Borrower, threatened to revoke or limit any thereof.
(u) Books and Records. The minute books of each Borrower contain
complete and accurate records of all meetings and other corporate actions of its
shareholders and its board of directors (the board of directors of Parent being
herein referred to as the "Board of Directors") and committees thereof. The
stock ledger of Parent is complete and reflects all issuances, transfers,
repurchases and cancellations of shares of capital stock of Parent.
(v) Employee Benefit Plans. Each employee benefit plan, program,
arrangement, practice or contract, whether formal or informal, maintained or
contributed to by any Borrower providing current or retirement benefits or
compensation to or on behalf of employees or former employees of such Borrower
(the "Benefits Plans"), are in compliance in all material respects with the
presently applicable laws.
(w) Small Business Matters. Parent (including the Subsidiaries) is a
"small business concern" within the meaning of the Small Business Investment Act
of 1958 and the regulations
17
23
thereunder (the "SBIC Act"), including Title 13, Code of Federal Regulations,
ss.121.301. The information set forth in the Small Business Administration Forms
480, 652 and Sections A and B of Form 1031, which have been delivered on or
prior to the date hereof to the Lenders regarding the Borrowers is accurate and
complete. Parent does not presently engage in, and it shall not hereafter engage
in, any activities, nor shall Parent use directly or indirectly the proceeds
from the sale of the Notes and Warrants for any purpose for which a Small
Business Investment Corporation is prohibited from providing funds by the SBIC
Act, including Title 13, Code of Federal Regulations, ss.107.720. Parent
acknowledges that it has been declared by each of WPLP, Pacific and Chase that
each such entity is a federal licensee under the SBIC Act.
(x) Information Supplied to the Lenders.
(i) Neither this Agreement, or the Schedules and Exhibits attached
hereto, nor any written document (including the Business Plan attached hereto as
Schedule 7(x)), certificate, projection or statement furnished to the Lenders by
or on behalf of the Borrowers pursuant to this Agreement contains any untrue
statement of a material fact, and none of this Agreement, the Schedules and
Exhibits attached hereto or such other written documents, projections,
certificates and statements omits to state a material fact necessary in order to
make the statements contained herein or therein not misleading. There is no
material fact relating to the business, prospects, operations, affairs or
conditions of the Borrowers which adversely affects or in the future may, in the
reasonable business judgment of the Borrowers, adversely affect the same which
has not been set forth in this Agreement or in the Schedules or Exhibits
attached hereto or other materials delivered pursuant to this Agreement.
(ii) The projections contained in the Business Plan are based upon
assumptions believed by Borrowers to be reasonable as of the date hereof,
however Borrowers give no assurance that the actual operations of Borrowers will
conform to such projections.
(iii) Any disclosure contained in any of the Schedules delivered
hereunder, which on its face is clearly and unequivocally applicable to another
Schedule to this Agreement, shall be deemed made with respect to such other
Schedule.
(y) Employees. No Borrower has a collective bargaining agreement with
any of its employees. There is no labor union organizing activity pending nor,
to the best knowledge of any Borrower, threatened with respect to such Borrower.
No Borrower is aware that any officer or key employee intends to terminate his
or her relationship with such Borrower, nor does any Borrower have any present
intention of terminating the employment of any officer or key employee.
18
24
(z) Business Operations. Borrowers represent and warrant that
Borrowers design, develop, manufacture, and market integrated, high-throughput
biochip and proteomic systems and services for analyzing and quantifying
biomolecules, such as DNA, RNA, and proteins. Except as set forth on Schedule
7(z) hereto, Borrowers have not, during the five years preceding the date of
this Agreement, been known as or used any other corporate, trade or fictitious
name, nor acquired all or substantially all of the assets, capital stock or
operating units of any person, nor had a business location at any address other
than the addresses set forth in the heading of this Agreement.
(aa) Collectibility of Accounts Receivable. The accounts receivable of
Borrowers which are shown on the February 28, 1999 balance sheet or thereafter
acquired by Borrowers are good and collectible at the aggregate recorded amounts
thereof (subject to no defense, counterclaim or set-off) except to the extent of
the reserves provided for such receivables on such balance sheet and all such
accounts receivable arose in the normal course of the business of Borrowers.
(bb) Inventory. All inventories reflected in the Interim Financial
Statements or acquired thereafter (the "Inventories") of each Borrower are
usable in the ordinary course of its business, have been recorded in amounts not
in excess of the cost for such items and consist solely of inventories of the
kind and quality regularly used in the Borrower's business. On the closing date,
such Inventories shall be in amounts reasonably related to the normal
requirements of the Borrower's business and will be usable and the finished
goods Inventories will be readily saleable all in the ordinary course of the
Borrower's business.
8. AFFIRMATIVE COVENANTS. As of the date of this Agreement and continuing
until Borrowers' obligations under this Agreement, the Notes, the Warrants, and
all Loan Documents are fully performed, including that the Notes are fully paid
to Lender, Borrowers shall at all times:
(a) Financial Statements. Furnish to the Lender the following
consolidated and consolidating balance sheets and statements of income and
retained earnings of the Borrowers prepared on the accrual basis according to
generally accepted accounting principles consistently applied: (1) monthly
financial statements containing at a minimum a balance sheet and income
statement together with analyses of variances from the annual operating Budget
and Business Plan, and such further detail as shall be reasonably requested by
Lender from time to time, no later than thirty (30) days after the end of each
month, certified as true and correct by an officer of Parent; (2) copies of
monthly aging of accounts receivable and/or accounts payable in the form and at
the time furnished to the Senior Lender; (3) audited annual financial statements
containing balance sheet, statement of earnings, statement of cash flows and
notes to
19
25
financial statements within ninety (90) days of the end of Parent's fiscal year
prepared by a big five accounting firm or its successor or an accounting firm
which is satisfactory to the Lender accompanied by (i) an unqualified opinion of
such firm, and (ii) a certificate from such accounting firm, addressed to the
Parent's Board of Directors, stating that in the course of its examination,
nothing came to its attention that caused it to believe that there was any
default by any Borrower in the fulfillment of or compliance with any of the
terms, covenants, provisions or conditions of this Agreement or any other
material agreement to which any Borrower is a party; (4) such additional
information, reports, budgets or statements as the Lender may from time to time
reasonably request in connection with this Agreement; and (5) permit, upon
reasonable notice, a representative of the Lender to inspect the books, records,
budgets, and documents received by the Board of Directors or properties of the
Borrowers at reasonable times and to make copies and abstracts of such books and
records and any documents relating to such properties, and to discuss the
Borrowers' affairs, finances, and accounts with its officers. Borrowers shall
also provide to Lenders within five (5) days of request all such information
required by Lenders to report to the Small Business Administration the economic
impact of Lender's loan to Borrowers. Without Lender's prior written consent,
Borrowers shall not modify or change any accounting policies or procedures in
effect on the date hereof.
(b) Payment Of Taxes. Promptly pay all taxes, levies and assessments,
and governmental charges upon it, its income, and its properties, due to all
local, state and federal agencies. Except to the extent that a Borrower has
established a cash reserve and is actively pursuing a tax dispute or appeal, any
failure by a Borrower to promptly pay any taxes, levies and assessments due,
shall be an event of default.
(c) Insurance. Maintain adequate fire and extended risk coverage,
business interruption, workers disability compensation, public liability,
environmental, flood, and such other insurance coverages as may be required by
law or as is customary and adequate among businesses in Borrowers' industry
engaged in the same or similar activities. All insurance policies shall be in
such amounts, upon such terms, in form, and carried with insurers with a "best
rating" of B or better or such insurers as are acceptable to Lender. Each
Borrower shall provide evidence satisfactory to Lender of all insurance
coverages and that the policies are in full force and effect, and for all
insurance coverages upon any property which is collateral, the insurance policy
shall be endorsed to provide Lender with a standard loss payable clause with not
less than thirty (30) days advance written notice to Lender by the insurer of
any cancellation or modification of coverage. Any failure by a Borrower to
maintain insurance as provided in this Agreement shall be an event of default
and Lender may obtain insurance, without obligation to do so, and all amounts so
expended by
20
26
Lender shall be added to the indebtedness or shall be payable on demand, at
Lender's option.
(d) Notice of Adverse Events. Promptly notify the Lender of any
actions, suits, proceedings or claims before any court, governmental department,
commission, board, bureau, agency or instrumentality, commenced or threatened
against the Borrowers involving Twenty-Five Thousand Dollars ($25,000.00) or
more or which could otherwise affect the conduct of its business.
(e) Maintenance. Maintain, preserve, and keep its properties and
equipment, whether leased or owned, in good repair and working order and
condition, ordinary wear and tear excepted, and will from time to time make all
needed and proper repairs, renewals, replacements, additions and betterments
thereto so that at all times the efficiency thereof shall be fully preserved and
maintained, and comply with all the federal, state and local laws and
regulations including environmental law.
(f) Board of Directors. Parent shall forward to the Lender copies of
all documents given by Parent to its board of directors and shall allow a
representative of the Lenders, designated by White Pines Management, L.L.C., to
observe the board meetings and provide the Lender with at least seven (7) days
notice (one (1) day for special meetings) prior to each and every board meeting.
Parent's board of directors must approve the Borrowers' annual operating budget
and five year Business Plan and Borrowers shall provide the Lender with a copy
of said annual operating budget and five year Business Plan as soon as available
and in no event less than five (5) days prior to the beginning of each fiscal
year.
(g) Environmental Compliance/Notices/Indemnity. Strictly comply with
all environmental laws applicable to Borrowers' business. Borrowers agree to
notify Lender not later than ten (10) days after Borrower's receipt, of any
summons, notice, lawsuit, citation, letter, or other advice received by a
Borrower from any Federal, State, or local agency or unit of government or other
person, which asserts that a Borrower is in violation of any environmental laws.
Borrowers agree to indemnify and hold Lender harmless from all violations by
Borrowers of any environmental laws, which indemnity shall include all costs and
expenses incurred by Lender, including actual legal fees, which are related to
any violation by Borrowers of any environmental laws, whether or not the Loan
has been paid at the time any such proceeding, claim, or action is instituted
against Lender.
(h) Maintain Corporate Existence and Due Qualification. Parent shall
preserve and maintain its corporate existence and good standing in the State of
Delaware and qualify and remain qualified as a foreign corporation in each
jurisdiction in which such qualification is required. Each Subsidiary shall
preserve and maintain its corporate existence and good standing under the laws
of the jurisdiction of its incorporation.
21
27
(i) Compliance With All Laws. Comply with all laws, rules and
regulations in effect or hereinafter promulgated by any foreign, federal, state
or local government, including without limitation all laws pertaining to
Borrowers' employees, the violation of which could have a material adverse
effect on the business of such Borrower.
(j) Information From Senior Lender. Provide the Lender (i) within
three (3) days of receipt thereof, copies of any or all notices or information
received from the Borrowers' Senior Lender exercising, terminating or
accelerating any rights or obligations of Senior Lender or any Borrower
contained in any agreements between such parties or expressing the intention or
consideration of the Senior Lender to take any such action, and (ii) with the
financial statements furnished pursuant to Section 8(a)(1), a summary of any
written or oral requests made to the Senior Lender for any waivers, and the
response thereto received from the Senior Lender.
(k) Reports.
(i) Provide Lender promptly after the sending or filing thereof,
copies of all reports, proxy statements and financial statements, if any, which
Parent sends to or files with any of its security holders or any securities
exchange or the Securities and Exchange Commission or any successor agency
thereof.
(ii) Provide Lender promptly in any event within ten (10) days
after receipt, a copy of any management letter or comparable analysis in the
event such letter or analysis is prepared by the auditors for the Borrowers.
(1) Compliance Certificate. Provide the Lender with appropriate
certification on an annual basis that the Borrowers are in compliance with all
the terms and conditions of this Agreement and that an Event of Default pursuant
to Section 10 hereof has not occurred.
(m) Use of Proceeds. The Borrowers shall use the proceeds of the Loan
for working capital and expenses of the transactions contemplated by this
Agreement, provided that none of the proceeds of the Loan will be used to repay
any existing indebtedness of Borrowers. Borrowers shall give Lenders access to
their records to confirm that Borrowers have used the proceeds of the Loan
solely for the foregoing purposes. Without limiting the generality of the
foregoing, Borrowers shall permit Lenders to conduct a post-closing review
within 90 days after the date hereof to assure that the proceeds of the Loan
were used for the intended purposes.
(n) Compliance With ERISA. Comply in all material respects with the
Employee Retirement Income Security Act of 1974, as amended and the Internal
Revenue Code of 1986, as
22
28
amended with respect to each of its federally insured pension plans.
(o) Patent Applications. Promptly file with appropriate governmental
authorities all applications for patents and patent rights as each Borrower in
its reasonable discretion, deems necessary or appropriate for the operation of
such Borrower's business as now conducted and proposed to be conducted.
(p) Disclosure. No representation or warranty by Borrowers in any
statement, schedule, or certificate to be furnished to the Lender pursuant to
this Agreement or the other Loan Documents, or in connection with the
transactions contemplated hereby or thereby, will contain any untrue statement
of a material fact or will omit to state a material fact necessary to make the
statements contained herein or therein not misleading.
(q) Reinstatement of Security Interests. Any secured indebtedness of
any Borrower other than to the Senior Lender shall require the holder of such
indebtedness to subordinate such indebtedness and the rights under any mortgage,
pledge, security interest or other collateral rights securing repayment of such
indebtedness, to the obligations of Parent to Lenders under the terms of the
Warrants immediately upon notice to Parent of the exercise of the Lender's
rights under subsection (K) of the Warrants, including without limitation, such
indebtedness as may be evidenced by Promissory Notes issued in accordance with
the provisions of subsection (L) of the Warrants. If the Security Agreement
and/or the Pledge Agreement have terminated in accordance with their respective
terms prior to notice to Borrower of the exercise of Lender's rights under
subsection (K) of the Warrants, the effectiveness of such Security Agreement and
Pledge Agreement shall automatically continue or be reinstated with respect to
all amounts payable in accordance with the terms of the Warrants immediately
upon notice to Borrower of the exercise of Lender's rights under subsection (K)
of the Warrants. In the event of continuation or reinstatement of such Security
Agreement and Pledge Agreement, Borrowers agree, within three days after demand
by Lenders (i) to execute and deliver to Lenders those documents which Lenders
determine are appropriate to further evidence (in the public records or
otherwise) such continuation or reinstatement (although the failure of Borrowers
to do so shall not affect in any way the reinstatement or continuation), and
(ii) to cause any secured creditor to execute and deliver to Lenders a
subordination agreement reasonably acceptable to Lenders as required by this
Section 8(q). The provisions of this Section 8(q) do not modify in any respect
whatsoever the rights of Lenders contained in Section 9(b) of this Agreement.
9. NEGATIVE COVENANTS. Until the payment in full of the Notes, the
Borrowers shall not, except with the prior written consent of the Lender:
23
29
(a) Financial Covenants.
(i) allow consolidated Tangible Net Worth to be less than negative
$3,600,000 during 1999 or at any time thereafter, to be less than negative
$1,500,000 as of December 31, 2000 or at any time thereafter, to be less than
$4,000,000 as of December 31, 2001 or at any time thereafter, to be less than
$13,200,000, as of December 31, 2002 or at any time thereafter, or to be less
than $24,100,000 as of December 31, 2003 or at any time thereafter. "Tangible
Net Worth" shall mean Net Worth less intangible assets. Intangible assets
include goodwill, patents, copyrights, development expenses, computer software,
mailing lists, trademarks, bond discount and underwriting expenses, organization
expenses, and all other intangibles.
(ii) allow consolidated Long-Term Debt to be greater than
$11,500,000 at any time during 1999, to be greater than $16,000,000 at any time
during 2000 or 2001 or 2002, to be greater than $15,000,000 as of December 31,
2002 or during 2003, or to be greater than $14,000,000 as of December 31, 2003
or at any time thereafter. "Long-Term Debt" shall mean the sum of (x) all bank
debt, (y) all liabilities classified as long-term in accordance with generally
accepted accounting principles, and (z) the current portion of any liabilities
encompassed by "(y)".
(b) Liens and Indebtedness. Pledge, mortgage or otherwise encumber, or
subject to or permit to exist upon or be subjected to any lien, security
interest or charge, any asset or any property of any kind or character at any
time owned by the Borrowers, except: (1) liens for taxes not yet due which are
being contested; (2) purchase money security interests incidental to the conduct
of its business, and (3) liens and encumbrances granted to Borrowers' Senior
Lender.
(c) Dividends, Distributions; Capital Structure. Parent shall not
purchase or retire any of its shares without Lender's prior written consent.
Parent shall not declare any dividends on, or make any other distributions with
respect to, any shares of its capital stock or apply any of its property or
assets to the purchase, redemption, or other retirement of any shares of any
class of its capital stock, or set apart any sum for any such payments.
(d) Stock. Except for (i) the shares issuable upon conversion of
outstanding shares of preferred stock of Parent, and (ii) the shares presently
subject to existing employee and director stock option plans, issue or sell any
additional shares of capital stock, whether common or preferred, either directly
or indirectly to any affiliate, shareholder, director, officer, employee or any
close relative thereof. "Close relative" means parent, child, sibling, spouse,
father-in-law, mother-in-law, son-in-law, brother-in-law, daughter-in-law, or
sister-in-law.
24
30
(e) Leases. Enter into any arrangement providing for the leasing by a
Borrower of any real or personal property previously owned by such Borrower if
any portion of the lease obligation does not constitute "Long-Term Debt" for
purposes of Section 9(a)(ii) hereof.
(f) Environmental. Allow the real property owned or leased by a
Borrower to be used to store, use, or otherwise handle any hazardous or toxic
substance or other contaminants, except in the ordinary course of Borrower's
business, nor shall any Borrower allow any oil or gas tanks to be placed on any
of its real property, whether owned or leased, or any other similar activities
which might result in the raising of environmental issues regarding the
property, nor shall any Borrower handle, arrange for transport, deliver for
disposal or dispose of (directly or indirectly) any hazardous waste or hazardous
substances so as to contaminate any property or give rise to any remediation,
clean-up or damage obligation under any statute, rule, regulation, ordinance or
other common law.
(g) Transactions With Insiders Or Related Companies. Other than
transactions between or among Parent and Subsidiaries, no Borrower shall,
directly or indirectly:
(i) enter into any transaction, agreement or arrangement with any
shareholder, director, employee, officer or affiliate of a Borrower, or any
close relative of any shareholder, director, officer or affiliate of a Borrower,
on terms and conditions any less favorable to such Borrower than those which
could have been obtained from a party which was not such a shareholder,
director, officer or affiliate or close relative; or
(ii) make any advance or loan which exceeds Ten Thousand and
00/100 ($10,000) Dollars or which extends for a period longer than one (1) year,
to any affiliate, or any shareholder, director, officer or employee thereof, or
to any close relative of the foregoing, or to any trust of which any of the
foregoing is a beneficiary, or guaranty any indebtedness for any of the
foregoing, provided that the foregoing shall not preclude the execution and
delivery by employees of their promissory notes for the purchase price of shares
of common stock upon exercise of options under the stock option plans of Parent.
(h) Nature Of Business. Engage in any business other than those which
Borrowers currently conduct or as contemplated by the Business Plan.
(i) Change In Management. Cause or permit Xxxxxxx X. Xxxxxxxx to cease
serving as President and Chief Executive Officer of Parent.
10. EVENTS OF DEFAULT. The occurrence of any of the following events which
shall not be cured by Borrowers within
25
31
fifteen (15) days after notice to Borrowers from Lender of such event shall
constitute an "Event of Default" under this Agreement; provided that no such
notice shall be required with respect to subparagraph "(a)" below, Failure To
Pay Amounts Due.
(a) Failure To Pay Amounts Due. Any fees or any principal or interest
on any indebtedness to Lender is not paid within two business days of when due;
(b) Misrepresentation; False Financial Information. Any warranty or
representation of Borrowers in connection with or contained in this Agreement,
the Loan Documents, any certificate, document or financial or other statement
now or hereafter furnished to the Lender by or on behalf of the Borrowers, is
false or misleading in any material respect.
(c) Noncompliance With Lender Agreements. Borrowers shall fail to
perform in any material respect any of their obligations, covenants, and
agreements under this Agreement, or any other agreement with Lender, including
but not limited to the Loan Documents attached hereto as Exhibits.
(d) Other Creditor Events. Any non-Lender indebtedness of Borrower is
declared to be due and payable prior to the stated maturity thereof or the
Senior Lender shall give a default notice or effect a standstill period under
the terms of any subordination agreement.
(e) Judgments; Attachments; Tax Liens. There shall be entered against
a Borrower or any guarantor, any judgment which materially affects such
Borrower's or any guarantor's business, property or financial condition, or if
any tax lien, levy, attachment, forfeiture, seizure, garnishment, execution or
similar writ or process shall be issued against the Collateral or which
materially affects such Borrower's business, property or financial condition,
and which remains unpaid, unstayed on appeal, undischarged, unbonded, or
undismissed for a period of thirty (30) days after the date thereof.
(f) Indictment. The institution of any criminal proceeding wherein
forfeiture of a material amount of the Borrower's property is a potential
penalty.
(g) Business Suspension, Bankruptcy. Any Borrower or any other obligor
shall voluntarily suspend transaction of its business; shall generally not pay
debts as they mature; shall make a general assignment for the benefit of
creditors; shall file or have filed against such Borrower any reorganization or
liquidation under the Bankruptcy Code or under any other State or Federal law
for the relief of debtors, or a receiver, trustee or custodian shall be
appointed for a Borrower or any other obligor or guarantor for any portion of
such Borrower's or other obligor's or guarantor's property, which is not
discharged within thirty (30) days after filing.
26
32
(h) Material Adverse Change. Any material adverse change in Borrowers,
business, property or financial condition has occurred or is imminent, or if the
Collateral value or Lender's rights therein are materially impaired in any way.
(i) Hazardous Material. Any Borrower handles, uses, stores, delivers
for disposal, disposes of, transports or arranges for the transportation of any
waste, whether hazardous or not, in any manner which is not in compliance with
applicable laws, rules, regulations, ordinances or the common law, or which
contaminates any property or gives rise to any remediation or clean-up
obligation under any law, rule, regulation, ordinance or the common law; or a
Borrower contaminates any real property owned by it or any other property, or
its real property is used to handle, treat or store, or become contaminated
(including without limitation contamination of soil, ground water and service
water located on, in or under the real property) with, pollutants or any other
substances which handling, treatment, storage or contamination may give rise to
remediation or clean-up obligation with respect to its real property or the
property of others under any law, rule, regulation, ordinance or the common law;
or its real property or any property to which a Borrower delivers for disposal,
disposes of, transports or arranges for transport (directly or indirectly) any
waste is listed on the National Priority List or any state listing which
identifies sites for remedial cleanup or investigatory action.
(j) Use Of Proceeds. Any diversion by Borrowers of the proceeds of
Lenders' Loan from the uses specified in Section 8(m) without Lenders' prior
written consent.
11. REMEDIES ON DEFAULT.
(a) Acceleration. Upon the occurrence of any Event of Default, the
Loan (with accrued interest thereon), and all other amounts owing to the Lender
under this Agreement and the Note, and all other indebtedness to Lender may, at
the option of Lender, and without demand or notice of any kind, be declared to
be immediately due and payable.
(b) Remedies Cumulative. The remedies provided for in this Agreement
are cumulative and not exclusive, and Lender may exercise any remedies available
to it at law or in equity, and as are provided in this Agreement, the Loan
Documents, and any other agreement between any Borrower and Lender.
(c) No Waiver. No delay or failure of Lender in exercising any right,
remedy, power or privilege hereunder shall affect that right, remedy, power or
privilege, nor shall any single or partial exercise thereof preclude the
exercise of any other right, remedy, power or privilege. No delay or failure of
Lender to demand strict adherence to the terms of this Agreement shall be deemed
to constitute a course of conduct inconsistent
27
33
with the Lender's right to at any time, before or after any Event of Default,
demand strict adherence to the terms of this Agreement and the related
documents.
12. OTHER CONSIDERATION TO LENDERS.
(a) Closing Fee. Upon closing of the Loan, Borrowers shall pay to
Lenders a closing fee in the amount of $105,000.
(b) Expenses. Borrowers agree to pay on demand all out-of-pocket
expenses of the Lenders incurred in connection with making the Loan, including
the actual reasonable fees and expenses of its counsel, expenses incurred in due
diligence activities, lien searches and credit reviews, in connection with the
preparation of this Agreement and the supporting documentation, provided that
the amount of such expenses which Borrowers shall be required to reimburse shall
not exceed (i) $5,000 of expenses of Lenders, and (ii) $50,000 of fees and
expenses payable to third parties by Lenders.
(c) Repurchase of Securities Upon Declination of Sale of Borrower. If
at any time following the fifth anniversary date of this Agreement, Borrowers or
any of the shareholders, officers, directors, employees, or agents of Parent
receive a bona-fide offer from any third party for (i) the purchase of all or
substantially all of the assets and properties of Parent, (ii) the purchase of
50% or more of the outstanding common stock of Parent, or (iii) the merger or
consolidation of Parent with another person or persons (collectively, the
"Offer"), Borrowers shall give Lenders prompt written notice of the offer and
its terms and the identity of the person making such Offer. Borrowers shall also
advise the Lenders whether Parent, or shareholders owning a majority of the
outstanding common stock of Parent, as the case may be, intend to accept such
Offer. Within 30 days after receipt of such notice, each Lender may notify
Parent that it is requesting that Parent, or shareholders owning a majority of
the outstanding common stock of Parent, as the case may be, accept, or cause
Parent to accept, such offer. If Parent, or shareholders owning a majority of
the outstanding common stock of Parent, as the case may be, does not accept the
Offer and close the transaction contemplated thereby, each Lender may, within
180 days after such offer shall have terminated or been revoked, or the
transaction contemplated thereby terminated or abandoned, give Parent written
notice of demand by such Lenders that Borrowers promptly purchase all of the
Warrants or shares of common stock issued upon exercise of the Warrants, and
any other securities of Parent acquired by Lenders pursuant to this Agreement,
held by such Lender, and Borrowers shall purchase such securities within 30 days
after the date of such demand. The consideration that the Borrowers shall pay to
the Lender for the repurchased securities shall be each Lender's prorata part of
the total consideration presented as part of the Offer, provided, however, that
if the Offer included consideration other than cash or promissory notes payable
in cash, Borrowers shall pay each
28
34
Lender in cash the fair market value of each Lender's prorata part of such
non-cash consideration, with such fair market value to be determined by an
appraiser selected by Parent and acceptable, in their sole discretion, to a
majority of the Lenders who made such demand. Borrowers shall pay the costs and
fees of the appraiser.
13. REPRESENTATIONS AND WARRANTIES OF LENDER. Each Lender represents and
warrants to Parent, only as to itself, as follows:
(a) Investment. The Lender is acquiring the Note and Warrants for its
own account, for investment purposes, without a view to or for resale in
connection with, any distribution thereof.
(b) Transfers. The Lender understands that since the Note, Warrants
and shares of common stock purchaseable upon exercise of the Warrants have not
been registered under the Securities Act of 1933 (the "Securities Act") or
applicable state securities laws, the Lender must bear the economic risk of an
investment in such securities for an indefinite period of time unless they are
subsequently registered under the Securities Act and applicable state securities
laws or an exemption from such registration is available. In that regard, the
Lender has been advised that:
(i) Parent's obligations to register such securities under the
Securities Act or any Blue Sky Laws are limited as set forth in the Registration
Rights Agreement attached hereto as Exhibit F.
(ii) Parent is not subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended, and Rule 144 is not presently
available for public release of the securities. It acknowledges that the
securities must be held indefinitely unless they are subsequently registered
under the Securities Act or an exemption from such registration is available. It
has been advised or is aware of the provisions of Rule 144 promulgated under the
Securities Act, which permits limited resale of securities purchased in a
private placement subject to the satisfaction of certain conditions.
(c) Accredited Investor. Lender is an "Accredited Investor", as that
term is defined in Rule 501 of Regulation D promulgated under the Securities
Act.
(d) Restrictive Legend. The Lender agrees that the documents
representing the securities will bear the following restrictive legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE
29
35
REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAW OR UNLESS THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED TO EFFECTUATE SUCH TRANSACTION.
(e) Sophistication. By reason of the Lender's or the Lender's offeree
representative's knowledge and experience in financial and business matters in
general, and investments of this type in particular, the Lender is capable of
evaluating the merits and risks of any investment in the Notes and Warrants.
(f) Legal Investment. Subject to the accuracy of the representations
and warranties of Borrowers set forth in this Agreement, each Lender's purchase
of the Note and Warrants hereunder will, at the time of the Closing, be legally
permitted by all laws and regulations to which such Lender is subject.
14. MISCELLANEOUS. The following miscellaneous provisions shall apply:
(a) Rights Cumulative; Waivers. This Agreement and all of the
covenants, warranties, and representations of the Borrowers and all of the
powers and rights of the Lender hereunder shall be in addition to and cumulative
of all other covenants, representations, and warranties of the Borrowers, and
all other rights and powers of the Lender contained in, or provided for in, any
other instrument or document now or hereafter executed and delivered by the
Borrowers to or in favor of the Lender. No waiver or consent shall be effective
as against the Lenders unless the same is in writing and signed by Lenders
owning not less than two-thirds of the Warrants (or shares of common stock of
Parent issued upon exercise of the warrants) issued pursuant to this Agreement.
Any waiver or consent effected in accordance with this Section 14(a), including
any waiver of an Event of Default, shall be binding upon each Lender. No such
waiver or consent shall extend to or affect any obligation or right except to
the extent expressly provided for therein.
(b) Notices. Any and all notices provided for in this Agreement shall
be given in writing by registered or certified mail, return receipt requested
and shall be deemed to have been given when mailed, and shall be addressed as
follows:
As to WPLP: As to Borrowers:
White Pines Limited Partnership I Genomic Solutions, Inc.
0000 Xxxxxxxx Xxxx, Xxxxx X 0000 Xxxxxxx Xxxxx, Xxxxx X
Xxx Xxxxx, XX 00000 Xxx Xxxxx, XX 00000
30
36
As to Chase:
As to Pacific: Chase Venture Capital
Pacific Capital, L.P. Associates, L.P.
0000 Xxxxxxxx Xxxx, Xxxxx X 380 Madison Avenue, 00xx Xxxxx
Xxx Xxxxx, XX 00000 Xxx Xxxx, XX 00000
As to American:
As to Bund, Xxxxx, Volunteer, American Healthcare Fund II
McMillan, Kalish, Marler, Boyle, 0000 Xxxxxxxx Xxxxxx, Xxx. 000
Xxxxxx, Xxxxxxx and Xxxxxxxx: Xxxxxxx, XX 00000
White Pines Management, L.L.C.
0000 Xxxxxxxx Xxxx, Xxxxx X As to Xxxxxxxxx-CA
Xxx Xxxxx, XX 00000 J. Xxxxxxx Xxxxxxxxx
000 Xxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
and with a copy to:
As to Xxxxxxx:
Xxxxxx X. Xxxxxxx
Xx. Xxxxx X. Xxxxxxx 000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxx and Associates Xxx Xxxxxxxxx, XX 00000
000 Xxxx Xxxxxxx Xxxxxx
Xxx Xxxxx, XX 00000 As to Xxxxxxxxx-FL
Xxxx X. Xxxxxxxxx
0000 Xxxxxxxx Xxxx
Xxxxx Xxxxx Xxxxx, XX 00000
As to Grove:
Grove Investment Partners
000 Xxxxx Xxxx
Xxxxxxxxxx, XX 00000
(c) Reimbursement For Expenses. Borrowers agree to pay and reimburse
the Lender upon demand for all expenses and costs paid or incurred by the Lender
of any nature, whether incurred in or out of court, and whether incurred before
or after all sums due pursuant to this Agreement shall become due, at their
maturity date or otherwise, including but not limited to reasonable actual
attorneys fees and costs, which Lender may deem necessary or proper in
connection with the administration or satisfaction of the indebtedness,
including the amending of this Agreement or the Loan Documents or providing any
consent, or waiving any provision contained herein or therein, or the
supervision, preservation, protection of (including but not limited to, the
maintenance of adequate insurance) or the realization upon the Collateral,
or incurred in any bankruptcy, arrangement, or reorganization proceeding
involving any Borrower. Any and all indebtedness owing by the Lender to the
Borrowers may at any time without notice or demand be offset and applied to any
indebtedness or liability of the Borrowers to the Lender, whether or not then
due.
(d) Binding Effect. This Agreement shall be binding upon the Borrowers
and their respective successors, and legal representatives, provided however,
that Borrowers cannot assign
31
37
or transfer their rights or obligations under this Agreement without Lender's
prior written consent. This Agreement shall inure to the benefit of the Lenders
and to the benefit of their respective heirs, legal representatives, successors
and assigns including any subsequent holder or holders of the Note, the Warrants
or any interest therein.
(e) Generally Accepted Accounting Principles. All computations and
determinations of the income, assets and liabilities of the Borrowers for the
purpose of this Agreement shall be made in accordance with United States
generally accepted principles of accounting consistently applied, except as may
be otherwise specifically provided herein.
(f) No Partnership Or Joint Venture Established. Nothing contained in
this Agreement or any other Loan Document, and no action taken by the Lender
pursuant hereto or thereto shall be deemed to create a partnership, joint
venture or other entity or business relationship between the Lender and the
Borrowers except that created in a conventional commercial loan transaction. It
is acknowledged by the Borrowers that the Lender asserts no dominion or control
over the business operations of the Borrowers other than for purposes of
monitoring its business operations to protect their interest in the Collateral
as a secured creditor of the Borrowers.
(g) Governing Law; Jurisdiction. This Agreement and the related
documents shall be interpreted and the rights of the parties determined under
the laws of the State of Michigan without regard to its conflict of law
principles. Each Borrower expressly submits to the jurisdiction and venue in the
Federal or state courts of the State of Michigan by process served by mail on
such Borrower at the address set forth above. Should any part, term or provision
of this Agreement be judged illegal or conflict with any applicable law, the
validity of the remaining portion or provisions of this Agreement shall not be
affected.
(h) Further Action. Each Borrower agrees, from time to time, upon
Lender's request, to make, execute, acknowledge, and deliver to Lender such
further and additional instruments, documents and agreements, to take such
further action as reasonably may be required to carry out the intent and purpose
of this Agreement and repayment of the loans.
(i) Writings Constitute Entire Agreement; Modifications Only In
Writing. This Agreement, the related documents and all other written agreements
between Borrowers and Lender, constitute the entire Agreement of the parties,
and there are no other agreements, express or implied. This Agreement supersedes
any and all commitment letters or term sheets heretofore issued in connection
with this Loan. None of the parties shall be bound by anything not expressed in
writing, and neither this Agreement, the related documents, nor any other
agreement can be modified except by a writing executed by
32
38
Borrowers and by Lenders owning not less than two-thirds of the Warrants (or
shares of common stock of Parent issued upon exercise of the Warrants) issued
pursuant to this Agreement. Any modification effected in accordance with this
Section 14(i) shall be binding upon each Lender.
(j) Survival Of Terms, Representations And Warranties. The terms and
conditions of this Agreement as well as the Representations and Warranties
contained herein shall survive the closing of this financing transaction.
(k) Jury Trial Waivers. Each Borrower does knowingly, voluntarily and
intelligently waive its constitutional right to a trial by jury with respect to
any claim, dispute, conflict, or contention, if any, as may arise under this
Agreement or under the related documents, and agree that any litigation between
the parties concerning this Agreement and the related documents shall be heard
by a court of competent jurisdiction sitting without a jury. Each Borrower does
hereby confirm to Lender that it has reviewed the effect of this waiver of jury
trial with competent legal counsel of its choice, or been afforded the
opportunity to do so, prior to signing this Agreement and the related documents,
and each acknowledge and agree that Lender is relying upon this waiver in
extending the Loans to Borrowers.
(1) Indemnification. Each Borrower hereby agrees to indemnify and hold
harmless the Lenders and their affiliates and their respective partners,
officers, directors, employees, agents and representatives against any loss,
liability, demand, claim, action, cause of action, cost, damage, deficiency,
tax, penalty, fine or expense (including reasonable legal and accounting fees
and expenses related thereto or incurred in enforcing this Section 14(l), but
excluding punitive damages) arising from the untruth, inaccuracy or breach of
any of the representations, warranties, covenants or agreements of the Borrowers
contained in this Agreement or any Loan Documents or any facts or circumstances
constituting any such untruth, inaccuracy or breach, or any such breach
resulting from the Borrowers' operation of its business.
(m) Lender's Assignment. The rights of Lender and its assigns
hereunder shall not be impaired by Lender's sale, hypothecation or
rehypothecation of any Note of the Borrowers or any item of the collateral or by
any indulgence, including but not limited to (a) any renewal, extension, or
modification which Lender may grant with respect to the indebtedness or any part
thereof or (b) any surrender, compromise, release, renewal, extension, exchange
or substitution which Lender may grant in respect to the collateral, or (c) any
indulgence granted in respect of any endorser, guarantor, or surety. The
purchaser assignee, transferee or pledgee of this Agreement, the Note, the
Warrants, the Security Agreement, Subordination Agreements, Financing
Statements, Collateral, and any other document (or any of them), sold, assigned,
transferred, pledged or repledged,
33
39
shall forthwith become vested with and entitled to exercise all the powers and
rights given by this Agreement as if said purchaser, assignee, transferee, or
pledgee were originally named as Lender in said documents.
(n) Brokers. No Borrower has made any commitment or otherwise incurred
any obligation to pay any commission to any broker or finder in connection with
the transaction provided for in this Agreement.
(o) Counsel for Certain Lenders. Each of Chase, American,
Xxxxxxxxx-CA, Xxxxxxx, Xxxxxxxxx-FL and Grove hereby confirms that it has
reviewed this Agreement and the Loan Documents with competent legal counsel of
its choice, or been afforded the opportunity to do so, prior to signing this
Agreement and the related documents, and each acknowledge and agree that such
Lender is not relying upon Xxxxxxx and Associates as its counsel in connection
with this Agreement.
15. CONSTRUCTION AND INTERPRETATION. Should any provision of this
Agreement require judicial interpretation, the parties hereto agree that the
court interpreting or construing the same shall not apply a presumption that the
terms hereof shall be more strictly construed against one party by reason of the
rule of construction that a document is to be more strictly construed against
the party that itself or through its agent prepared the same, it being agreed
that the Lenders, Borrowers and their respective agents have participated in the
preparation hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.
LENDERS: BORROWERS:
WHITE PINES LIMITED PARTNERSHIP I GENOMIC SOLUTIONS, INC.
By: White Pines G.P., L.L.C.,
its general partner
By: /s/ Xxxxxxxxx X. Xxxxx By: /s/ Xxxxxxx X. Xxxxxxxx
---------------------------------- ---------------------------
Xxxxxxxxx X. Xxxxx, Chairman Xxxxxxx X. Xxxxxxxx
President
PACIFIC CAPITAL, L.P. GENOMIC SOLUTIONS, LTD.
By: Pacific Capital Corporation,
its general partner
By: /s/ Xxxxxxxxx X. Xxxxx By: /s/ Xxxxxxx X. Xxxxxxxx
----------------------------------- ---------------------------
Xxxxxxxxx X. Xxxxx, Vice-Chairman
34
40
IAN R. N. BUND XXXXX XXXXXX GENOMIC SOLUTIONS, K.K.
PROTOTYPE PS PLAN ACCOUNT
#000-00000-00000
XXXXX CONSULTING ASSOCIATES, INC.
VOLUNTEER HEALTHCARE ASSOCIATES, L.L.C
MCDONALD INVESTMENTS INC. CUSTODIAN
FBO S. XXXXXXXX XXXXXXXX III XXX By: /s/ Xxxxxxx X. Xxxxxxxx
ROLLOVER ACCOUNT #00000000 ---------------------------
XXXXXX X. XXXXXX LIVING TRUST U/A/D
SEPTEMBER 9, 1997
XXXX X. XXXXXX
MCDONALD INVESTMENTS INC. CUSTODIAN
FBO XXXXXX X. XXXXX XXX
ROLLOVER ACCOUNT #00000000
NATIONAL CITY BANK OF MI/IL CUSTODIAN
FBO XXXXXXX X. XXXXXX XXX
ROLLOVER ACCOUNT DATED JUNE 12, 1991
#MI-1491-00-4
XXXXXXX AND ASSOCIATES PROFIT SHARING
PLAN X/X/X XXXXXXX 0, 0000
XXXXXXX X. XXXXXXXX
By: White Pines Management, L.L.C.,
a Michigan limited liability
company, attorney in-fact
By: /s/ Xxxxxxxxx X. Xxxxx
-----------------------------------
Xxxxxxxxx X. Xxxxx, Chairman
CHASE VENTURE CAPITAL ASSOCIATES, L.P.
By:
-----------------------------------
AMERICAN HEALTHCARE FUND II
By:
-----------------------------------
---------------------------------------
J. XXXXXXX XXXXXXXXX
---------------------------------------
XXXXXX X. XXXXXXX
---------------------------------------
XXXX X. XXXXXXXXX
GROVE INVESTMENT PARTNERS
By:
-----------------------------------
35
41
XXXX X. XXXXXX
MCDONALD INVESTMENTS INC. CUSTODIAN
FBO XXXXXX X. XXXXX XXX
ROLLOVER ACCOUNT #00000000
NATIONAL CITY BANK OF MI/IL CUSTODIAN
FBO XXXXXXX X. XXXXXX XXX
ROLLOVER ACCOUNT DATED JUNE 12, 1991
#MI-1491-00-4
XXXXXXX AND ASSOCIATES PROFIT SHARING
PLAN X/X/X XXXXXXX 0, 0000
XXXXXXX X. XXXXXXXX
By: White Pines Management, L.L.C.,
a Michigan limited liability
company, attorney-in-fact
By: /s/ Xxxxxxxxx X. Xxxxx
-----------------------------------
Xxxxxxxxx X. Xxxxx, Chairman
CHASE VENTURE CAPITAL ASSOCIATES, L.P.
By: /s/ Xxxxxx Xxxxxx
-----------------------------------
AMERICAN HEALTHCARE FUND II
Capital Health Venture Partners, its General Partner, by
By: /s/ Xxx Xxxxxxxx
-----------------------------------
/s/ J. Xxxxxxx Xxxxxxxxx
---------------------------------------
J. XXXXXXX XXXXXXXXX
/s/ Xxxxxx X. Xxxxxxx
---------------------------------------
XXXXXX X. XXXXXXX
/s/ Xxxx X. Xxxxxxxxx
---------------------------------------
XXXX X. XXXXXXXXX
GROVE INVESTMENT PARTNERS
By: /s/ Xxxx Xxxx
-----------------------------------
XXXX XXXX
35
42
Attachments to
Exhibit 10.3
EX-10.3 Additional information to Business Loan Agreement among Genomic
Solutions and certain of its warrantholders, dated April 23, 1999
43
EXHIBIT A
PROMISSORY NOTE
44
THE RIGHTS OF THE HOLDER OF THIS NOTE TO RECEIVE PAYMENT ARE SUBJECT AND
SUBORDINATE TO THE PAYMENT OF ALL OBLIGATIONS OF MAKER OR OBLIGOR TO COMERICA
BANK, AND ITS SUCCESSORS AND ASSIGNS, UNDER THE TERMS OF THE SUBORDINATION
AGREEMENT DATED APRIL 23, 1999 EXECUTED BY GENOMIC SOLUTIONS, INC., THE PAYEE OF
THIS NOTE, ET AL.
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAW OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED TO EFFECTUATE
SUCH TRANSACTION.
P R 0 M I S S 0 R Y N 0 T E
$ Ann Arbor, Michigan
April 23, 1999
FOR VALUE RECEIVED, Genomic Solutions, Inc., a Delaware corporation, 0000
Xxxxxxx Xxxxx, Xxxxx X, Xxx Xxxxx, Xxxxxxxx 00000, Genomic Solutions, Ltd., a
United Kingdom corporation, Xxxx 0, Xxxxx Xxxxx, Xxxxxx Xxx Xxxx, Xxxxx Socon,
St. Neots, Cambridgeshire, England PE193TP and Genomic Solutions, K.K., a
Japanese corporation, Gotanda Chuo Xxxx. 0X, 0-0, Xxxxxxxxxxxxxx 0-xxxxx,
Xxxxxxxxx-xx, Xxxxx 141-0022, Japan, jointly and severally, hereinafter
collectively referred to as "Borrower", promise to pay to the order of ,
hereinafter called the "Lender", or holder the sum of ($ ) dollars in lawful
money of the United States of America, with interest at the rate of twelve
percent (12.0%) per annum on all sums at any time unpaid, at or at such
other place as the holder hereof may designate by written notice to the
Borrower, with interest from the date of the disbursement of the loan, until
paid.
The principal and interest shall be payable over five (5) years ("Loan
Term") as follows: except as otherwise provided herein for early payment, the
principal shall be due and payable on the earliest of (i) April 23, 2004, (ii)
the settlement date following the effective date of a registration statement
filed by Genomic Solutions, Inc. (hereinafter sometimes referred to as "Parent")
with the Securities and Exchange Commission for a public offering and sale of
securities of Parent, (iii) the effective date, immediately after the effective
time, of any merger or consolidation of Parent, (iv) a transfer of more than 50%
of the issued and outstanding common stock of Parent (if
1
45
immediately after the transfer the transferee has control of Parent), or (v) a
sale of substantially all of the assets of Parent. Interest shall be payable
quarterly in arrears on each March 31, June 30, September 30 and December 31
commencing June 30, 1999. On each interest payment date, (i) 7/12ths of the
interest payable on such date shall be paid in cash, and (ii) 5/12ths of the
interest payable on such date shall be paid by the issuance to Lender of a
number of shares of common stock of Parent equal to the amount of such interest
divided by the Minimum Company Value, provided that on each scheduled interest
payment date, Lender may upon ten (10) days, prior written notice to Parent
elect not to receive such payment in shares of common stock of Parent and
instead elect to defer payment of 5/12ths of the interest due on such scheduled
interest payment date, which amount shall then be added to the outstanding
principal balance of this Note with effect as of such payment date. Except as
otherwise provided herein for early or accelerated payment, the entire unpaid
principal balance plus accrued interest and all other indebtedness shall be due
and payable on or before April 23, 2004. Interest shall be calculated on a 365
day basis on the unpaid principal balance for the actual days outstanding. For
purposes of the foregoing, "Minimum Company Value" shall be the same amount
determined as the Minimum Company Value in accordance with the provisions of the
Warrants attached to the Loan Agreement (defined below) as Exhibit B (initially
$5.00 per share).
Parent has granted to Lender a security interest in or lien upon all assets
of Parent as described in the Security Agreement and Assignment and Pledge
Agreement of even date herewith, and Borrower may hereafter grant a security
interest in or lien upon other assets as may be described in any other security
agreement, mortgage, or other document executed at any time by the Borrower and
delivered to the Lender (herein collectively termed "Collateral") as security
for the payment of this Note, and for the payment of all other liabilities,
whether direct, indirect, absolute or contingent, now or hereafter existing, due
to become due, several or otherwise, of the Borrower to the Lender under the
Loan Documents (as defined in the Loan Agreement) (herein termed
"Indebtedness").
Upon an event of default under any security agreement, the Business Loan
Agreement dated April 23, 1999 between Lender, Borrower and others (the "Loan
Agreement"), or any document given in connection with the Collateral, which
event of default is not cured within any applicable grace period, (i) this Note
and all Indebtedness shall, at the option of the Lender, become immediately due
and payable in full without notice, presentation or demand for payment, all such
being hereby waived by the Borrower and in such event, it is agreed that the
Lender may exercise all rights and remedies available to it under any security
agreement, hypothecation agreement, loan agreement, or other agreement relating
to or otherwise securing any of the Indebtedness or, which may be available to
Lender under the
2
46
Uniform Commercial Code as in effect in the State of Michigan or other
applicable law, and (ii) this note shall thereafter bear interest at the rate of
sixteen percent (16%) per annum until such default is cured. Delay or
forbearance by the Lender in the exercise of any right granted hereunder shall
not operate as a waiver thereof.
A late payment fee in the amount of five percent (5.0%) of the installment due
and owing will be assessed against the Borrower in the event the payment
required hereunder is received by the Lender more than ten (10) days after the
due date.
Provided that all interest payments on this Note shall then be current, Borrower
may prepay this Note in whole at any time or in part from time to time. Upon any
payment of the principal of this Note in whole or in part prior to April 23,
2004, including as a result of this Note becoming immediately due and payable at
the option of the Lender in accordance with the terms of this Note, Borrower
shall pay a premium equal to the following sums:
(i) on amounts prepaid prior to April 24, 2000 - five percent (5%) of
amounts prepaid;
(ii) on amounts prepaid after April 23, 2000 but prior to April 24, 2001,
four percent (4%) of amounts prepaid;
(iii) on amounts prepaid after April 23, 2001 but prior to April 24, 2002,
three percent (3%) of amounts prepaid;
(iv) on amounts prepaid after April 23, 2002 but prior to April 24, 2003,
two percent (2%) of amounts prepaid;
(v) on amounts prepaid after April 23, 2003, one percent (1%) of amounts
prepaid,
provided however that (x) if such payment of this Note is a condition imposed by
parties purchasing not less than $10,000,000 of common stock or preferred stock
of Parent, the premium payable upon payment of this Note in whole or in part
prior to April 24, 2000 shall be 2-1/2% instead of 5%, and (y) no premium shall
be payable if the value of Borrower, implicit in the price at which shares of
common stock of Parent are sold in a public offering pursuant to a registration
statement, or the price applicable in any merger or consolidation of Parent or
the transfer of more than 50% of the issued and outstanding common stock of
Parent or the sale of substantially all of the assets of Parent, shall exceed
$50,000,000, and if the prepayment of this Note shall occur by reason of such
event. This Note is one of various promissory notes executed and delivered by
Borrower pursuant to the Loan Agreement. Borrower shall not prepay this Note in
whole or in part unless Borrower shall concurrently prepay in whole or a prorata
part of all other promissory notes originally executed and delivered by Borrower
on the same date as this Note.
3
47
Notwithstanding any provision to the contrary, it is the intent of the
Lender and Borrower that neither the Lender nor any subsequent holder shall be
entitled to receive, collect, reserve or apply, as interest, any amount in
excess of the maximum lawful rate of interest permitted to be charged by
applicable law or regulations, as amended or enacted from time to time. In the
event the Note calls for an interest payment that exceeds the maximum lawful
rate of interest then applicable, such interest shall not be received,
collected, charged, or reserved until such time as that interest, together with
all other interest then payable, falls within the applicable maximum lawful rate
of interest. In the event the Lender, or any subsequent holder, receives any
such interest in excess of the then maximum lawful rate of interest, such amount
which would be excessive interest shall be deemed a partial prepayment of
principal and treated hereunder as such, or, if the principal indebtedness
evidenced hereby is paid in full, any remaining excess funds shall immediately
be paid to the Borrower.
Borrower hereby waives presentment, demand, protest and notice of dishonor
and agrees that Borrower shall not be released or discharged by reason of any
release, sale or non-action with respect to the Collateral or other undertakings
securing this Note.
The security rights of Lender and its assigns shall not be impaired by
Lender's sale, hypothecation, or rehypothecation of any Note of the Borrower or
any item of the Collateral, or by any indulgence, including but not limited to:
(i) Any renewal, extension, or modification which Lender may grant with respect
to the Indebtedness or any part thereof, (ii) Any surrender, compromise,
release, renewal, extension, exchange, or substitution which Lender may grant in
respect to the Collateral, or (iii) any indulgence granted in respect of any
endorser, comaker, guarantor or surety. The purchaser, assignee, transferee, or
pledgee of this Note, the Collateral, any guarantee, and any other document (or
any of them) , sold, assigned, transferred, pledged, or repledged, shall
forthwith become vested with and entitled to exercise all the powers and rights
given by this Note and all Loan Documents of the undersigned to Lender, as if
said purchaser, assignee, transferee, or pledgee were originally named as payee
in this Note and in the Loan Documents.
This Note shall be construed, interpreted and enforced in accordance with
the laws of the State of Michigan without regard to its conflict of laws
principles. Borrower expressly submits to the jurisdiction and venue in the
Federal or state courts of the State of Michigan by process served by mail on
Borrower at the address set forth above.
This Note has been negotiated between Borrower and Lender and shall be
deemed to be mutually drafted by them.
4
48
IN WITNESS WHEREOF, this Note has been executed by the duly authorized officers
of the Borrower.
GENOMIC SOLUTIONS, INC.
By:
------------------------------------------
Xxxxxxx X. Xxxxxxxx, President
GENOMIC SOLUTIONS, LTD
By:
------------------------------------------
GENOMIC SOLUTIONS, K.K.
By:
------------------------------------------
5
49
Exhibit B
filed as
Exhibits 4.10, 4.11 and 4.12
50
EXHIBIT C
SECURITY AGREEMENT
51
SECURITY AGREEMENT
This Security Agreement is entered into this 23rd day of April, 1999, by
Genomic Solutions, Inc., a Delaware corporation, 0000 Xxxxxxx Xxxxx, Xxxxx X,
Xxx Xxxxx, Xxxxxxxx 00000 ("Borrower") in favor of White Pines Limited
Partnership I, a Michigan limited partnership, 0000 Xxxxxxxx Xxxx, Xxxxx X, Xxx
Xxxxx, Xxxxxxxx 00000 (hereinafter referred to as "WPLP"), Pacific Capital,
L.P., a Delaware limited partnership, 0000 Xxxxxxxx Xxxx, Xxxxx X, Xxx Xxxxx,
Xxxxxxxx 00000 (hereinafter referred to as "Pacific"), Chase Venture Capital
Associates, L.P., a California limited partnership, 000 Xxxxxxx Xxxxxx, 00xx
Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 (hereinafter referred to as "Chase"), American
Healthcare Fund II, a Delaware limited partnership, 0000 Xxxxxxxx Xxxxxx, Xxxxx
000, Xxxxxxx, Xxxxxxxx 00000 (hereinafter referred to as "American"), Ian R. N.
Bund Xxxxx Xxxxxx Prototype PS Plan Account #000-00000-00000, X.X. Xxx 0000,
Xxxxxxxxxx Xxxxx, Xxxxxxxx 00000 (hereinafter referred to as "Bund"), Xxxxx
Consulting Associates, Inc., an Ohio corporation, 0000 Xxxxxxxx Xxxxx, Xxxxxx,
Xxxx 00000 (hereinafter referred to as "Xxxxx"), Volunteer Healthcare
Associates, L.L.C., a Tennessee limited liability company, 0 Xxxxxxxx Xxxxx,
Xxxxx 000, Xxxxxxxxx, Xxxxxxxxx 00000 (hereinafter referred to as "Volunteer"),
McDonald Investments Inc. Custodian FBO S. Xxxxxxxx XxXxxxxx III XXX Rollover
Account #00000000, 0000 Xxx Xxxxxx Xxxx, Xxxxx 000, Xxxxxxxxxx Xxxxx, Xxxx 00000
(hereinafter referred to as "XxXxxxxx"), J. Xxxxxxx Xxxxxxxxx, 000 Xxxx Xxxxxx,
Xxxxx 000, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000 (hereinafter referred to as
"Xxxxxxxxx-CA"), Xxxxxx X. Xxxxxxx, 000 Xxxx Xxxxxx, Xxxxx 000, Xxx Xxxxxxxxx,
Xxxxxxxxxx 00000 (hereinafter referred to as "Xxxxxxx"), Xxxx X. Xxxxxxxxx, 0000
Xxxxxxxx Xxxx, Xxxxx Xxxxx Xxxxx, Xxxxxxx 00000 (hereinafter referred to as
"Xxxxxxxxx-FL"), Grove Investment Partners, an Illinois partnership, 000 Xxxxx
Xxxx, Xxxxxxxxxx, Xxxxxxxx 00000 (hereinafter referred to as "Grove") Xxxxxx X.
Xxxxxx Living Trust u/a/d September 9, 1997, 000 Xxxxx Xxx Xxxxx, #0000, Xxx
Xxxxxxxx, Xxxxxxx 00000 (hereinafter referred to as "Xxxxxx"), Xxxx X. Xxxxxx,
00000 Xxx Xxxxx Xxxxx, Xxxxxxxx, Xxxxxxxx 00000 (hereinafter referred to as
"Xxxxxx"), McDonald Investments Inc. Custodian FBO Xxxxxx X. Xxxxx XXX Rollover
Account #00000000, 0000 Xxx Xxxxxx Xxxx, Xxxxx 000, Xxxxxxxxxx Xxxxx, Xxxx 00000
(hereinafter referred to as "Xxxxx"), National City Bank of MI/IL, Custodian FBO
Xxxxxxx X. Xxxxxx XXX Rollover Account dated June 12, 1991 Account
#MI-1491-00-4, 101 National City Bank, 000 X. Xxxx Xxxxxx, Xxx Xxxxx, Xxxxxxxx
00000 (hereinafter referred to as "Xxxxxx"), Xxxxxxx and Associates Profit
Sharing Plan u/a/d January 1, 1991, 000 Xxxx Xxxxxxx Xxxxxx, Xxx Xxxxx, Xxxxxxxx
00000 (hereinafter referred to as "Xxxxxxx") and Xxxxxxx X. Xxxxxxxx, 00000
Xxxxxxxxx Xxxx Xxxx, Xxxxxxx, Xxxxxxxx 00000 (hereinafter referred to as
"Xxxxxxxx") (WPLP, Pacific, Chase, American, Bund, Xxxxx, Volunteer, XxXxxxxx,
Xxxxxxxxx-CA, Xxxxxxx, Xxxxxxxxx-FL, Grove, Kalish, Marler, Boyle, Amster,
Xxxxxxx and Xxxxxxxx each being sometimes hereinafter referred to as "Lender", a
"Lender" or the "Lender" and collectively as "Lenders").
1
52
For value received, the Borrower hereby grants to each Lender a security
interest in and to all of the Borrower's tangible and intangible real and
personal property and fixtures, whether now owned or hereafter acquired,
including, but not limited to, goods, documents, inventory, work in process,
instruments, equipment, furniture, machinery, fixtures, trade fixtures, contract
rights, chattel paper, accounts receivable, documents, patents, licenses and
motor vehicles, together with the proceeds from the sale or other disposition
thereof and the products thereof (the "Collateral"). The Collateral shall be
considered to be all of the assets of the Borrower. The Borrower hereby pledges,
assigns, transfers and grants to the Lender a security interest in the
Collateral to secure the payment of all loans, advances, and extensions of
credit from the Lender to the Borrower, including all renewals and extensions
thereof and any and all obligations of every kind whatsoever, whether now, or
hereafter existing or arising between the Lender and the Borrower and howsoever
incurred or evidenced, whether primary, secondary, contingent, or otherwise,
under or in connection with (1) the Borrower's Notes of even date herewith in
the aggregate amount of six million and no/100 ($6,000,000) dollars to the
Lenders, payable as to principal and interest as provided in the Notes; (2)
future advances by the Lender to the Borrower, if any; (3) all costs and
expenditures made or incurred by the Lender for taxes, insurance, and repairs to
and maintenance of the Collateral or made or incurred by Lender in the
disbursement, administration, collection or enforcement of the Notes; and (4)
all liabilities of Borrower to Lender now existing or incurred in the future,
matured or unmatured, direct or contingent, and any renewals, extensions, and
substitutions of those liabilities, and any other obligations of the Borrower,
under the Business Loan Agreement and Loan Documents (as defined therein) of
Borrower of even date herewith. The foregoing obligations shall be hereafter
collectively called the "liabilities" and shall also include all interest,
costs, expenses, and reasonable actual attorneys fees accruing to or incurred by
the Lender.
The Borrower hereby warrants, covenants and agrees as follows:
1. Warranties. The Borrower warrants the following:
(a) except as provided in the Business Loan Agreement, it has or will
acquire free and clear title to all of the Collateral and the security interest
granted to Lender shall be a first security interest, and the Borrower will
defend same to the Lender against the claims and demands of all persons;
(b) the Borrower will fully cooperate in placing or maintaining Lender's
lien or security interest;
2
53
(c) all of the collateral is located in the states of Michigan or
Massachusetts;
(d) all accounts are genuine and collectible except to the extent of
reserves provided on the balance sheet;
(e) the Borrower will not remove or change the location of any Collateral
without the Lender's prior written consent;
(f) the Borrower will not use the Collateral or permit it to be used for
any unlawful purpose;
(g) the Borrower will not conduct business under any name other than that
stated herein, nor change, nor reorganize the type of business entity as
described, except upon the prior written approval of the Lender, in which event
the Borrower agrees to execute any documentation of whatsoever character or
nature demanded by the Lender for filing or recording, at the Borrower's
expense, before such change occurs;
(h) the Borrower will keep all records of account, documents, evidence of
title, and all other documentation regarding its business and the Collateral at
the address specified herein, unless notice thereof is given to the Lender at
least ten (10) days prior to the change of any address for the keeping of such
records; the Borrower will, at all times, maintain the Collateral in good
condition and repair, ordinary wear and tear excepted, and will not sell or
remove same except as to inventory in the ordinary course of business;
(i) the Borrower is a legally created business entity, as described before,
and it has the power, and the person signing is duly authorized, to enter into
this Agreement; the execution of this Agreement will not create any breach of
any provision of any other agreement to which Borrower is a party; and
(j) all Financial Statements delivered by the Borrower to the Lender to
obtain loans and extensions of credit taken as a whole (A) fairly present in all
material respects (subject, in the case of the interim financial statements, to
normal, recurring year-end adjustments which are not material individually or in
the aggregate) the financial position of the Borrower as of the dates indicated
and the results of operations of the Borrower for the periods indicated, (B) (x)
have been prepared in accordance with Generally Accepted Accounting Principles
("GAAP") consistently applied throughout the periods covered thereby (subject,
in the case of the interim financial statements, to normal, recurring year-end
adjustments which are not material individually or in the aggregate) or (Y) to
the extent not prepared in accordance with GAAP, then footnotes to the Financial
Statements will be provided describing in reasonable detail the differences, if
any, between the accounting
3
54
principles pursuant to which such Financial Statements were in fact prepared and
GAAP and (C) are in accordance with the books and records of the Borrower which
have been maintained in a manner consistent with historical practice.
2. Insurance. Borrower shall maintain adequate fire and extended risk
coverage, business interruption, workers disability compensation, public
liability, environmental, flood, and such other insurance coverages as may be
required by law or as is customary and adequate among businesses in Borrowers'
industry engaged in the same or similar activities. All insurance policies shall
be in such amounts, upon such terms, in form, and carried with insurers with a
"best rating" of B or better or such insurers as are acceptable to Lender. Each
Borrower shall provide evidence satisfactory to Lender of all insurance
coverages and that the policies are in full force and effect, and for all
insurance coverages upon any property which is collateral, the insurance policy
shall be endorsed to provide Lender with a standard loss payable clause with not
less than thirty (30) days advance written notice to Lender by the insurer of
any cancellation or modification of coverage. Said proceeds may be utilized to
restore or replace the collateral with Lender's consent, which consent will not
be unreasonably withheld, provided Borrower is not in default other than a
default arising from the loss of or damage to collateral. In the event of
default or if said proceeds are not utilized to restore or replace the
collateral, Lender may apply such proceeds as it may receive toward the payment
of the liabilities in such order as the Lender may at its sole discretion
determine. If the Borrower at any time fails to obtain or to maintain any of the
insurance required above or pay any premium in whole or in part relating
thereto, the Lender, without waiving any default hereunder, may make such
payment or obtain such policies as the Lender, in its sole discretion, deems
advisable to protect the Borrower's property. All costs incurred by the Lender,
including reasonable attorney's fees, court costs, expenses, and other charges
thereby incurred, shall become a part of the liabilities and shall be payable on
demand.
3. Taxes, Liens, etc. The Borrower agrees to pay all taxes, levies,
judgments, assessments, and charges of any nature whatsoever relating to the
Collateral or to the Borrower's business. Except to the extent that Borrower has
established a cash reserve and is actively pursuing a tax appeal, if the
Borrower fails to pay such taxes or other charges in accordance with the
foregoing, the Lender at its sole discretion, may pay such charges on behalf of
the Borrower; and all sums so dispensed by the Lender, including reasonable
actual attorney's fees, court costs, expenses, and other charges relating
thereto, shall become a part of the liabilities and shall be payable on demand.
4. Information and Reporting. The Borrower agrees to supply to the Lender
such information concerning the status of any of its assets as the Lender, from
time to time, may
4
55
reasonably request. The Borrower further agrees to permit the Lender, its
employees, and agents to have access to the Collateral for the purpose of
inspecting it, together with all of the Borrower's other physical assets if any,
and to permit the Lender, from time to time, to verify accounts as well as to
inspect, copy, and to examine the books, records, and files of the Borrower.
5. Accounts. The Borrower acknowledges that Lender has a security interest
in Accounts. It is understood that the Lender will initially permit the Borrower
to collect accounts from its debtors. The Borrower understands that this
privilege may be terminated by the Lender only after an event of default under
the Business Loan Agreement or the Notes, Warrants or this Agreement shall occur
and is not cured within any applicable grace period, and that, in such event:
(a) the Lender shall be vested with all of the rights of the Borrower in
respect thereto, including the right of stoppage in transit, the ability to
notify any debtor or debtors of the assignment, and the ability to execute any
instrument on behalf of the Borrower in settlement or fulfillment of an account;
(b) the Borrower agrees to execute such assignments as the Lender may
request to evidence the assignment and, in the event of an assignment to the
Lender, Borrower thereafter receives payment on any account as the agent of the
Lender, and the Borrower agrees to transmit such payment in the form in which it
was received to the Lender on the date of receipt thereof, appropriately
endorsed, if necessary, to permit negotiation by the Lender;
(c) until such remittance, the Borrower agrees to keep all such receipts
on account separate and apart from the Borrower's own funds so that such
receipts are readily identifiable as the property of the Lender and to hold same
in trust for the Lender; and
(d) in any event, the Lender is authorized to endorse or to sign, in the
name of the borrower, any instrument of whatsoever nature to effect the
collection of the accounts for application to the liabilities.
6. Default. A default by the Borrower under the Business Loan Agreement,
the Notes, the Warrants or any other agreement entered into between the Borrower
and the Lender, which default is not cured within any applicable grace period,
shall constitute a default of this Security Agreement. The covenants,
conditions, events of default and other terms set forth or referred to in any
and all documents entered into between the Borrower and Lender are incorporated
into this Security Agreement with the same force and effect as if those such
covenants, conditions, and events of default were fully set forth herein.
5
56
7. Remedy. The Borrower agrees that, whenever a default exists, Lender
shall have the remedies set forth in the Business Loan Agreement and Lender may
exercise, from time to time, any rights and remedies, including the right to
immediate possession of the Collateral, available to it under applicable law.
The lender shall have the right to hold any property then in or upon said
Collateral at the time of repossession not covered by the security agreement
until return is demanded in writing by the Borrower or other party entitled
thereto. The Borrower agrees, in the case of default, to assemble, at its own
expense, all Collateral at a convenient place acceptable to the Lender and to
pay all reasonable costs of the Lender in connection with the collecting of the
liabilities and enforcement of any rights hereunder, including reasonable
attorney's fees and legal expenses, and including participation in Bankruptcy
proceedings; and to pay all of the expense of locating the collateral, as well
as the expense of any repairs for any realty or other property to which any of
the Collateral may have been affixed or made a part. Any notification of
intended disposition of the Collateral by the Lender shall be deemed to be
reasonable and proper if sent postage prepaid, by regular mail, to the Borrower
at least seven (7) days before such disposition, and addressed to the Borrower
either at the address shown herein or at any other address. The Lender shall, in
the event of any default have the right to peacefully retake any of the goods.
In the event of a default, the Borrower expressly authorizes the Lender to
offset any debts of the Lender to the Borrower against the Liabilities.
8. Termination. This Agreement and related financing statements shall be
terminated upon payment in full of the aforementioned Notes and all other sums
and expenses required to be paid pursuant to the terms of the Business Loan
Agreement, the Loan Documents other than the Warrants, and the Warrants but only
if prior to the time such termination would otherwise occur Borrower has been
notified of the exercise of Lenders' rights under subsection (K) of the
Warrants. If this Agreement and the related financing statements shall have been
terminated prior to the date on which Borrower is notified of the exercise of
Lenders' rights under subsection (K) of the Warrants, the effectiveness of this
Agreement shall automatically continue or be reinstated with respect to all
amounts payable in accordance with the terms of the Warrants upon notice to
Borrower of the exercise of Lenders, rights under subsection (K) of the
Warrants.
9. Miscellaneous. Time is of the essence of this agreement. Except as
otherwise defined in this agreement, all terms herein shall have the meanings
provided by the Uniform Commercial Code as it has been adopted in the State of
Michigan. Any delay on the part of the Lender in exercising any power,
privilege, or right hereunder, or under any other document executed by the
Borrower to the Lender in connection herewith, shall not operate as a waiver
thereof, and no single or partial
6
57
exercise thereof or any other power, privilege, or right shall preclude other or
further exercise thereof. The waiver by the Lender of any default of the
Borrower shall not constitute a waiver of subsequent default. All rights,
remedies, and powers of the Lender hereunder are irrevocable and cumulative, and
not alternative or exclusive, and shall be in addition to all rights, remedies,
and powers given hereunder or in or by any other instruments or by the provision
of the Uniform Commercial Code as adopted in the State of Michigan, or any other
laws now existing or hereinafter enacted.
This agreement has been delivered in the State of Michigan and shall be
construed in accordance with the laws of the State of Michigan. Whenever
possible, each provision of this agreement shall be interpreted in such manner
as to be effective and valid under applicable law; but, if any provision of this
agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such provision or the invalidity without
invalidating the remainder of such provision or the remaining provisions of this
agreement. The rights and privileges of the Lender hereunder shall inure to the
benefits of its successors and assigns, and this agreement shall be binding on
all successors and assigns of the Borrower. The Borrower may not assign this
agreement or any benefits accruing to it hereunder without the express written
consent of the Lender.
This agreement has been negotiated between Borrower and Lender and shall be
deemed to be mutually drafted by them.
In witness whereof, the parties have executed this Agreement on the date
and year first above written.
LENDERS: BORROWER:
WHITE PINES LIMITED PARTNERSHIP I
GENOMIC SOLUTIONS, INC.
By: White Pines G.P., L.L.C.,
its general partner
By: By:
------------------------------------ -------------------------------
Xxxxxxxxx X. Xxxxx, Chairman Xxxxxxx X. Xxxxxxxx
President
PACIFIC CAPITAL, L.P.
By: Pacific Capital Corporation,
its general partner
By:
------------------------------------
Xxxxxxxxx X. Xxxxx, Vice-Chairman
7
58
IAN R. N. BUND XXXXX XXXXXX
PROTOTYPE PS PLAN ACCOUNT
#000-00000-00000
XXXXX CONSULTING ASSOCIATES, INC.
VOLUNTEER HEALTHCARE ASSOCIATES, L.L.C
MCDONALD INVESTMENTS INC. CUSTODIAN
FBO S. XXXXXXXX XXXXXXXX III XXX
ROLLOVER ACCOUNT #00000000
XXXXXX X. XXXXXX LIVING TRUST U/A/D
SEPTEMBER 9, 1997
XXXX X. XXXXXX
XXXXXXXX INVESTMENTS INC. CUSTODIAN
FBO XXXXXX X. XXXXX XXX
ROLLOVER ACCOUNT #00000000
NATIONAL CITY BANK OF MI/IL CUSTODIAN
FBO XXXXXXX X. XXXXXX XXX
ROLLOVER ACCOUNT DATED JUNE 12, 1991
#MI-1491-00-4
XXXXXXX AND ASSOCIATES PROFIT SHARING
PLAN X/X/X XXXXXXX 0, 0000
XXXXXXX X. XXXXXXXX
By: White Pines Management, L.L.C.,
a Michigan limited liability
company, attorney-in-fact
By:
----------------------------------------
Xxxxxxxxx X. Xxxxx, Chairman
CHASE VENTURE CAPITAL ASSOCIATES, L.P.
By:
----------------------------------------
AMERICAN HEALTHCARE FUND II
By:
----------------------------------------
J. XXXXXXX XXXXXXXXX
-------------------------------------------
XXXXXX X. XXXXXXX
-------------------------------------------
XXXX X. XXXXXXXXX
GROVE INVESTMENT PARTNERS
By:
----------------------------------------
8
59
EXHIBIT D
SUBORDINATION AGREEMENT
60
SUBORDINATION AGREEMENT
(All Indebtedness and Liens)
Genomic Solutions, Inc., Genomic Solutions, Ltd., and Genomic Solutions K.K.
(each, a "Borrower" and, together the "Borrowers') ("Borrower" is indebted to
the undersigned (each a "Creditor" and collectively "Creditors") in the
aggregate principal sum of Six Million Dollars ($6,000,000) evidenced by [ ] AN
OPEN ACCOUNT [X] PROMISSORY NOTES [ ] OTHER (DESCRIBE)________________
_____________________________________________which indebtedness is [ ] UNSECURED
[ ]SECURED by substantially all assets of the Borrowers, and Creditors are or
may become financially interested in Borrowers and desire to aid Borrowers in
obtaining or having continued financial accommodations, whether by way of loan,
commitment to loan, discounting of instruments, extensions of credit or the
obtaining of any other financial aid from Comerica Bank ("Bank").
In order to induce the Bank to extend or to continue to extend financial
accommodations to Borrowers from time to time, whether by way of a loan,
commitment to loan, discounting of instruments, extension of credit or otherwise
and in consideration of any of these financial accommodations, Bank, Borrowers
and Creditors agree as follows:
1. Any and all obligations and liabilities of Borrowers to Creditors,
including, without limit, principal and interest payments, whether direct
or indirect, absolute or contingent, joint or several, secured or
unsecured, due or to become due, now existing or later arising and whatever
the amount and however evidenced (the "Subordinated indebtedness"), are
subordinated in right of payment to any and all obligations and liabilities
of Borrowers to the Bank, including, without limit, principal and interest
payments, whether direct or indirect absolute or contingent, joint or
several, secured or unsecured, due or to become due, now existing or later
arising and however evidenced, together with all other sums due thereon and
all costs of collecting the same (including without limit, reasonable
attorney fees) for which Borrowers are liable (the "Senior Indebtedness")
provided, however, that Senior Indebtedness does not include aggregate
principal amounts at any one time outstanding in excess of $3,000,000
during 1999, in excess of $6,000,000 during 2000, in excess of $7,000,000
during 2001 or in excess of $8,000,000 during 2002 or thereafter.
2. Except as otherwise provided in this agreement, Creditors will not ask for,
demand, xxx for, take or receive (by way of voluntary payment,
acceleration, set-off or counterclaim, foreclosure or other realization on
security, dividends in bankruptcy or otherwise), or offer to make any
discharge or release of, any of the Subordinated Indebtedness, and
Creditors waive any such rights with respect to the Subordinated
Indebtedness nor shall Creditors exercise any rights of subrogation or
other similar rights with respect to the Senior Indebtedness.
61
3. Subject to the provisions of Subsection 20(B) below, Creditors will not
exercise any of Creditors' rights in any collateral now or later securing
the Subordinated Indebtedness. All rights of Creditors in any collateral
now or later securing the Subordinated Indebtedness are subordinated to all
rights of the Bank now or later existing in any of the same collateral
securing the Senior Indebtedness.
4. The Bank, in its own name or in the name of Creditor, may collect and
enforce the Subordinated Indebtedness and all claims and demands of
Creditor in connection therewith, by proof of debt in bankruptcy, or in any
other proceeding involving dissolution, insolvency, liquidation or an
adjustment of the indebtedness of Borrower. Creditors make, constitute and
appoint Bank their true and lawful attorney-in-fact with full power of
substitution to take any action in furtherance of the foregoing in the
event Creditors fail to do so promptly following request by Bank,
including, but not limited to, the signing of proofs of claim, evidence of
indebtedness, and the execution and delivery of all documents and
agreements necessary to obtain or accomplish any protection for or
collection or disposition of any part of the Subordinated Indebtedness or
any collateral. Such appointment shall be deemed irrevocable and coupled
with an interest.
5. Should any payment, distribution or security or proceeds from these be
received by Creditors upon or with respect to the Subordinated Indebtedness
contrary to the terms of this Agreement, Creditors shall immediately
deliver same to the Bank in the form received (except for endorsement or
assignment by Creditors where required by the Bank), for application on the
Senior Indebtedness (whether or not then due and in such order of maturity
as Bank elects) and, until so delivered, the same shall be held in trust by
Creditors as the property of the Bank.
6. Each Creditor represents and warrants severally but not jointly that it has
not made or permitted to be made any assignment, transfer, pledge, or
disposition for collateral purposes or otherwise, of all or any part of the
Subordinated Indebtedness or any collateral or other security for the
Subordinated Indebtedness. The Creditors agree that any instrument or
document evidencing the Subordinated Indebtedness shall at all times bear
the following legend:
The rights of the holder of this Note to receive payment are subject and
subordinate to the payment of all obligations of maker or obligor to
Comerica Bank, and its successors and assigns, under the terms of the
Subordination Agreement dated _______________ executed by Genomic
Solutions, Inc., the payee of this note, et al.
7. This Agreement constitutes a continuing agreement of subordination, even
though at times Borrowers are not indebted to the Bank. The Bank may
continue, in reliance on this Agreement, without notice to Creditors, to
lend monies, extend credit, modify, renew or make other financial
accommodations, to or for the account of Borrowers until the fourteenth
(14th) day ("effective date") following delivery by Creditors to Bank of
revocation of this
2
62
Agreement. Any such notice of revocation shall not be effective as to any
Senior Indebtedness existing at the effective date of revocation or any
Senior Indebtedness created after that pursuant to any commitment or
agreement of the Bank or pursuant to any Borrower loan (whether advances or
readvances by the Bank after the effective date of revocation are optional
or obligatory) existing at the effective date of revocation or any
modifications or renewals of any such Senior Indebtedness, whether in whole
or in part. Possession by the Bank of any note or other evidence of
indebtedness made, endorsed or guaranteed by Borrower shall be conclusive
evidence (but not the only means of establishing) that Borrower is indebted
to the Bank.
8. [INTENTIONALLY OMITTED]
9. Each Creditor delivers this Agreement based solely on its independent
investigation of (or decision not to investigate) the financial condition
of Borrowers and is not relying on any information furnished by the Bank.
Each Creditor assumes full responsibility for obtaining any further
information concerning Borrowers' financial condition, the status of the
Senior Indebtedness or any other matter which it may deem necessary or
appropriate now or later. Each Creditor waives any duty on the part of the
Bank, and agrees that it is not relying upon nor expecting the Bank to
disclose to it any fact now or later known by the Bank, whether relating to
the operations or condition of Borrowers, the existence, liabilities or
financial condition of any guarantor of the Senior Indebtedness, the
occurrence of any default with respect to the Senior Indebtedness, or
otherwise, notwithstanding any effect such fact may have upon Creditor's
risk or Creditor's rights against any Borrower. Each Creditor knowingly
accepts the full range of risk encompassed in this Agreement, which risk
includes, without limit, the possibility that Borrowers may incur Senior
Indebtedness to the Bank after the financial condition of Borrowers, or its
ability to pay Borrowers' debts as they mature, has deteriorated. Each
Creditor acknowledges and agrees that the Bank's rights under this
Agreement are not conditioned upon pursuit by the Bank of any remedy the
Bank may have against Borrowers or any other person or any other security.
10. The Bank, in its sole discretion, without notice to Creditors, may release
or exchange any security now or later held by the Bank for payment of the
Senior Indebtedness or release any party now or later liable for payment of
the Senior Indebtedness without affecting in any manner the Bank's rights
under this Agreement. Each Creditor acknowledges and agrees that the Bank
has no obligation to acquire or perfect any lien on or security interest in
any asset(s), whether realty or personalty, to secure payment of the Senior
Indebtedness, and that it is not relying upon assets in which the Bank has
or may have a lien or security interest for payment of the Senior
Indebtedness,
11. Notwithstanding any prior revocation, termination, surrender, or discharge
of this Agreement in whole or in part, the effectiveness of this Agreement
shall automatically continue or be reinstated in the event that any payment
received or credit given by the Bank in respect of the Senior Indebtedness
is returned, disgorged, or rescinded under any applicable state or federal
3
63
law, including, without limitation, laws pertaining to bankruptcy or
insolvency, in which case this Agreement, shall be enforceable against each
Creditor as if the returned, disgorged, or rescinded payment or credit had
not been received or given by the Bank, and whether or not the Bank relied
upon this payment or credit or changed its position as a consequence of it.
In the event of continuation or reinstatement of this Agreement, each
Creditor agrees upon demand by the Bank to execute and deliver to the Bank
those documents which the Bank determines are appropriate to further
evidence (in the public records or otherwise) this continuation or
reinstatement, although the failure of the Creditor to do so shall not
affect in any way the reinstatement or continuation.
12. Each Creditor waives any right to require the Bank to: (a) proceed against
any person or property; or (b) pursue any other remedy in the Bank's power.
Each Creditor waives notice of acceptance of this Agreement and
presentment, demand, protest, notice of protest, dishonor, notice of
dishonor, notice of default, notice of intent to accelerate or demand
payment of any Senior Indebtedness, and diligence in collecting any Senior
Indebtedness, and agrees that the Bank may, once or any number of times,
modify the terms of any Senior Indebtedness, compromise, extend, increase,
accelerate, renew or forbear to enforce payment of any or all Senior
Indebtedness, or permit any Borrower to incur additional Senior
Indebtedness, all without notice to Creditors and without affecting in any
manner the unconditional obligations of Creditors under this Agreement.
13. Each Creditor acknowledges that the Bank has the right to sell, assign,
transfer, negotiate or grant participations or any interest in, any or all
of the Senior Indebtedness and any related obligations, including without
limit this Agreement. In connection with the above, but without limiting
its ability to make other disclosures to the full extent allowable, the
Bank may disclose all documents and information which the Bank now or later
has or acquires relating to Creditor and this Agreement, however obtained.
Creditor further agrees that the Bank may disclose such documents and
information to Borrowers. Each Creditor further agrees that the Bank may
provide information relating to this Agreement or relating to Creditors to
the Bank's parent, affiliates, subsidiaries and service providers.
14. No waiver or modification of any rights under this Agreement shall be
effective unless the waiver or modification shall be in writing and signed
by an authorized officer of the applicable party. Each waiver or
modification shall be a waiver or modification only with respect to the
specific matter to which the waiver or modification relates and shall in no
way impair the rights of the party or the obligations of the other parties
in any other respect.
15. This Agreement shall bind and be for the benefit of Creditors and the Bank
and their respective successors and assigns, and shall be construed
according to the laws of the State of Michigan, without regard to conflict
of laws principles. If this Agreement is executed by two or more persons,
it shall bind each of them individually as well as jointly.
4
64
16. The term "Borrower", as used in this Agreement, includes any person,
corporation, partnership or other entity which succeeds to the interests or
business of a Borrower named above, and the terms "Senior Indebtedness" and
"Subordinated Indebtedness" include indebtedness of any successor Borrower
to the Bank and Creditors. Reference to the Borrowers' indebtedness in this
Agreement refers to indebtedness of any one or more Borrowers.
17. Creditors jointly and not severally agree to reimburse the Bank upon demand
for any and all costs and expenses (including, without limit, court costs,
legal fees, and reasonable attorney fees whether inside or outside counsel
is used, whether or not suit is instituted and, if instituted, whether at
the trial or appellate level, in a bankruptcy, probate or administrative
proceeding, or otherwise) incurred in enforcing the duties and obligations
of Creditors under Section 4 of this Agreement.
18. Each Creditor waives any defense against the enforceability of this
Agreement based upon or arising by reason of the application by any
Borrower of the proceeds of any Indebtedness for purposes other than the
purposes represented by any Borrower to the Bank or intended or understood
by the Bank or Creditors. Each Creditor waives all rights to require the
Bank to xxxxxxxx the Collateral or any other property the Bank may at any
time have as security for the Indebtedness and waives a right to require
the Bank to first proceed against any guarantor or other person before
proceeding against the Collateral.
19. The relative priorities of the Bank and Creditors in the Collateral as set
forth in this Agreement control irrespective of the time, method or order
of attachment or perfection of the hens and security interests acquired by
the parties in the Collateral and irrespective of the priorities as would
otherwise be determined by reference to the Uniform Commercial Code or
other applicable laws. Creditors shall not contest the validity, priority
or perfection of the Bank's security interest in the Collateral (regardless
of whether the Bank's security interest in the Collateral is valid or
perfected). The priorities of any liens or security interests of the
parties in any property of the Borrowers other than the Collateral are not
affected by this Agreement and shall be determined by reference to
applicable law. The Bank's rights under this agreement are in addition
to, and not in substitution of, its rights under any other subordination
agreement with any Creditor.
20. Special Provisions
A. Notwithstanding anything to the contrary in this Agreement, Creditors
may ask for, demand, xxx for, take or receive from Borrowers the
regularly scheduled quarterly payments which may come due under the
above-described promissory notes ("Notes") and expense reimbursements
permitted thereunder; provided, however, that Creditors may not ask
for, demand, xxx for, take or receive from Borrower any such payments
after Creditors are given written notice by the Bank that a default or
an event of default exists or has occurred under any note(s),
guaranty(ies), and/or
5
65
agreement(s) between the Bank and Borrower or that any loan(s) between Borrower
and the Bank has (have) been called (a "Standstill Notice"). All such payments
due Creditors under the Notes must be suspended until such time (if ever) as
Creditor receives subsequent written notice from the Bank stating that the
default has been cured and/or the loan(s) has (have) been paid. The Bank agrees
to give Borrower copies of the notices, but the Bank's failure to do so shall
not affect its rights under this Agreement or any other agreement with Borrower.
The Notes may not be modified or prepaid without the prior written consent of
the Bank.
B. Notwithstanding any of the other provisions of this Agreement, if within
120 days after receipt by Creditors of a Standstill Notice the Bank has not
accelerated the Senior Indebtedness and initiated legal action against
Borrowers or the Collateral, and continued to diligently pursue such legal
action and/or remedies, Creditors may accelerate the due date of the Notes,
may demand and xxx for the amounts due under the Notes and exercise any of
Creditors' rights in any Collateral now or later securing the Subordinated
Indebtedness regardless of the issuance of a subsequent Standstill Notice.
Creditors shall give the Bank written notice of their intent to so exercise
their remedies ten days prior to exercising such remedies. In exercising
remedies against the collateral, the Creditors shall cooperate with the
Bank and shall remit any proceeds of the sale or disposition of collateral
to the Bank to be applied to the Senior Indebtedness until such time as the
Senior Indebtedness is paid in full. In no event shall a Standstill Notice
arising from default other than a payment default be in effect without the
commencement of legal action by the Bank as provided in this paragraph for
more than 120 days in any 12 month period.
C. In the event of any distribution, division or application, whether partial
or complete, voluntary or involuntary, by operation of law or otherwise, of
all or any part of Borrowers' assets, or the proceeds of Borrowers' assets,
in whatever form, to Creditors of Borrower or upon any indebtedness of
Borrowers, whether by reason of the liquidation, dissolution or other
winding-up of Borrowers, or by reason of any execution sale, receivership,
insolvency, or bankruptcy proceeding, assignment for the benefit of
Creditors, proceedings for reorganization, or readjustment of Borrowers or
Borrowers' properties, then and in such event, (a) the Senior Indebtedness
shall be paid in full before any payment is made upon the Subordinated
Indebtedness, and (b) all payments and distributions, of any kind or
character and whether in case, property, or securities, which shall be
payable or deliverable upon or in respect of the Subordinated Indebtedness
shall be paid or delivered directly to Bank for application in payment of
the amounts then due on the Senior Indebtedness until the Senior
Indebtedness shall have been paid in full.
D. Upon payment in full of the Senior Indebtedness, Creditor shall be
subrogated to any rights, liens and security interests of Bank pursuant to
the Senior Indebtedness.
6
66
E. This agreement may be executed in any number of counterparts, each of which
shall constitute an original and all of which taken together shall
constitute one and the same agreement.
F. The parties acknowledge and agree that Bank is holding original stock
certificates of Genomic Solutions, Ltd. and Genomic Solution, K.K. as
security for the Senior Indebtedness and that Bank will not release those
stock certificates without first giving Creditors the opportunity to take
possession of those certificates to perfect their security interest in
those stock certificates as security for the Subordinated Indebtedness.
THE UNDERSIGNED AND THE BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A
CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER CONSULTING (OR
HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE KNOWINGLY
AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES ANY RIGHT TO TRIAL BY JURY
IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN
ANY WAY RELATED TO, THIS AGREEMENT.
7
67
IN WITNESS WHEREOF, Creditors and Bank have caused this Agreement to be executed
as of April 23, 1999.
LENDERS:
WHITE PINES LIMITED PARTNERSHIP I
By: White Pines G.P., L,L.C.,
its general partner
By:
-------------------------------------------
Xxxxxxxxx X. Xxxxx, Chairman
PACIFIC CAPITAL, L.P.
By: Pacific Capital Corporation,
its general partner
By:
--------------------------------------------
Xxxxxxxxx X. Xxxxx, Vice chairman
IAN R. N. BUND XXXXX XXXXXX
PROTOTYPE OS PLAN ACCOUNT
#000-00000-00000
XXXXX CONSULTING ASSOCIATES, INC.
VOLUNTEER HEALTHCARE ASSOCIATES, L.L.C.
MCDONALD INVESTMENTS INC. CUSTODIAN
FBO S. XXXXXXXX XXXXXXXX III XXX
ROLLOVER ACCOUNT #853162191
XXXXXX X. XXXXXX LIVING TRUST U/A/D
SEPTEMBER 9, 1997
8
68
XXXX X. XXXXXX
XXXXXXXX INVESTMENTS INC. CUSTODIAN
FBO XXXXXX X. XXXXX XXX
ROLLOVER ACCOUNT #00000000
NATIONAL CITY BANK OF MI/IL CUSTODIAN
FBO XXXXXXX X. XXXXXX XXX
ROLLOVER ACCOUNT DATED JUNE 12, 1991
#MI-1491-00-4
XXXXXXX AND ASSOCIATES PROFIT SHARING
PLAN X/X/X XXXXXXX 0, 0000
XXXXXXX X. Xxxxxxxx
By: White Pines Management, L.L.C.,
a Michigan limited liability company,
attorney-in-fact
By:
----------------------------------------------
Xxxxxxxxx X. Xxxxx, Chairman
CHASE VENTURE CAPITAL ASSOCIATES, L.P.
By: Chase Capital Partners, its General partner
By:
----------------------------------------------
AMERICAN HEALTHCARE FUND II
By:
---------------------------------------------
-------------------------------------------------
J. XXXXXXX XXXXXXXXX
-------------------------------------------------
XXXXXX X. XXXXXXX
-------------------------------------------------
XXXX X. XXXXXXXXX
GROVE INVESTMENT PARTNERS
By:
----------------------------------------------
9
69
COMERICA BANK
By: BANK'S ADDRESS:
----------------------------
Its: 000 Xxxxxxxx Xxxxxx
---------------------------- Xxxxxxx, XX 00000
BORROWER'S ACKNOWLEDGMENT
The undersigned ("Borrowers") accept notice of subordination created by this
Agreement and agree that they will take no action inconsistent with this
Agreement. Borrowers agree that the Bank may, at its option, without notice and
without limiting Bank's other rights, upon any breach by Creditors holding at
least 10% of the aggregate outstanding principal amount of the Subordinated
Indebtedness ("Material Creditors") of, or purported termination by Material
Creditors of, this Agreement, declare all Senior Indebtedness to be immediately
due and payable and/or terminate any commitments of Bank to Borrowers.
GENOMIC SOLUTIONS, INC.
BORROWERS' ADDRESS
By: 0000 Xxxxxxx Xxxxx
----------------------------------- Xxx Xxxxx, XX 00000
Its:
----------------------------------
GENOMIC SOLUTIONS, LTD
By:
----------------------------------
Its:
----------------------------------
GENOMIC SOLUTIONS, K.K.
By:
----------------------------------
Its:
----------------------------------
10
70
EXHIBIT E
BORROWER'S OPINION
71
[JAFFE, RAITT, HEUER & XXXXX LETTERHEAD]
April 23, 1999
White Pines Limited Partnership I; Pacific Capital, L.P.;
Chase Venture Capital Associates, L.P.; American Health Care Fund II;
Ian R. N. Bund Xxxxx Xxxxxx Prototype PS Plan Account #000-00000-00000;
Xxxxx Consulting Associates, Inc.; Volunteer Healthcare Associates, L.L.C.;
McDonald Investments Inc. Custodian f/b/o S. Xxxxxxxx XxXxxxxx III XXX
Rollover Account #00000000; J. Xxxxxxx Xxxxxxxxx; Xxxxxx X. Xxxxxxx;
Xxxx X. Xxxxxxxxx; Grove Investment Partners; Xxxxxx X. Xxxxxx Living Trust
u/a/d September 9, 1997; Xxxx X. Xxxxxx; XxXxxxxx Investments Inc. Custodian
f/b/o Xxxxxx X. Xxxxx XXX Rollover Account #00000000; National City Bank of
MI/IL
Custodian f/b/o Xxxxxxx X. Xxxxxx XXX Rollover Account Dated June 12, 1991
#MI-1491-00-4; Xxxxxxx and Associates Profit Sharing Plan u/a/d January 1, 1991;
and Xxxxxxx X. Xxxxxxxx (collectively, the "Lenders")
c/o White Pines Management
0000 Xxxxxxxx Xxxx, Xxxxx X
Xxx Xxxxx, Xxxxxxxx 00000
RE: BUSINESS LOAN AGREEMENT, DATED APRIL 23, 1999 (THE "AGREEMENT") AMONG
GENOMIC SOLUTIONS INC., A DELAWARE CORPORATION (THE "COMPANY"), ITS
SUBSIDIARIES AND THE LENDERS
Gentlemen:
We have acted as counsel to the Company in connection with the negotiation
and preparation of the Agreement and related documents and the consummation of
the transactions contemplated in the Agreement. We are delivering this opinion
to you at the request of the Company, pursuant to Section 6(e) of the Agreement.
Any capitalized terms used, but not defined, in this opinion have the same
meanings as in the Agreement.
In rendering this opinion, we have examined and relied on the following
documents, all of which are dated the date hereof unless otherwise specified,
and nothing else:
72
JAFFE, RAITT, HEUER & XXXXX
White Pines Management
April 23, 1999
Page 2
A. The Agreement, including its Exhibits and Schedules;
B. Promissory notes of the Company and its subsidiaries to each of the
Lenders, respectively (collectively, the "Notes");
C. Warrants (noncancellable) to purchase shares of common stock of the
Company, issued to each of the Lenders, respectively, in the amounts set forth
in the Agreement (collectively, the "Noncancellable Warrants");
D. Warrants (cancellable at $5.00 Liquidity Event) to purchase shares of
common stock of the Company, issued to each of the Lenders, respectively, in the
amounts set forth in the Agreement (collectively, the "Cancellable-at-$5.00
Warrants");
E. Warrants (cancellable above $5.00 Liquidity Event) to purchase shares of
common stock of the Company, issued to each of the Lenders, respectively, in the
amounts set forth in the Agreement (collectively, the "Cancellable-above-$5.00
Warrants" and together with the Noncancellable Warrants and the
Cancellable-at-$5.00 Warrants, the "Warrants");
F. Registration Rights Agreement between the Company and the Lenders (the
"Registration Rights Agreement");
G. Security Agreement executed by the Company in favor of the Lenders (the
"Security Agreement").
H. Assignment and Pledge Agreement between the Company and the Lenders;
I. Subordination Agreement among Comerica Bank, the Company and each of the
Lenders (the "Subordination Agreement");
J. Second Amendment to Shareholder Agreement of the Company (the
"Amendment"), executed by the Company, the Lenders and certain holders of Series
B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock of the
Company (collectively, "Preferred Stockholders") between April 16, 1999 and the
date hereof;
K. Copies of Uniform Commercial Code financing statements on Michigan and
Massachusetts forms UCC-1 and on Michigan form UCC-lA, naming and executed by
the Company as debtor (collectively, the "Financing Statements"), to be filed in
the office of the Secretary of State of Michigan, the Secretary of State of
Massachusetts and the Washtenaw County, Michigan Register of Deeds,
respectively;
73
JAFFE, RAITT, HEUER & XXXXX
White Pines Management
April 23,1999
Page 3
L. Consent and Waiver of Shareholder forms, and Amended Consent and Waiver
of Shareholder forms, executed by certain Preferred Stockholders between April
16, 1999 and the date hereof;
M. Certificate of Incorporation for the Company, as amended, as certified
by the Delaware Secretary of State on April 9, 1999;
N. Certificate of Good Standing for the Company, as certified by the
Delaware Secretary of State on April 9, 1999;
O. Certificate of Authority of the Company to transact business in
Michigan, as certified by the Michigan Department of Consumer and Industry
Services on April 12, 1999;
P. A copy of the Bylaws of the Company, certified by the Secretary of the
Company on April 23, 1999;
Q. A copy of the resolutions of the Board of Directors of the Company,
authorizing the execution and delivery of, and consummation of the transactions
contemplated in, the Agreement, certified by the Secretary of the Company on
April 23, 1999;
R. Series B Preferred Stock Purchase Agreement between the B.I. Systems
Corporation (a predecessor to the Company by merger) ("B.I. Systems") and
certain purchasers of Series B Preferred Stock of the B.I. Systems Corporation,
dated May 1997;
S. Series C Preferred Stock Purchase Agreement between the Company and
certain purchasers of Series C Preferred Stock of the Company, dated December
29, 1997
T. Series D Preferred Stock Purchase Agreement between the Company and
certain purchasers of Series D Preferred Stock of the Company, dated May 27,
1998;
U. Series M Preferred Stock Purchase Agreement between B.I. Systems and
Millipore Corporation, dated as of May 7, 1997 (the "Series M Agreement");
V. Purchase Agreement among the Company, PBA Technology Limited ("PBA") and
certain shareholders of PBA, dated December 24, 1997;
W. Current loan documentation between the Company and Comerica Bank;
X. Minute Book of the Company, including stockholder records, from December
1997 to the present;
74
JAFFE, RAITT, HEUER & XXXXX
White Pines Management
April 23, 1999
Page 4
Y. Shareholder Agreement of the Company, dated December 24, 1997, among
the Company and certain of its shareholders, as amended as of May 27, 1998 and
as of the date hereof (the "Shareholder Agreement"); and
Z. A Certificate of Facts (the "Certificate of Facts"), dated as of the
same date as this opinion, executed by Xxxxxxx X. Xxxxxxxx, individually and as
an officer, director and shareholder of the Company, a copy of which is
attached.
For the purposes of this opinion, the documents identified in paragraphs A
through K above, inclusive, are collectively referred to as the "Transaction
Documents," and the documents identified in paragraphs A through Z are
collectively referred to as the "Documents."
In rendering this opinion, we have assumed, without independent
investigation: (i) the genuineness of all signatures of the persons signing the
Documents other than those officers of the Company signing on behalf of the
Company; (ii) the authority of the persons signing the Documents other than
those officers signing on behalf of the Company; (iii) the authenticity of all
documents submitted to us as originals; (iv) the conformity to authentic
original documents of all documents submitted to us as certified, conformed or
photostatic copies; (v) the accuracy and completeness of factual matters,
representations, warranties and recitals set forth in the Documents, (vi) the
parties to the Transaction Documents (other than the Company) have all necessary
power and authority to execute, deliver, accept and perform their respective
obligations under such Transaction Documents; (vii) all necessary action has
been taken by all parties to the Transaction Documents (other than the Company)
so as to cause each of them to be bound by the Transaction Documents to which
they are parties under the laws of their respective jurisdictions of residence;
(viii) each of the Lenders is an "Accredited Investor" as such term is defined
under the Securities Act of 1933 and the regulations promulgated thereunder; and
(ix) none of the collateral under the Security Agreement or the Financing
Statements consists of "instruments" or "chattel paper" as such terms are
defined in UCC Section 9-105, and none of such collateral consists of equipment
used in farming operations, farm products, accounts or general intangibles
arising from or relating to the sale of farm products, consumer goods, crops,
timber to be cut, minerals and the like (including oil and gas), or accounts
resulting from the sale thereof (as defined in UCC Section 9-103). All
references to "UCC" herein are references to the Uniform Commercial Code as
presently in effect in the State of Michigan, MCLA ss.440.1101 et seq.
Our review has been limited to examining the Documents, applicable Michigan
and, where applicable, United States law and the General Corporation Law of the
State of Delaware, as amended. This opinion is qualified accordingly.
To the extent that any opinion given in this letter is dependent on factual
information or is expressed in terms of our knowledge, we have relied
exclusively on the assumptions stated above, the Documents and the relevant
factual representations set forth in the Certificate of Facts.
75
JAFFE, RAITT, HEUER & XXXXX
White Pines Management
April 23, 1999
Page 5
We have not undertaken to independently verify any such factual information,
assumptions or factual representations. In this opinion, "knowledge" means the
conscious awareness of facts or other information by (i) the attorney executing
this opinion on behalf of our firm; (ii) any attorney who has been actively
involved in (a) negotiating the terms and conditions of the Agreement, (b)
drafting the Documents, or (c) preparing this opinion; and (iii) the attorney
who is primarily responsible for providing the response for a particular issue
or confirmation addressed in this opinion.
Based on the foregoing, and subject to the qualifications and limitations
set forth below, we are of the opinion that:
1. The Company is a corporation organized, validly existing and in good
standing under the laws of the State of Delaware, and is qualified to
do business as a foreign corporation in the State of Michigan. The
Company has all required corporate power and authority to own its
property, which to our knowledge it owns, and to carry on its
business, which to our knowledge it carries on, and to execute and
deliver the Transaction Documents and to perform all of the
transactions contemplated thereunder.
2. The Company's execution and delivery of the Transaction Documents and
the Company's performance of its obligations thereunder, have been
duly authorized by all requisite corporate action.
3. The Company has duly executed and delivered the Transaction Documents,
and the Transaction Documents constitute valid and binding obligations
of the Company, enforceable against the Company in accordance with
their respective terms. No consent, approval or authorization of, or
designation, declaration or filing with, any governmental authority or
any other person or entity is required of the Company, that has not
already been obtained, in connection with the execution and delivery
of the Transaction Documents or, except for compliance with applicable
securities laws which are addressed in paragraph 8 below, the issuance
and delivery of the Warrants in accordance with the terms of the
Agreement or the consummation of any other transaction contemplated by
the Agreement.
4. The Company's execution and delivery of the Transaction Documents, and
the Company's performance and fulfillment of its obligations
thereunder and compliance with the respective terms and provisions
thereof, and the consummation of the transactions contemplated
therein, does not and will not (a) violate any law, statute, rule or
regulation to which the Company or its assets, properties or business
is subject; (b) violate, result in the breach or violation of,
constitute a default under, result in the creation of any lien,
mortgage, security
76
JAFFE, RAITT, HEUER & XXXXX
White Pines Management
April 23, 1999
Page 6
interest, charge or other encumbrance on any assets or properties
pursuant to, or give any third party the right to accelerate any
obligation under, any mortgage, indenture, contract, agreement, lease,
instrument, restriction, judgment, ruling, writ, injunction, decree or
other obligation or court order which is known to us and to which the
Company is a party or, to our knowledge, by which the Company or any
of its assets, properties or business is bound or subject; or (c)
violate, result in the breach or violation of or constitute a default
under the terms, conditions or provisions of its Certificate of
Incorporation or its Bylaws.
5. Immediately after the Closing as contemplated in the Agreement, the
authorized capital stock of the Company shall consist of 40,000,000
shares of common stock, par value $0.001 (the "Common Stock"), and
10,000,000 shares of preferred stock, par value $0.001 (the "Preferred
Stock"), of which 1,680,880 shares shall be designated as Series B
Preferred Stock, 4,070,339 shares shall be designated as Series C
Preferred Stock, 1,100,000 shares shall be designated as Series D
Preferred Stock and 50,000 shares shall be designated as Series M
Preferred Stock. Immediately after the Closing, to our knowledge,
1,680,880 shares of Series B Preferred Stock, 4,070,339 shares of
Series C Preferred Stock, 1,100,000 shares of Series D Preferred Stock
and 50,000 shares of Series M Preferred Stock will be validly issued
and outstanding and free of any preemptive rights which have not been
waived. When issued against payment therefor in accordance with the
terms of the Agreement and the Warrants, the common stock issuable
upon exercise of the Warrants will be validly issued and outstanding
and free of any preemptive rights existing as a matter of law or, to
our knowledge, under the Certificate of Incorporation or Bylaws of the
Company or any contractual agreement, which have not been waived.
6. The Company has reserved 1,100,000 shares of Common Stock for issuance
upon conversion of the Series D Preferred Stock, 4,070,339 shares of
Common Stock for issuance upon conversion of the Series C Preferred
Stock, 5,093,576 shares of Common Stock for issuance upon conversion
of the Series B Preferred Stock and 270,027 shares of Common Stock for
issuance upon conversion of the Series M Preferred Stock. As of the
date hereof, to our knowledge, options to acquire an aggregate of
2,162,020 shares of Common Stock are outstanding. Except as aforesaid
and as contemplated by the Agreement, to our knowledge: (i) no
subscription, warrant, option, convertible security or other right
(contingent or otherwise) to purchase or acquire from the Company any
shares of capital stock of the Company is authorized or outstanding;
(ii) there is not any commitment or offer of the Company to issue any
subscription, warrant, option, convertible security or other such
right or to issue or distribute to holders of any shares of its
capital stock any evidences of indebtedness or assets of the Company;
(iii) the Company has no obligation (contingent or otherwise) to
purchase, redeem or
77
JAFFE, RAITT, HEUER & XXXXX
White Pines Management
April 23, 1999
Page 7
otherwise acquire any shares of its capital stock or any interest
therein or to pay any dividend or make any other distribution in
respect thereof; and (iv) there are no restrictions on the transfer of
the Company's capital stock other than those arising from securities
laws or the Documents or contemplated by the Agreement. To our
knowledge, except as contemplated by the Agreement, Shareholder
Agreement and the Series M Agreement, no person or entity is entitled
to any preemptive or similar right with respect to the issuance of
any capital stock of the Company. To our knowledge, except for the
Shareholder Agreement and the Series M Agreement, there are no voting
trusts, voting agreements, proxies or other agreements, instruments or
understandings with respect to the voting of the capital stock of the
Company and there are no agreements or understandings granting to any
person or entity any rights with respect to the registration of any
capital stock of the Company under the Securities Act of 1933, as
amended (the "Securities Act").
7. We have no knowledge of any action, suit, proceeding or investigation
before any court, public board or body pending to which the Company is
the subject, and to our knowledge, no such proceedings are threatened
by others in writing.
8. Based on a claim of exemption under Section 4(2) of the Securities
Act, it is not necessary in connection with the offer, sale and
delivery of the Warrants pursuant to the terms of the Agreement to
register such Warrants under the Securities Act or under applicable
state securities laws regulating the issuance or sale of securities.
9. The Company has granted to Lenders a valid security interest in all
those assets of the Company in which a security interest may be
granted by the execution of a security agreement under the UCC. All
required filings necessary to perfect such security interest with
respect to all collateral located in the State of Michigan and with
respect to all receivables, contracts, contract rights and general
intangibles to the extent the Company's chief executive office is
located in the State of Michigan, but only to the extent such
collateral consists of the type of property in which a security
interest may be perfected by filing a financing statement in the State
of Michigan under the UCC, have been made. In order to continue the
effectiveness of the Financing Statements, continuation statements
must be filed within the six-month period preceding the fifth
anniversary of the date of the filing of such Financing Statements.
The continuation statements extend the effectiveness of the original
statements for an additional five years (running from the last date
such filings would have been effective), and succeeding continuation
statements must be filed in the same manner to further extend the
effectiveness of the Financing Statements.
78
JAFFE, RAITT, HEUER & XXXXX
White Pines Management
April 23, 1999
Page 8
10. The Warrants have been validly issued and are not subject to any
preemptive rights or rights of first refusal existing as a matter of
law or, to our knowledge, under the Certificate of Incorporation or
Bylaws of the Company or any contractual agreement, which have not
been effectively waived. The common stock of the Company issuable upon
exercise of the Warrants (a) has been duly and validly reserved, and
neither it nor its issuance will be subject to any preemptive rights
or rights of first refusal existing as of the date hereof as a matter
of law or, to our knowledge, existing as of the date hereof under the
Certificate of Incorporation or Bylaws of the Company or any
contractual agreement, which have not been effectively waived, and (b)
upon issuance and payment therefor as provided in the Warrants, will
be validly issued, fully paid and nonassessable.
11. The provisions of Article V(D)(4) of the Company's Certificate of
Incorporation will not preclude or limit in any manner the exercise by
the Lenders of their rights under Section 12(c) of the Agreement or
subsection K of the Warrants.
We express no opinion as to any of the following matters, and the foregoing
opinions are qualified accordingly:
(a) The effect on the Documents of: (i) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar laws
relating to or affecting the enforcement of creditors' rights
generally; or (ii) general principles of equity, whether at law or in
equity;
(b) The interrelation with, or effect on the validity, enforceability or
binding effect on the Documents or on anything in this opinion of any
documents which we have not reviewed; although we have no reason to
believe that there are any such documents which would effect the
validity, enforceability or binding effect of the Documents;
(c) The validity, binding effect or enforceability of provisions of the
Documents: (i) appointing any person as another person's
attorney-in-fact; (ii) waiving rights or defenses to obligations where
such waivers are against the statutes, laws or public policy of the
State of Michigan, the State of Delaware or the United States of
America; (iii) waiving any right of redemption, exemption, trial by
jury, objection to personal jurisdiction or venue or other similar
right; or (iv) providing that the rights and remedies of the parties
to such Documents are not exclusive, that every right or remedy is
cumulative and may be exercised in addition to or with any other right
or remedy, or that the election of some remedy or remedies does not
preclude recourse to one or more other remedies;
79
JAFFE, RAITT, HEUER & XXXXX
White Pines Management
April 23, 1999
Page 9
(d) Any subsidiary of the Company with its principal offices outside of
the United States of America, including Genomic Solutions, K.K. and
Genomic Solutions, Ltd., and all of our opinions are expressly
limited to the Company and its assets, as distinguished from such
subsidiaries and their respective assets;
(e) Any rights, powers or preferences of the holders of Series M Preferred
Stock of the Company, including without limitation those rights,
powers or preferences provided in the Series M Agreement; and
(f) Except as expressly provided in our opinion in paragraph eight, the
compliance of the transactions contemplated herein with, or other
effect of, the Securities Act or the securities laws of any
jurisdiction.
We are qualified to practice law in the State of Michigan only and do not
purport to be experts on or to express any opinion concerning any laws other
than the laws of the State of Michigan, the General Corporation Law of the State
of Delaware, as amended, and the laws of the United States of America. This
opinion is qualified accordingly.
This opinion is for the sole benefit of the Lenders and may not be relied
on by any other party without our prior written consent. This opinion is given
on and as of the date hereof only, and it does not contemplate, and no opinion
is given or intended with respect to future events or subsequent changes in law
or fact, and the undersigned has no obligation to update this opinion with
respect thereto.
Very truly yours,
JAFFE, RAITT, HEUER & XXXXX,
Professional Corporation
Xxxxx Sugar
80
CERTIFICATE OF FACTS
April 23, 1999
Jaffe, Raitt, Heuer & Xxxxx,
Professional Corporation
Xxx Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Gentlemen:
The undersigned is executing this Certificate of Facts individually and as
an officer and director of Genomic Solutions Inc., a Delaware corporation
("Genomic"). I am aware that you will be relying on this Certificate as a basis
for formulating your opinion letter to various lenders (the "Lenders") with
respect to, among other things, Genomic's secured, subordinated loan of $6.0
million from, and the issuance of warrants to, the Lenders in accordance with
that Business Loan Agreement (the "Agreement") among Genomic, its subsidiaries
and the Lenders, dated as of the date hereof (the "Financing").
I have been personally involved in the Financing and the statements herein
are made based on my personal actual knowledge. In furtherance thereof, I have
taken the utmost care and diligence to ascertain that each and every statement
herein is complete, true and accurate and I have undertaken to verify each and
every statement in order to determine not only the veracity of the statements
made, but also that all pertinent material, data and information have been
disclosed.
Based upon the foregoing, I certify as follows to Jaffe, Raitt, Heuer &
Xxxxx, Professional Corporation ("JRHW").
1. I have delivered to JRHW true and complete copies of the Amended and
Restated Certificate of Incorporation, Certificate of Good Standing,
By-Laws, minute book and stockholder records of Genomic, as amended
through the date hereof, all of which are in full force and effect.
2. I have delivered to JRHW a true and complete copies of the following:
(a) the Agreement, including its Exhibits and Schedules; (b) the
promissory notes of Genomic and its subsidiaries to each of the
Lenders, respectively; (c) the Warrants issued to the Lenders
(cancellable and noncancellable, as provided in the Agreement)
(collectively, the "Warrants"); (d) the Registration Rights Agreement
between Genomic and the Lenders; (e) the Security Agreement executed
by Genomic in favor of the Lenders; (f) the Subordination Agreement
among Comerica Bank, Genomic and each of the Lenders; (g) the Second
Amendment to Shareholder Agreement of Genomic, executed by Genomic,
the Lenders and certain holders of Series B, Series C and Series D
Preferred Stock of Genomic; (h) UCC Financing Statements, to be filed
with the Michigan Secretary of State, Secretary of State of
Massachusetts and Washtenaw County Register of Deeds; and (i) Consent
and Waiver of Shareholder forms, and Amended Consent and Waiver of
Shareholder forms, executed by certain Preferred Stockholders of
Genomic.
3. I have delivered to JRHW a true and complete copy of the resolution of
the Board of Directors of Genomic, authorizing the execution and
delivery of, and consummation of the transactions contemplated in, the
Agreement.
4. I have delivered, or provided access, to JRHW of all other corporate
documents, agreements and instruments to which Genomic is a party or
by which it may be bound, which are pertinent or relate to the
transactions contemplated in the Agreement.
81
JAFFE, RAITT, HEUER & XXXXX
MAY 27, 1998
Page 2
bound, which are pertinent or relate to the transactions contemplated
in the Agreement.
5. All of the directors of Genomic are aware that Genomic has entered
into the Agreement and that Genomic is issuing the Warrants and
granting the registration rights under the Registration Rights
Agreement, and such directors have approved these transactions, as
reflected in the resolutions referred to in Paragraph 3 above.
6. There are no litigation, suits, judgments, investigations or other
proceedings before any court or administrative agency, pending or
threatened, against Genomic.
7. No consent, approval, action, order or authorization of, or
designation, registration, declaration, qualification or filing with,
any governmental or regulatory authority is necessary or required,
that has not already been obtained, as a prerequisite for Genomic to
enter into the Agreement or to issue the Warrants or the common stock
issuable upon the exercise thereof, or for Genomic to execute and
deliver the other documents evidencing the transactions contemplated
thereby.
8. I know of no reason why the documents executed by Genomic in
connection with the above transactions would not constitute the valid
and binding obligations of or be unenforceable against Genomic.
9. Neither entering into the Agreement, nor the execution and delivery of
the documents executed in connection therewith, nor the issuance by
Genomic of the Warrants or the common stock issuable upon the exercise
thereof, will contravene, violate or cause a default under any
agreement, mortgage, indenture, or lease or any license, permit,
judgment, decree, order, statute, ordinance, rule or governmental
regulation to which Genomic is a party or bound.
10. Documents and other information which I or other representatives of
Genomic have given or made available to you during your review of
Genomic and its affairs in connection with the negotiation and
consummation of the Agreement (the "Documents") are complete and
accurate in all material respects. Any copies of Documents which I or
other representatives of Genomic have given to you are accurate
reproductions of the originals.
11. I have reviewed the representations and warranties made in the
Agreement and its exhibits and schedules, and I am not aware of any
facts or circumstances that would render any of the representations or
warranties in the Agreement and its exhibits and schedules untrue.
You may make copies of this signed Certificate of Facts, and you may rely
on such copies, as well as facsimile copies of this Certificate of Facts, to the
same extent as the original.
Very truly yours,
_______________________________________________
XXXXXXX X. XXXXXXXX, individually and as an
officer and director of Genomic Solutions Inc.,
a Delaware corporation
82
EXHIBIT F
REGISTRATION RIGHTS AGREEMENT
Filed as Exhibit 4.7
83
EXHIBIT G
AMENDMENT TO SHAREHOLDERS AGREEMENT
84
SECOND AMENDMENT TO SHAREHOLDERS AGREEMENT
THIS SECOND AMENDMENT TO SHAREHOLDERS AGREEMENT (the "Amendment") is made
and entered into by and between GENOMIC SOLUTIONS INC., a Delaware corporation
(the "Company"), and the undersigned persons (collectively, the "Shareholders")
as of April _, 1999. Capitalized terms not otherwise defined in this Amendment
shall have the meanings set forth in the Shareholders Agreement dated as of
December 24, 1997, as amended by the Amendment to Shareholders Agreement dated
May 27, 1998 (the "Agreement").
RECITALS:
A. The Company and certain of its shareholders entered into the Agreement
which provides for certain rights, privileges and restrictions applicable to the
Company's Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock and Common Stock held by shareholders who executed and delivered the
Agreement.
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. The Company and the Shareholders desire to amend the Agreement to
provide for and accommodate certain rights, privileges and certain restrictions
with respect to the Warrants.
D. Section 6.1 of the Agreement permits amendment with the approval of
not less than 66 2/3% of the shares of Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock, together with any shares issued
upon conversion of each respective class, each voting as a separate class on a
fully converted basis.
E. The holders of the Warrants are referred to individually as a
"Warrantholder" and collectively, as the "Warrantholders".
NOW, THEREFORE, for and in consideration of the foregoing Recitals and
other good and valuable consideration, the receipt and adequacy of which is
acknowledged, the Company and the Shareholders agree as follows:
SECTION 1.1 IS HEREBY DELETED IN ITS ENTIRETY AND REPLACED WITH THE
FOLLOWING SECTION 1.1:
85
1.1 Right of First Offer.
(a) Subject to the terms and conditions specified in this Section 1.1,
the Company hereby grants to each Preferred Shareholder and to each
Warrantholder a right to participate in future sales by the Company of its
Shares (as hereinafter defined). For purposes of this Section 1.1 and
Section 1.4, Preferred Shareholder or Warrantholder includes any partners
or retired partners, and designated affiliated purchasers ("Designees"),
including spouses and ancestors, lineal descendants and siblings of such
partners or spouses who acquire Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock or Warrants (collectively, the
"Senior Securities") or Common Stock issued upon conversion thereof, by
gift, will or intestate succession, of a Preferred Shareholder or a
Warrantholder. A Preferred Shareholder or Warrantholder shall be entitled
to apportion the right of first offer hereby granted to it among itself and
its partners and Designees 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
Preferred Shareholder and each Warrantholder in accordance with the
following provisions:
(1) The Company shall deliver a written notice ("Notice") to the
Preferred Shareholders and Warrantholders 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 20 calendar days after the Notice is sent, any
Preferred Shareholder and any Warrantholder 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
Preferred Shareholder's or Warrantholder's "Proportion") that the
number of shares of Common Stock held by such Preferred Shareholder or
Warrantholder (treating preferred stock and Warrants as if fully
converted to Common Stock) bears to the total number of shares of
Common Stock of the Company then outstanding (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 20-day period provided in subsection (2) hereof,
offer the remaining unsubscribed portion of such Shares which the
Preferred Shareholders and Warrantholders 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 consummated within 120 days following the
expiration of such 10-day period, the right provided hereunder shall
be deemed to be revived and
2
86
such Shares shall not be offered unless first reoffered to the
Preferred Shareholders and the Warrantholders in accordance herewith.
(4) The right of first offer in this Section 1.1 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 2.15 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 convertible or exercisable securities of the Company, (iv)
to any Common Stock issued upon conversion of the Series B Preferred
Stock, the Series C Preferred Stock, the Series D Preferred Stock, any
other series of Preferred Stock issued pursuant to the Certificate of
Incorporation or the Warrants, (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.
SECTION 1.3 IS HEREBY DELETED IN ITS ENTIRETY AND REPLACED WITH THE
FOLLOWING SECTION 1.3:
1.3 Right of First Refusal.
(a) If any Series B Holder, Series C Holder, Series D Holder or
Warrantholder wishes to transfer any shares of Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock or Common Stock issued
upon conversion of such preferred stock or Warrants, and if Xxxxxxxx
wishes to transfer any shares of Common Stock issued to him at any time, in
any case except in a Permitted Transfer (each such person, a "Selling
Shareholder"), the Selling Shareholder 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 Shareholder wishes to
transfer the Offered Securities, including the date of the proposed
transfer. This Section 1.3 shall not apply in the case of a Public
Offering, as defined in Section 2.15.
(b) Delivery of an Offer Notice by any Series B Holder, Series C
Holder, Series D Holder, Warrantholder or Xxxxxxxx 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 Preferred
Shareholders and Warrantholders, pursuant to this Section 1.3, at the price
and on the other material terms described in the Offer Notice.
3
87
(c) Within seven calendar days after it receives an Offer Notice from
a Series B Holder, Series C Holder, Series D Holder, Warrantholder or
Xxxxxxxx, the Company will deliver a copy of the Offer Notice to each
Preferred Shareholder and each Warrantholder.
(d) 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 from any Selling Stockholder, to accept the Offer
with respect to all of the Offered Securities.
(e) If the Company does not elect to accept an Offer, then within
seven calendar days after the expiration of the period specified in Section
1.3(d), the Company will notify each Preferred Shareholder and each
Warrantholder of the Preferred Shareholder's and Warrantholder's rights
under Section 1.4(f).
(f) If the Company does not elect to accept an Offer made by the
Series B Holders, Series C Holders, Series D Holders, Warrantholders or
Xxxxxxxx within the period specified in Section 1.3(d), then each of the
Preferred Shareholders and each of the Warrantholders may elect to accept
the Offer with respect to all or any portion of the Offered Securities, but
at least the Preferred Shareholder's or Warrantholder's Proportion of the
Offered Securities, by written notice delivered to the Company not later
than twenty-one calendar days after the Preferred Shareholder or the
Warrantholder received the Offer Notice.
(g) If pursuant to Section 1.3(f) Preferred Shareholders and
Warrantholders who accept the Offer made by the Series B Holder, Series C
Holder, Series D Holder, Warrantholder or Xxxxxxxx ("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:
(i) first, each Participant shall purchase the Participant's
Proportion of the Offered Securities; and
(ii) 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.
(h) If the Company or Participants elect to accept an Offer made by a
Series B Holder, Series C Holder, Series D Holder, Warrantholder or
Xxxxxxxx in its entirety, then the Selling Shareholder 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
4
88
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.
(i) If neither the Company nor Participants accept an Offer made by a
Series B Holder, Series C Holder, Series D Holder, Warrantholder or
Xxxxxxxx in its entirety, then the Selling Stockholder may transfer the
Offered Securities in accordance with Section 1.3(j) (subject to any other
agreements binding on the Selling Shareholder) 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 1.3 shall again apply to any transfer of Offered Securities
not transferred within such period.
(j) A Selling Stockholder may not transfer the Offered Securities
pursuant to Section 1.3(i), unless and until such transferee shall have
executed this Agreement in counterpart or delivered a written
acknowledgment to the Company that the securities to be received in the
proposed transfer are subject to this Agreement, thereby agreeing to be
bound hereby in all respects.
(k) 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:
(i) the spouse or a lineal ancestor or descendant (whether
natural or adopted) of the transferor;
(ii) 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
(iii) a partner in a transferor which is a partnership, or a
stockholder of a transferor which is corporation or a member 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.
SECTION 1.4 IS HEREBY DELETED IN ITS ENTIRETY AND REPLACED WITH THE
FOLLOWING SECTION 1.4:
Section 1.4 Tag-Along Rights. If a third-party ("Intended Transferee")
presents a bona fide written offer (the "Offer") to purchase fifty percent (50%)
or more of the Company's Subject Common Stock, as defined below, from any holder
or holders of the Company's common stock (the shares to be purchased are
referred to herein as the "Subject Shares"), and if the holder of the Subject
Shares (the "Intended Transferor") desires to accept the Offer and complies with
Section 1.3, it shall provide written notice of the Offer to the Company, which
immediately upon receipt
5
89
will send a written notice describing the Offer to the Preferred Shareholders
and the Warrantholders. The Preferred Shareholders and the Warrantholders shall
be entitled to participate in the transaction with the Intended Transferor, in
the same capacity as the Intended Transferor, such that each of the Preferred
Shareholders and each of the Warrantholders shall be entitled to transfer, on
the terms and conditions and in the manner set forth in the Offer, that
percentage of his or her Common Stock, including for these purposes, all Common
Stock that would be issued upon conversion, equal to the percentage of the
Subject Common Stock that the Subject Shares represent. "Subject Common Stock"
means all Common Stock including all stock that has been or may be converted
into Common Stock. To exercise his or her rights under this Section, a
Preferred Shareholder or Warrantholder shall so notify the Intended Transferor,
the Intended Transferee and the Board of Directors of the Company on or before
the twentieth (20th) business day after the Offer is received by the Preferred
Shareholders and the Warrantholders.
SECTION 2.2 IS HEREBY DELETED IN ITS ENTIRETY AND REPLACED WITH THE
FOLLOWING SECTION 2.2:
2.2 Company Registration.
(a) Subject to Section 2.2(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 6.6, the Company shall, subject to the
provisions of Sections 2.4, 2.5, 2.6 and 2.7, 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 2.
(b) The registration rights of the Holders pursuant to Section 2.2(a)
above are subject to the demand registration rights of the Warrantholders,
as more particularly described in the Registration Rights Agreement dated
_______________, 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
6
90
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.
SECTION 6.1 IS HEREBY DELETED IN ITS ENTIRETY AND REPLACED WITH THE
FOLLOWING SECTION 6.1:
6.1 Waivers and Amendments. With the written consent of the holders of
more than 66 2/3% of the shares of Series B Preferred Stock, Series C Preferred
Stock and Series D Preferred Stock and of the Warrants, together with any shares
issued upon conversion of each, each voting as a separate class on a fully
converted basis, the obligations of the Company and the rights of the holders of
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
the Warrants and shares issued upon conversion of each 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 percentage which is 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 Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock, Warrants on a fully
converted basis, and shares issued upon the conversion of each. 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 Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock, Warrants and shares issued upon
conversion of each. 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 6.1.
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. In the event of any inconsistency or 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.
7
91
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 parties have caused this Amendment to be executed
by themselves or by their respective representatives thereunto duly authorized
as of the day and year first above written. The undersigned Shareholders execute
this Amendment with respect to all shares of capital stock of the Company
currently owned and hereafter acquired.
GENOMIC SOLUTIONS INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
------------------------------------------
Xxxxxxx X. Xxxxxxxx
Its: President and
Chief Executive Officer
---------------------------------------------
Xxxxxxx X. Xxxxxxxx
---------------------------------------------
Xxxxxx X. Xxxxxx
---------------------------------------------
Xxxxxx Xxxxxxxxx
Corporate Capital Partners
By:
------------------------------------------
Its:
-----------------------------------------
---------------------------------------------
Xxxxx Xxxxxxx
8
92
EXHIBIT H
ASSIGNMENT AND PLEDGE AGREEMENT
93
ASSIGNMENT AND PLEDGE AGREEMENT
1. Genomic Solutions, Inc., a Delaware Corporation, 0000 Xxxxxxx Xxxxx,
Xxxxx X, Xxx Xxxxx, Xxxxxxxx 00000 (herein "Pledgor"), in consideration of
financial accommodations given, or to be given, or continued to Pledgor, Genomic
Solutions, Ltd., a United Kingdom corporation, Xxxx 0, Xxxxx Xxxxx, Xxxxxx Xxx
Xxxx, Xxxxx Socon, St. Neots, Cambridgshire, England PE193TP and/or Genomic
Solutions, K.K., a Japanese corporation, Gotanda Chuo Xxxx. 0X, 0-0,
Xxxxxxxxxxxxxx 0-xxxxx, Xxxxxxxxx-xx, Xxxxx 000-0000, Xxxxx (Genomic Solutions,
Ltd. and Genomic Solutions, K.K. each sometimes hereinafter being referred to as
a "Subsidiary" and sometimes hereinafter collectively referred to as the
"Subsidiaries" and each of Pledgor, Genomic Solutions, Ltd. and Genomic
Solutions, K.K. sometimes hereinafter referred to as "Borrower", a "Borrower" or
the "Borrower" and collectively sometimes referred to as the "Borrowers") by
White Pines Limited Partnership I, a Michigan limited partnership, 0000 Xxxxxxxx
Xxxx, Xxxxx X, Xxx Xxxxx, Xxxxxxxx 00000 (hereinafter referred to as "WPLP"),
Pacific Capital, L.P., a Delaware limited partnership, 0000 Xxxxxxxx Xxxx, Xxxxx
X, Xxx Xxxxx, Xxxxxxxx 00000 (hereinafter referred to as "Pacific"), Chase
Venture Capital Associates, L.P., a California limited partnership, 000 Xxxxxxx
Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 (hereinafter referred to as
"Chase"), American Healthcare Fund II, a Delaware limited partnership, 0000
Xxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxx 00000 (hereinafter referred to as
"American"), Ian R. N. Bund Xxxxx Xxxxxx Prototype PS Plan Account
#000-00000-00000, X.X. Xxx 0000, Xxxxxxxxxx Xxxxx, Xxxxxxxx 48303(hereinafter
referred to as "Bund") , Xxxxx Consulting Associates, Inc., an Ohio corporation,
0000 Xxxxxxxx Xxxxx, Xxxxxx, Xxxx 00000 (hereinafter referred to as "Xxxxx"),
Volunteer Healthcare Associates, L.L.C., a Tennessee limited liability company,
0 Xxxxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxxx 00000 (hereinafter referred to
as "Volunteer"), McDonald Investments Inc. Custodian FBO S. Xxxxxxxx XxXxxxxx
III XXX Rollover Account #00000000, 0000 Xxx Xxxxxx Xxxx, Xxxxx 000, Xxxxxxxxxx
Xxxxx, Xxxx 00000 (hereinafter referred to as "XxXxxxxx") , J. Xxxxxxx
Xxxxxxxxx, 000 Xxxx Xxxxxx, Xxxxx 000, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
(hereinafter referred to as "Xxxxxxxxx-CA") , Xxxxxx X. Xxxxxxx, 000 Xxxx
Xxxxxx, Xxxxx 000, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000 (hereinafter referred to as
"Xxxxxxx"), Xxxx X. Xxxxxxxxx, 0000 Xxxxxxxx Xxxx, Xxxxx Xxxxx Xxxxx, Xxxxxxx
00000 (hereinafter referred to as "Xxxxxxxxx-FL") , Grove Investment Partners,
an Illinois partnership, 000 Xxxxx Xxxx, Xxxxxxxxxx, Xxxxxxxx 00000 (hereinafter
referred to as "Grove") Xxxxxx X. Xxxxxx Living Trust u/a/d September 9, 1997,
000 Xxxxx Xxx Xxxxx, #0000, Xxx Xxxxxxxx, Xxxxxxx 00000 (hereinafter referred to
as "Xxxxxx"), Xxxx X. Xxxxxx, 00000 Xxx Xxxxx Xxxxx, Xxxxxxxx, Xxxxxxxx 00000
(hereinafter referred to as "Xxxxxx"), McDonald Investments Inc. Custodian FBO
Xxxxxx X. Xxxxx XXX Rollover Account #00000000, 0000 Xxx Xxxxxx Xxxx, Xxxxx 000,
Xxxxxxxxxx Xxxxx, Xxxx 00000 (hereinafter referred to as "Xxxxx"), National City
Bank of MI/IL, Custodian FBO Xxxxxxx X. Xxxxxx XXX Rollover Account
94
dated June 12, 1991 Account #MI-1491-00-4, 101 National City Bank, 000 X. Xxxx
Xxxxxx, Xxx Xxxxx, Xxxxxxxx 00000 (hereinafter referred to as "Xxxxxx"), Xxxxxxx
and Associates Profit Sharing Plan u/a/d January 1, 1991, 000 Xxxx Xxxxxxx
Xxxxxx, Xxx Xxxxx, Xxxxxxxx 00000 (hereinafter referred to as "Xxxxxxx") and
Xxxxxxx X. Xxxxxxxx, 00000 Xxxxxxxxx Xxxx Xxxx, Xxxxxxx, Xxxxxxxx 00000
(hereinafter referred to as "Xxxxxxxx") (WPLP, Pacific, Chase, American, Bund,
Xxxxx, Volunteer, XxXxxxxx, Xxxxxxxxx-CA, Xxxxxxx, Xxxxxxxxx-FL, Grove, Kalish,
Marler, Boyle, Amster, Xxxxxxx and Xxxxxxxx each being sometimes hereinafter
referred to as "Lender", a "Lender" or the "Lender" and collectively as
"Lenders"), and as collateral security for the payment of all debts,
obligations or liabilities now or hereafter existing, absolute or contingent,
including any extensions or renewals thereof, present or future, direct or
indirect, due or to become due from the Borrowers to the Lenders under (i) the
Promissory Notes in the amount of six million and no/100 ($6,000,000) dollars,
(ii) the Business Loan Agreement of even date herewith between Borrowers and
Lenders, and (iii) all obligations due under any of the Loan Documents (as
defined in the Business Loan Agreement), (all of which shall be called
"Indebtedness"), hereby irrevocably assigns, orders, transfers, pledges and sets
over to Lenders, their successors and assigns:
(a) All distributions, profit distributions, proceeds from sale of
stock included in the Collateral, and any and all other distributions due to
Pledgor from each Subsidiary and any successor in interest thereto.
(b) All shares and other property delivered to and deposited with
the Lenders, all property which is hereafter delivered to or comes into the
possession or control of the Lenders in any manner and for any purpose during
the existence of this Agreement, together with the stock rights, rights to
subscribe, liquidating dividends, stock dividends, dividends paid in stock, new
securities or other property which the Pledgor is entitled to receive and grants
to Lenders a continuing security interest in certain instruments, stock, chattel
paper, notes, debentures or other securities, to wit:
All shares of and 100% of its ownership interest in each Subsidiary as well as
any and all other property now or hereafter in the Lenders' possession or
control (all of the above set forth in subparagraph 1(a) and 1(b) herein
collectively termed "Collateral").
2. Pledgor warrants:
(a) that it is the lawful owner of all the Collateral including one
hundred percent (100%) of the capital stocks of each Subsidiary, free of all
claims, liens, or encumbrances whatsoever other than as set forth in the
Business Loan Agreement and the security interest granted to Lenders pursuant
hereto;
95
(b) all written information furnished by Pledgor to Lenders
hereafter, will be correct and true as of the date given; and
(c) that the pledge and security interest in the Collateral arising
out of this Agreement has been given and granted to induce the Lenders to
extend, or to continue to extend, credit accommodations to the Borrowers.
3. At any time, after an event of default under the Business Loan
Agreement or the Promissory Notes, Warrants or Security Agreement contemplated
therein shall occur and is not cured within any applicable grace period and
without notice, and at the expense of the Pledgor, Lenders may but are not
-obligated to:
(a) collect all dividends, interest, principal payments and other
sums payable upon or on account of the Collateral;
(b) Enter into an extension, reorganization, deposit, merger or
consolidation agreement, or other agreement related to or affecting the
Collateral, and in this connection may deposit or surrender control of the
Collateral, accept other property in exchange for the Collateral, and perform
such acts and things as it considers proper. Money or property received in
exchange for the Collateral shall be applied to the Indebtedness secured hereby;
(c) Compromise or settle claims or disputes as it deems desirable or
proper with reference to the Collateral;
(d) Insure, process and preserve the Collateral;
(e) Transfer the title to the Collateral to its name or the name of
the nominee;
(f) Exercise as to the Collateral, all the rights, powers and
remedies of an owner; and
(g) Perform any and all acts which Lenders in good xxxxx xxxx
necessary for the protection and preservation of Collateral or its value or
Lenders' security interest therein, including, but not limited to, transferring
any Collateral to Lenders' own name and receiving the income thereon as
additional security hereunder.
4. If, during the term of this Agreement, any stock dividends,
reclassifications, adjustments or other changes are made in the capital
structure of the corporation or other entity issuing the Collateral or any
portion thereof, whether it is a reorganization, recapitalization, share
split-up, a combination of shares, merger, transfer, or consolidation, all new,
additional or substituted shares for securities of whatever
96
class, issued with respect to the Collateral by reason of change, shall be
delivered to the Lenders immediately after issuance. The Lenders shall hold the
shares or security so issued as the Collateral under the terms of this
Agreement. If, during the term of this Agreement, warrants, options, or other
rights with respect to the Collateral are issued to the Pledgor, and if the
Pledgor exercises any such warrants, option, or right, all new stock or
securities received upon such exercise shall be delivered by the Pledgor to the
Lenders immediately after they are issued. Such new stock or securities shall be
held by the Lenders as Collateral under the terms of the Agreement.
5. (a) At any time after a default shall occur in any of the
Indebtedness according to the terms thereof, which default is not cured within
any applicable grace period, including the Notes, Security Agreements, Business
Loan Agreement, Warrants, or any other Loan Document between Lenders and
Borrowers and/or the Pledgor (the terms of such being incorporated by reference
herein) ; including a material impairment in any way of the value of the
Collateral or Lender's rights therein, the Lender may at its option, without
notice or demand to Pledgor, declare all or part of the Indebtedness to be
immediately due and payable. The Lender shall have the remedies of a secured
party under the Uniform Commercial Code of the State of Michigan. The Lenders
may sell the Collateral in such manner and for such price as the Lenders deem
appropriate without any liability for any loss due to decrease in the market
value of the Collateral during the period held. The Lender shall have the right
to purchase all or part of the Collateral at public or private sale. If
notification of intended disposition of any of the Collateral is required by
law, such notification shall be deemed reasonable and properly given if mailed,
postage prepaid, at least seven (7) days before any such disposition to any
address of the Pledgor appearing on the records of the Lenders. Lenders shall
have the right, but shall not be obligated, to vote the Collateral.
(b) Upon the exercise of Lenders' rights to receive distributions
with respect to the Collateral as provided in Section 3 above, Lenders shall be
vested with all the rights of the Pledgor in respect thereto, the ability to
notify any obligor or payor of the assignment and the ability to execute any
instrument on behalf of the Pledgor in settlement or fulfillment thereof. In
such event, Pledgor agrees to execute such additional assignments, instruments
and documents as the Lenders may request to evidence the assignment. The Pledgor
agrees that if thereafter it receives any payment of any such sums it shall
receive same as the agent of the Lenders and the Pledgor agrees to transmit such
payment in the form in which it was received to the Lenders on the date of
receipt thereof, appropriately endorsed, if necessary, to permit negotiation by
the Lenders. In any event, the Lenders are authorized to endorse or to sign, in
the name of the Pledgor, any instrument of whatsoever nature to effect the
collection of said payments for application to all sums due the Lenders.
97
6. The Collateral shall be evidenced by share certificates registered
in the name of Pledgor and accompanied by stock powers duly executed in blank.
Said share certificates and duly executed stock powers have been delivered to
Lenders concurrently with the execution of this Agreement
7. The proceeds of any sale shall be applied in the following order:
(a) to pay all costs and expenses of every kind for care,
safekeeping, collection, sale, foreclosure, delivery or otherwise respecting the
Collateral (including reasonable expenses incurred in the protection of the
Lenders' title or lien upon or right in any of the Collateral, reasonable actual
expenses for legal services of any kind in connection therewith or making of
such sale or sales, insurance, commission for sale, or guaranty).
(b) to interest on all Indebtedness of the Borrowers to the Lenders;
(c) to principal thereof, whether or not such Indebtedness is due or
accrued. After such application, Lenders will account to Pledgor for any
surplus and Borrowers shall remain liable to Lenders for any deficiency.
Application of proceeds as between particular debts, obligations, or
liabilities of Borrowers, shall be in the absolute and sole discretion of the
Lenders. The Lenders shall have the right in their sole discretion to determine
which rights, security liens, security interests, or remedies, they shall at
any time pursue, relinquish, subordinate, modify, or take any action with
respect thereto, without in any way modifying or affecting any other security
for the Indebtedness or any of the Lenders' rights hereunder.
8. Pledgor agrees that Lenders' security interest in the Collateral and
in any and all other property belonging to Pledgor, pledged or hypothecated, to
secure indebtedness shall be as valid as if Pledgor had duly assigned, released,
transferred and delivered said property to the Borrowers and the Borrowers, with
full ownership thereof, had pledged said property to secure all such
Indebtedness upon the terms herein stated.
9. Any transferee of, or endorser, guarantor, or surety paying the
indebtedness secured hereby may take over all or any part of the Collateral
subject hereto, and shall succeed to all rights of the Lenders in respect
thereto and the Lenders shall be under no further responsibility therefore.
98
10. The Pledgor authorizes Lenders, without notice or demand and
without affecting any liability on the Indebtedness to:
(a) renew, extend, accelerate, or change the time for repayment or
other terms of the Indebtedness secured hereby, including increasing or
decreasing the rate of interest;
(b) take and hold security other than the Collateral herein
described, for the payment of the Indebtedness and to exchange, substitute,
transfer, enforce, waive and release such security; and
(c) release or substitute any Borrower, endorser, guarantor, or
other Pledgor of the Indebtedness.
11. The Pledgor waives presentment, demand for performance, notice of
non-performance, protest, notice of protest, or notice of dishonor in connection
with an obligation or evidence of indebtedness held by Lenders as Collateral, or
in connection with any obligation of or evidence of indebtedness which
represents the Indebtedness secured thereby. The Lenders shall not be required
to examine into the validity of or to exchange or to collect on any Collateral
subject to this Agreement or to take any action necessary to hold any
corporation, issuer, or other parties liable on the Collateral; and diligence in
looking after, preserving, or acting with respect to the Collateral or
collecting the same is hereby waived by the parties hereto.
12. No delay on the part of the Lenders in the exercise of any right or
remedy shall operate as a waiver thereof, and no single or partial exercise by
the Lenders of any right or remedy shall preclude other or further exercise
thereof or the exercise of any other right or remedy. All of the Lenders' rights
and remedies whether evidenced hereby or by any other writing, shall be
cumulative and may be exercised from time to time singularly or concurrently.
13. This is a continuing Agreement and the rights, powers and remedies
apply to all past, present and future Indebtedness of the Borrowers to the
Lenders including that arising under successive transactions which continue the
Indebtedness, increase or decrease it, or create new Indebtedness. No notice of
creation or existence of any Indebtedness or of any renewal, extension, or
modification thereof, need be given to Pledgor. This agreement and related
financing statements shall be terminated upon payment in full of the
Indebtedness and all other sums and expenses required to be paid thereby,
provided however that for purposes of the foregoing, no Indebtedness shall be
deemed to exist under the terms of the Warrants prior to such time as Borrower
has been notified of the exercise of Lenders' rights under subsection (K) of the
Warrants. If this Agreement and the related financing statements shall have been
terminated prior to the date on which Borrower is notified of the exercise
99
of Lenders' rights under subsection (K) of the Warrants, the effectiveness of
this Agreement shall automatically continue or be reinstated with respect to all
amounts payable in accordance with the terms of the Warrants upon notice to
Borrower of the exercise of Lenders' rights under subsection (K) of the
Warrants. The breach of the terms of any Note, Warrant, Security Agreement,
Pledge or Business Loan Agreement of whatsoever nature between Borrowers and
Lenders, which is not cured within any applicable grace period, shall constitute
a default and breach of all such agreements including this agreement.
14. Lenders may deliver the Collateral or any part of it to the Pledgor
and the receipt by the Pledgor discharges the Lenders from any liability or
responsibility for said Collateral.
15. This Agreement shall be governed and interpreted according to the
laws of the State of Michigan without regard to its conflict of law principles.
Parties agree that all actions and proceedings arising in connection with this
Agreement shall be litigated in the State Courts or the Federal District Courts
in the State of Michigan. The parties hereby waive any right that they may have
to change the venue of any action against it by any other party in accordance
with this paragraph. The parties hereby consent and submit to the jurisdiction
and venue of the State Courts and Federal District Courts of the State of
Michigan. This Agreement shall inure to the benefit of and be binding upon the
Lenders, their successors and assigns, including the assignees of any
Indebtedness secured by this Agreement, and the Pledgor and its legal
representatives, successors and assigns. In the event any provision of this
Agreement shall be invalid or unenforceable, in full or in part, neither the
validity nor the enforceability of the remainder of this Agreement shall be
affected in any way.
16. Nothing herein contained shall be construed to bind Lenders to
perform any of the Pledgor's obligations under any of the Collateral as a
shareholder.
17. This Assignment and Pledge Agreement has been negotiated between the
parties and shall be deemed to have been mutually drafted by them.
In Witness Whereof, the parties hereto have executed this Agreement this
23rd day of April, 1999.
LENDERS: PLEDGOR:
WHITE PINES LIMITED PARTNERSHIP I GENOMIC SOLUTIONS, INC.
By: White Pines G.P., L.L.C.,
its general partner
By: By:
-------------------------------- ------------------------------
Xxxxxxxxx X. Xxxxx, Chairman Xxxxxxx X. Xxxxxxxx
President
100
PACIFIC CAPITAL, L.P.
By: Pacific Capital Corporation,
its general partner
By:
---------------------------------
Xxxxxxxxx X. Xxxxx, Vice-Chairman
IAN R. N. BUND XXXXX XXXXXX
PROTOTYPE PS PLAN ACCOUNT
#000-00000-00000
XXXXX CONSULTING ASSOCIATES, INC.
VOLUNTEER HEALTHCARE ASSOCIATES, L.L.C
MCDONALD INVESTMENTS INC. CUSTODIAN
FBO S. XXXXXXXX XXXXXXXX III XXX
ROLLOVER ACCOUNT #00000000
XXXXXX X. XXXXXX LIVING TRUST U/A/D
SEPTEMBER 9, 1997
XXXX X. XXXXXX
XXXXXXXX INVESTMENTS INC. CUSTODIAN
FBO XXXXXX X. XXXXX XXX
ROLLOVER ACCOUNT #00000000
NATIONAL CITY BANK OF MI/IL CUSTODIAN
FBO XXXXXXX X. XXXXXX XXX
ROLLOVER ACCOUNT DATED JUNE 12, 1991
#MI-1491-00-4
XXXXXXX AND ASSOCIATES PROFIT SHARING
PLAN X/X/X XXXXXXX 0, 0000
XXXXXXX X. XXXXXXXX
By: White Pines Management, L.L.C.,
a Michigan limited liability
company, attorney-in-fact
By:
---------------------------------
Xxxxxxxxx X. Xxxxx, Chairman
CHASE VENTURE CAPITAL ASSOCIATES, L.P.
By:
---------------------------------
AMERICAN HEALTHCARE FUND II
By:
--------------------------------- -------------------------------
XXXX X. XXXXXXXXX
------------------------------------
J. XXXXXXX XXXXXXXXX GROVE INVESTMENT PARTNERS
By:
----------------------------
-----------------------------------
XXXXXX X. XXXXXXX
101
SCHEDULE 7.b
GENOMIC SOLUTIONS INC.
OUTSTANDING WARRANT:
- Warrant to Purchase Common Stock of Genomic Solutions Inc.
ESA, Inc., a Massachusetts corporation is entitled to purchase
from Genomic Solutions Inc., a Delaware corporation at the
exercise price of Six Dollars ($6.00) per share (the "Exercise
Price"), One hundred twenty-five thousand (125,000) shares of
Genomic Solutions Inc. common stock, par value $.001.
102
SCHEDULE 7.g
GENOMIC SOLUTIONS INC.
SEE ATTACHED LISTS:
SCHEDULE DESCRIPTION
-------- -----------
7.g.1 Series B Convertible Preferred Shareholders
7.g.2 Series C Convertible Preferred Shareholders
7.g.3 Series D Convertible Preferred Shareholders
7.g.4 Series M Convertible Preferred Shareholders
7.g.5 Common Stock Shareholders
7.g.6 Employee Stock Options
7.g.7 Non-Employee Stock Options
7.g.8 Warrant Holder (see Schedule 7.b)
7.g.9 Officers, Directors and Significant Employees
7.g.10 Officers, Directors and Significant Employees with indebtedness to the Borrower
7.g.11 Officers and Significant Employees who own directly/indirectly any interest in
any entity which is a Competitor, Customer or Supplier of Genomic Solutions
103
SCHEDULE 7.g.1
GENOMIC SOLUTIONS INC.
SERIES B PREFERRED STOCK
SHAREHOLDERS LIST
104
GENOMIC SOLUTIONS INC. (FORMERLY B. I. SYSTEMS CORP.) STOCK REGISTER
SERIES B PREFERRED STOCK
ON AN AS
CONVERTED BASIS
CERT. DATE OF REISSUED TO COMMON STOCK % OF
NO. HOLDER CONTACT ISSUE SHARES ORIGINAL ISSUANCE AS GSI 3.03030 CLASS
---- ------- ------------------------- -------- -------- ----------------- --------- ---------------- -----
Xxxx X Xxxxxxxxxx
Corporate Capital Partners
000 Xxxxxxxx Xxxxxx, Xxx. Series B
Corporate 416 Preferred
B1 Capital Partners Xxxx Xxxx, XX 00000-0000 Stock 24,007 10-Jun-97 24-Dec-97 72,748.48 1.4%
Xxxxx Xxxxx Series B
19115 Shaker Boulevard Preferred
B2 Xxxxx Xxxxx Xxxxxx Xxxxxxx, XX 00000 Stock 24,007 10-Jun-97 24-Dec-97 72,748.48 1.4%
Xxxx Xxxx Xxxxxx
Liberty BIDCO Investments
00000 X xxxxxxx Xxx, Xxx
Xxxxxxx BIDCO 211 Series B
Investment Xxxxxxxxxx Xxxxx, XX 00000- Preferred
B3 Corp. 2582 Stock 52,016 10-Jun-97 24-Dec-97 157,624.24 3.1%
Xxxxx X Xxxxxx Series B
Xxxxx X Xxx Xxxx - Cleft Road Preferred
B4 Xxxxxx Xxxx Xxxx, XX 00000 Stock 20,000 10-Jun-97 24-Dec-97 60,606.06 1.2%
Grove Xxxx Xxxx Series B
Investment 336 Essex Road Preferred
B5 Partners Xxxxxxxxxx, XX 00000 Stock 24,007 10-Jun-97 24-Dec-97 72,748.48 1.4%
Xxxx X. Xxxxxxxxx
0000 Xxxxxxxx Xxxx Series B
Xxxx X. Xxxxx Vedra Beach, FL Preferred
B6 Xxxxxxxxx 32082 Stock 24,007 10-Jun-97 24-Dec-97 72,748.48 1.4%
Xxx Xxxxxxxx
Capital Health Venture
Partners
American 20 X. Xxxxxx Drive, Ste Series B
Healthcare 2200 Preferred
B7 Fund II Xxxxxxx, XX 00000 Stock 400,353 10-Jun-97 24-Dec-97 1,213.190.91 23.8%
Xxxx Xxxxxx Series B
2200 Southwest Fwy Preferred
B8 Xxxx Xxxxxx Xxxxxxx, XX 00000 Stock 20,006 10-Jun-97 24-Dec-97 60,624.24 1.2%
Xxxxxxx Styles Series B
0000 Xxxxxxxxx Xxx Preferred
B9 Xxxxxxx Styles Xxxxxxx, XX 00000 Stock 12,004 10-Jun-97 24-Dec-97 36,375.76 0.7%
105
GENOMIC SOLUTIONS INC. (FORMERLY B. I. SYSTEMS CORP.) STOCK REGISTER
SERIES B PREFERRED STOCK
ON AN AS
DATE OF CONVERTED BASIS
ORIGINAL REISSUED TO COMMON STOCK % OF
CERT. NO. HOLDER CONTACT ISSUE SHARES ISSUANCE AS GSI 3.03030 CLASS
--------- ------- ------- ----- ------ -------- ------ ------------------ ------
J Xxxxxxx Xxxxxxxxx
000 Xxxxxxx Xxxxxx, Xxx Xxxxxx X
J. Xxxxxxx 1215 Preferred
B10 Xxxxxxxxx Xxx Xxxxxxxxx, XX 00000 Stock 526,336 1O-Jun-97 24-Dec-97 1,594,957.58 31.3%
Xxxxxx X. Xxxxxxx
000 Xxxxxxx Xxxxxx, Xxx Xxxxxx X
Xxxxxx G 1215 Preferred
B11 Xxxxxxx Xxx Xxxxxxxxx, XX 00000 Stock 159,969 10-Jun-97 24-Dec-97 484,754.55 9.5%
Xxxxx X. Xxxx
Xxxx & Xxxx
0000 Xxxxxxxx Xxxx, Series B
Xxxxxxxx X. Suite 208 Preferred
B12 Xxxx Xxxxx XX 00000 Stock 300,000 10-Jun-97 24-Dec-97 909,090.91 17.8%
Xxxxxx X Xxxxxxx Series B
Xxxxxx G 000 Xxxxxxx Xxxxxx 1215 Preferred
B13 Xxxxxxx Xxx Xxxxxxxxx, XX 00000 Stock 20,161 25-Jun-97 24-Dec-97 61,093.94 1.2%
Ian R N Bund
White Pines Capital
0000 Xxxxxxxx Xx, Xxxxx X Series B
Xxx Xxxxx, XX 00000 Preferred
X00 Xxx X. X. Xxxx 00000 Stock 50,000 4-Aug-97 24-Dec-97 151,515.15 3.0%
Xxxxxx X. Xxxxxx
Xxxxxx Xxxxx Series B
Xxxxxx X. 353 Sacramento, 10th Fl. Preferred
B15 Xxxxxx Xxx Xxxxxxxx XX 00000 Stock 24,007 4-Aug-97 24-Dec-97 72,748.48 1.4%
--------- -----------------------
TOTAL SERIES B SHARES 1,680,880 5,093,575.76 100.0%
========= =======================
106
SCHEDULE 7.g.2
GENOMIC SOLUTIONS INC.
SERIES C PREFERRED STOCK
SHAREHOLDERS LIST
107
Genomic Solutions Inc. (formerly B. I. Systems Corp.) Stock Register
Series C Preferred Stock
On An As
Date of Converted Basis
Original to Common Stock % of
Cert No. Holder Contact Issue Shares Issuance 1.00000 Class
-------- --------- ------- ----- ------ -------- ------------------ ------
Chase Capital Partners
Xxxxxx Xxxxxx
Xx. Xxxx Xxxxx
000 Xxxxxxx Xxxxxx,
00xx Xxxxx Series C
Chase Capital New York, New York Preferred
C1 Partners 10017 Stock 3,015,375 29-Dec-97 3,015,375 74.1%
Xxx Xxxxxxxx
Capital Health Venture
Partners
American 0000 Xxxxxxxx Xxx. Series C
Healthcare Suite 220 Preferred
C2 Fund II Xxxxxxx, XX 00000 Stock 342,857 29-Dec-97 342,857 8.4%
J. Xxxxxxx Xxxxxxxxx
000 Xxxxxxx Xxxxxx, Xxx.
0000 Series C
J. Xxxxxxx San Francisco, CA Preferred
C3 Xxxxxxxxx 94104 Stock 142,857 29-Dec-97 142,857 3.5%
Xxxxxx X. Xxxxxxx
000 Xxxxxxx Xxxxxx, Xxx.
0000 Series C
Xxxxxx G San Francisco, CA Preferred
C4 Xxxxxxx 94104 Stock 15,285 29-Dec-97 15,285 0.4%
0000 Xxxxxxxx Xx Series C
Suite B Preferred
X0 Xxx X. X. Xxxx Xxx Xxxxx, XX 00000 Stock 104,924 29-Dec-97 104,924 2.6%
Grove Xxxx Xxxx Series C
Investment 000 Xxxxx Xxxx Preferred
C6 Partners Xxxxxxxxxx, XX 00000 Stock 50,378 29-Dec-97 50,378 1.2%
Xxxxx X. Xxxxxx Series C
Xxxxx X. Xxx Xxxx - Cleft Road Preferred
X0 Xxxxxx Xxxx Xxxx, XX 00000 Stock 17,143 29-Dec-97 17,143 0.4%
Xxxx X. Xxxxxxxxx
0000 Xxxxxxxx Xxxx Series C
Xxxx X. Xxxxx Vedra Beach, FL Preferred
C8 Xxxxxxxxx 32082 Stock 10,000 29-Dec-97 10,000 0.2%
Chase Capital Partners
Xxxxxx Xxxxxx
Xx. Xxxx Xxxxx
000 Xxxxxxx Xxxxxx,
00xx Xxxxx Series C
Chase Capital New York, New York Preferred
C9 Partners 10017 Stock 358,053 6-Jan-98 356,053 8.7%
Xxxxxx X. Xxxxxx
Xxxxxx Xxxxx Series C
Xxxxxx X. 353 Sacramento, 10th Fl. Preferred
C10 Xxxxxx Xxx Xxxxxxxx XX 00000 Stock 15,467 6-Jan-98 15,467 0.4%
--------- ---------------------
TOTAL SERIES C SHARES 4,070,339 4,070,339 100.0%
========= =====================
108
SCHEDULE 7.G.3
GENOMIC SOLUTIONS INC.
SERIES D PREFERRED STOCK
SHAREHOLDERS LIST
109
Series D.
Preferred Stock Schedule I
INVESTORS
Shares of Dollar
Series D Value
Certificate Preferred Preferred
Number Name and Address Stock Stock
------ ---------------- ---------- -----------
D 1 Chase Venture Capital Associates, L.P. 987,488 $ 5,924,928
Chase Capital Partners
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
D 2 American Healthcare Fund II 25,000 $ 150,000
Capital Health Venture Partners
0000 Xxxxxxxxx Xxx., Xxxxx 000
Xxxxxxx, XX 00000
D 3 J. Xxxxxxx Xxxxxxxxx 10,000 $ 60,000
000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
D 4 Xxxxxx X. Xxxxxxx 4,000 $ 24,000
000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
D 5 Liberty BIDCO Investment Corp. 18,379 $ 110,274
00000 Xxxxxxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxxx Xxxxx, XX 00000-0000
D 6 Xxxxx X. Xxxxxx 16,870 $ 101,220
Xxx Xxxx - Xxxxx Xxxx
Xxxx Xxxx, XX 00000
D 7 Grove Investment Partners 16,667 $ 100,002
000 Xxxxx Xxxx
Xxxxxxxxxx, XX 00000
D 8 Xxxxxx X. Xxxxxx 10,286 $ 61,716
C/o Xxx Xxxxxx & Company
000 Xxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
D 9 Xxxx Xxxxxx 7,069 $ 42,414
0000 Xxxxxxxxx Xxx.
Xxxxxxx, XX 00000
D 10 Xxxxxxx Styles 4,241 $ 25,446
0000 Xxxxxxxxx Xxx.
Xxxxxxx, XX 00000
--------- -----------
Total 1,100,000 $ 6,600,000
========= ===========
110
SCHEDULE 7.G.4
GENOMIC SOLUTIONS INC. (FORMERLY B. I. SYSTEMS CORP.) STOCK REGISTER
SERIES M PREFERRED STOCK
On An As Converted Basis
Date of Reissued to Common Stock
Cert. No. Holder Contact Issue Shares Original Issuance as GSI 5.40054
--------- ------ ------- --------- ------ ----------------- --------- ------------------------
Series M
Millipore Preferred
M 1 Corporation Stock 50,000 1O-Jun-97 24-Dec-97 270,027
------ -------
CAPITAL SERIES M SHARES 50,000 270,027
====== =======
111
SCHEDULE 7.G.5
GENOMIC SOLUTIONS INC.
COMMON STOCK
SHAREHOLDERS LIST
112
SCHEDULE 7.g.5
GENOMIC SOLUTIONS INC.
COMMON STOCK SHAREHOLDERS
AS OF: APRIL 23, 1999
COMMON
INVESTOR STOCK
-------- ---------
Xxxx Xxxxxxxxx 98,796
Xxx Xxxxxxx 87,154
American Healthcare Fund II 172,870
X. Xxxxxxxx 675,000
Liberty Bidco 25,535
Corporate Capital Partners 11,785
Xxxxx Xxxxx 11,785
Xxxxx Xxxxxx 19,642
Grove investment Partners (X. Xxxx) 11,785
Xxxx X. Xxxxxxxxx 11,785
Xxxx Xxxxxx 9,821
Xxxxxxx Styles 5,893
Xxxxxx Xxxxxx 11,785
Xxx Xxxxxxxxx 4,911
Xxxxx Xxxxxxx 5,893
Xxx Xxx Xxxx 7,333
Xxx Xxxxx 5,893
X. Xxxxxx 5,893
Xxxx Xxxxxxxx 4,911
Xxxxxxx Xxxxxxx 11,785
X. Xxxxxxxx 21
X. Xxxxxxxxx 41
Computational Biosciences 40,000
Xxxx Xxxxxxxx 13,533
Xxxxx Xxxxxx 16,666
Xxxx Xxxxxxx 3,933
Xxxxxx Brykit 3,333
Xxxx Xxxxxxxxx 13,333
Xxxxx Xxxxxxxxx 3,333
Xxxxxxx Xxxxxx 5,000
Xx Xxxxxxx 3,933
Xxxxx Xxxxx 3,733
Xxxxx Xxxxxx 1,866
Xxxxxx Xxxxx 28,933
Xxxxxxx Xxxxx 28,932
Xxxxx Sugar 28,932
Xxxxx Xxxxxxx Xxxxx 160,373
Xxxxxxxxxx Xxxxx 185,795
Xxxxxx Xxxx Xxxxxxx 346,168
Xxx X. Xxxxxxxxx 141,102
Dr. Xxxx Xxxxxxx 14,110
Xxxxx Xxxxx 9,407
Xxxxxx Xxxxx 47,033
Xxxxxxx Boston 14,110
Xxxxxxx Xxxx Xxxxxx 256,335
Ian Boston 47,033
Xxxxxxx X. Boston 47,033
Xxxx Xxxxxxxx Xxxx 76,449
Xxxx Xxxxxxxx Xxxx 75,000
Hansard Management Services Ltd. 110,052
---------
TOTAL SHARES OUTSTANDING 2,925,777
=========
113
SCHEDULE 7.g.6 -- 1 of 3
Stock Option Summary
Stock Options summary as of April 23, 1999
GENOMIC SOLUTIONS INC.
SUMMARY OF EMPLOYEE
STOCK OPTIONS
As Of April 23, 1999
Balance
Outstanding
---------------------------------------
Xxxx X. Xxxxxxxx 655,000
---------------------------------------
Xxxx Xxxxxxxxx 76,667
---------------------------------------
Xxxxx Xxxxxxxxxx 117,250
---------------------------------------
Xxxx Xxxxx 76,000
---------------------------------------
Xxxxx Xxxxx 75,000
---------------------------------------
Xxxx Xxxx 40,000
---------------------------------------
Xxxx Xxxxxxx 40,000
---------------------------------------
Xxxxx Xxxxx 40,000
---------------------------------------
M. Akahori 45,000
---------------------------------------
Xxxxx Xxxxxx 38,334
---------------------------------------
Xxxx Xxxxx 42,000
---------------------------------------
Xxxx Xxxxx 30,000
---------------------------------------
Xxxxx Xxxxxx 20,000
---------------------------------------
Xxxx Xxxxxxxx 30,000
---------------------------------------
Xxxx Xxxxxxx 20,000
---------------------------------------
Rob Mount 10,000
---------------------------------------
Xxxxx Xxx 4,000
---------------------------------------
Xxx Xxxxxx 15,000
---------------------------------------
Xxxx Xxxxxxxxx 18,000
---------------------------------------
Xxxx Xxxxxxx 18,000
---------------------------------------
Xxxxxxx Xxxxxx 14,000
---------------------------------------
Xxxxxx Xxxxx 43,000
---------------------------------------
Xxxxxx Xxxxxx 10,667
---------------------------------------
Xxxxx Xxxxxx 13,000
---------------------------------------
Xxxx Xxxxxxx 20,000
---------------------------------------
Xxxxxx Xxxxxxxxx 14,600
---------------------------------------
Xxxxx Xxxxxxxx 25,000
---------------------------------------
Xxxxx Xxxxxx 10,000
---------------------------------------
Xxx Xxxxxx 2,000
---------------------------------------
Xxxx Xxxx 10,000
---------------------------------------
Xxxxxxx Xxxx 5,000
---------------------------------------
Xxx Xxxx 5,000
---------------------------------------
Xxxxx Xxxxxxx 5,000
---------------------------------------
Adriaan De Feitjer 10,000
---------------------------------------
X. Xxxx-san 11,000
---------------------------------------
Xxxx Xxxxxxxx 27,467
---------------------------------------
Xxxxx Xxxxxx 11,000
---------------------------------------
Xxxx Xxxxxxxxxxxx 10,000
---------------------------------------
Xxxxx Xxxxxx 18,000
---------------------------------------
Xxx Xxxxx 10,000
---------------------------------------
Xxx Xxxxxxxxxxx 10,000
---------------------------------------
Xxxx Xxxxxxx 7,167
---------------------------------------
Xx Xxxxxxx 7,067
---------------------------------------
Xxxxxx Xxxxx 10,000
---------------------------------------
114
Stock Option Summary
SCHEDULE 7.g.6 -- 2 of 3 Stock Options summary as of April 23, 1999
GENOMIC SOLUTIONS INC.
SUMMARY OF EMPLOYEE
STOCK OPTIONS
As Of April 23, 1999
Balance
Outstanding
-----------
----------------------------------------------------------------
Xxxxxxx Xxxxx 10,000
----------------------------------------------------------------
Xxxxx Xxxxx 8,267
----------------------------------------------------------------
Xxxx Xxxxxx 5,000
----------------------------------------------------------------
Xxxxx X'Xxxxx 5,400
----------------------------------------------------------------
Xxxxx Xxxxxxxx 5,000
----------------------------------------------------------------
Xxxxxx Xxxxxx 5,000
----------------------------------------------------------------
Xxx Xxxxx 1,000
----------------------------------------------------------------
Xxxxxxx Xxxx 250
----------------------------------------------------------------
Xxxxx Xxxxx 5,000
----------------------------------------------------------------
Xxxxx Xxxxxx 5,000
----------------------------------------------------------------
Xxxx Xxxxxx 5,000
----------------------------------------------------------------
Xxxxx Xxxxxxx 500
----------------------------------------------------------------
Xxxxx Xxxxxxxx 5,000
----------------------------------------------------------------
Xxxxx Xxxxxxx 5,000
----------------------------------------------------------------
Xxx Xxxx 5,000
----------------------------------------------------------------
Xxxxx Xxxxxx 5,000
----------------------------------------------------------------
Xxxxx Xxxxxxx 5,000
----------------------------------------------------------------
Xxxxxx Xxxxxxx 5,000
----------------------------------------------------------------
Xxxx Xxxxxx 10,000
----------------------------------------------------------------
Xxxxx Xxxxxxxx 5,000
----------------------------------------------------------------
Xxxx Xxxxxx 5,000
----------------------------------------------------------------
Xxxxx Xxxxxx 5,000
----------------------------------------------------------------
Xxxxx Xxxxxx 4,134
----------------------------------------------------------------
Xx Xxxxxx 2,500
----------------------------------------------------------------
Xxxxx Xxxxxxxxxx 250
----------------------------------------------------------------
Xxxxx Xx Xxxxxx 2,000
----------------------------------------------------------------
Xxxx Xxxxxxxx 250
----------------------------------------------------------------
Xxxxx Xxxxxxxx 6,000
----------------------------------------------------------------
Xxx Xxxxxxx 11,000
----------------------------------------------------------------
Xxxx Xxxxxx 500
----------------------------------------------------------------
Xxxx Xxxxx 5,000
----------------------------------------------------------------
Xxxx Xxxxx 3,500
----------------------------------------------------------------
Xxxxx Xxxxxxxx 6,000
----------------------------------------------------------------
Xxx Xxxxxx 5,000
----------------------------------------------------------------
Jan Luton 10,000
----------------------------------------------------------------
Xxxx Xxxx 2,500
----------------------------------------------------------------
Xxxxx Xxxxxxxx 1,000
----------------------------------------------------------------
Xx Xxxxxxxx 1,000
----------------------------------------------------------------
Xxxxx Chemokalskaya 2,500
----------------------------------------------------------------
Xxxxxxx Xxxxxxxx 250
----------------------------------------------------------------
Xxxxx XxxXxxxxx 250
----------------------------------------------------------------
Xxxx Xxxxxxx 250
----------------------------------------------------------------
Xxxxx Xxxxx 2,500
----------------------------------------------------------------
Xxxxx Xxxxxx 250
115
Stock Option Summary
SCHEDULE 7.g.6 -- 3 of 3 Stock Options summary as of April 23, 1999
GENOMIC SOLUTIONS INC.
SUMMARY OF EMPLOYEE STOCK OPTIONS
As Of April 23, 1999
Balance
Outstanding
-----------
----------------------------------------------------------------
Xxxxxxx XxXxxx 2,500
----------------------------------------------------------------
Xxxx Xxxxxxx 250
----------------------------------------------------------------
Richard Orrell 2,500
----------------------------------------------------------------
Andrea Jiggens 250
----------------------------------------------------------------
John Cox 250
----------------------------------------------------------------
Ian Taylor 20,000
----------------------------------------------------------------
TOTAL 1,922,020
============
116
SCHEDULE 7.G.7
GENOMIC SOLUTIONS INC.
NON-EMPLOYEE STOCK OPTIONS
As of the date of closing the following persons have been granted and issued
stock options under the Genomic Solution's 1998 Non-Employee Director and
Consultant Stock Option Plan.
BOARD OF DIRECTORS OF GENOMIC SOLUTIONS INC.
Robert G. Shepler ............................................... 20,000
J. Matthew Mackowski ............................................. 20,000
American Healthcare Fund ........................................ 20,000
Chase Venture Capital Associates, L.P . ......................... 20,000
P. Nicholas King ................................................ 20,000
-------
TOTAL ........................................................... 100,000
OTHER
- Per the Subscription Agreement between Genomic Solutions Inc. and HD
Technologies Ltd. stock options were granted and issued to:
Steve Davis ........................................................... 30,000
Andrew Hoffman ........................................................ 30,000
------
TOTAL ................................................................. 60,000
- Per the Collaboration Agreement between Genomic Solutions Inc. and HD
Technologies Ltd., stock options were granted and issued to:
Steve Davis ................................................. 30,000
Andrew Hoffman .............................................. 30,000
------
TOTAL ....................................................... 60,000
- Scientific Advisory Board Members:
Dr. Richard Wooster ............................... .................. 5,000
Dr. Michael Liebman .................................................. 5,000
Dr. Rolf Apweiler..................................................... 5,000
Dr. James Sikela ..................................................... 5,000
-------
TOTAL ................................................................ 20,000
TOTAL NON-EMPLOYEE STOCK OPTIONS GRANTED & ISSUED ........................ 240,000
=======
117
SCHEDULE 7.g.9
LIST OF OFFICERS, DIRECTORS AND SIGNIFICANT EMPLOYEES:
1. GENOMIC SOLUTIONS INC. (GSI")
1. The following persons are the duly elected and acting officers of the
Genomic Solutions Inc., holding the office(s) set forth opposite their name
below:
NAME OFFICE
Executive Officers:
Jeffrey S. Williams President, Chief Executive Officer
Andrew A. Jakimcius Executive Vice president of Operations
Michael P. Kurek Executive Vice President, Marketing and Sales
Steven J. Richvalsky Executive Vice President, Treasurer, Secretary and
Chief Financial Officer
William M. Skea Vice President, Proteomic Business
General Officers:
Frank C. Becker Vice President, Marketing
Gregory H. Kinch Vice President, Sales (Americas)
Mary F. Lopez Vice President, Proteomics Research & Development
Mary Stanaway Vice President, Imaging Systems
2. The following persons are the duly elected and acting directors of Genomic
Solutions Inc.
Directors:
Jeffrey S. Williams
Robert G. Shepler, Chairman
P. Nicholas ("Nick") King
J. Matthew Mackowski
Dan Mitchell
Damion E. Wicker
3. The following persons have been identified as Significant Employees of
Genomic Solutions Inc.:
Significant Employees:
Chris Barker Vice President, Molecular Biology
Jeffrey Fosdick Controller
118
SCHEDULE 7.g.9 - CONTINUED
I. GENOMIC SOLUTIONS LTD. (UNITED KINGDOM)
The following persons are the acting directors and officers of the Genomic
Solutions Ltd., holding the office(s) set forth opposite their name below:
Directors:
Jeffrey S. Williams Chairman
P. Nick King Vice Chairman
Kevin A. Auton Managing Director
David W. Byatt Director and Vice President, Development
A. John Pinkney Director and Vice President, Operations
A. Paul Dunkley Director and Controller
II. GENOMIC SOLUTIONS K.K. (JAPAN)
4. The following persons are the duly elected and acting officers and
directors of Genomic Solutions K.K.:
Directors:
Jeffrey S. Williams Director
Michael P. Kurek Director
M. Akahori Representative Director
Steven J. Richvalsky Statutory Auditor
119
SCHEDULE 7.g.10
OFFICERS, DIRECTORS AND SIGNIFICANT EMPLOYEES
WITH INDEBTEDNES TO ANY GENOMIC SOLUTIONS COMPANY:
As defined and agreed to in the Employment Agreement by and between Genomic
Solutions Inc. and Jeffrey S. Williams, effective January 1, 1998, Genomic
Solutions provided to Mr. Williams a loan, evidenced by a five year promissory
note, the proceeds of which were used by Mr. Williams to exercise vested options
to purchase 675,000 shares of Genomic Solutions common stock. The principle
amount of the note was $47,250. Interest on the unpaid principal of the note is
accrued. The note is secured by 127,703 shares of Genomic's common stock, issued
in the name of Mr. Williams.
As of this date of closing, there are no other loans provided by Genomic
Solutions or any of its wholly owned subsidiaries to any of its officers,
director or significant employees (as listed on Schedule 7.g.9 of this
agreement).
120
SCHEDULE 7.g.11
OFFICERS AND SIGNIFICANT EMPLOYEES OWNERSHIP INTEREST IN OUTSIDE PARTIES
WHO ARE COMPETITORS, CUSTOMERS AND SUPPLIERS OF GENOMIC SOLUTIONS
Except for what ownership interest may be held within a mutual fund, the
following is a list of officers and significant employees material ownership
interest in competitors, customers and suppliers of Genomic Solutions.
EMPLOYEE NAME LOCATION COMPETITORS CUSTOMERS SUPPLIERS
------------- -------- ----------- --------- ---------
Jeffrey S. Williams Inc. None None None
Andrew Jakimcius Inc. None None None
Michael P. Kurek Inc. None None None
Steven J. Richvalsky Inc. None None None
William M. Skea Inc. None None None
Frank C. Becker Inc. None None None
Gregory H. Kinch Inc. See (a.) below None None
Mary F. Lopez Inc. None None None
Mary Stanaway Inc. None None None
Chris Barker Inc. None None None
Jeffrey Fosdick Inc. None None None
Kevin A. Auton Ltd. None None None
P. Nick King Ltd. None None None
David W. Byatt Ltd. None None None
A. John Pinkney Ltd. None None None
A. Paul Dunkley Ltd. None None None
M. Akahori K. K. None None None
a.) Greg Kinch owns common stock in the following companies as of the date of
close;
Affymetrix 500 shares
Incyte Pharmaceuticals 250 shares
Gene Logic 1,000 shares
121
SCHEDULE 7.h
GENOMIC SOLUTIONS INC.
WHOLLY OWNED SUBSIDIARIES:
--------------------------------------------------------------------------------
ITEM COMMENT
--------------------------------------------------------------------------------
1. Genomic Solutions Limited, a United Kingdom
Corporation wholly owned by Genomic Solutions Inc.
Office is located in Cambridgeshire, UK.
2. Genomic Solutions K.K., a Japanese Corporation wholly owned by
Genomic Solutions Inc. office is located in Tokyo, Japan.
FORMER SUBSIDIARIES:
--------------------------------------------------------------------------------
ITEM COMMENT
--------------------------------------------------------------------------------
3. Nihon Bio Image, Ltd., a Michigan Corporation
wholly owned by B.I. Systems Corporation, doing
business as a branch office in Japan. Entity
dissolved with formation of Genomic Solutions K.K.
in June 1998.
4. Bio Image UK, Inc., a Michigan Corporation wholly
owned by B.I. Systems Corporation. Operations
ceased and office closed effective October 31,
1997. Entity dissolved.
OTHER:
--------------------------------------------------------------------------------
ITEM COMMENT
--------------------------------------------------------------------------------
5. Genomic Solutions Limited subscribed Pound Sterling 91,000, for
Preference shares in the capital of, or
approximately 30% equity investment in, HD
Technologies, Ltd., of Manchester, England.
6. Genomic Solutions Inc holds (registered in the name of B.I.
Systems Corp.) 15,000 shares of the Series B Preferred Stock of
BioSeparations, Inc., a Delaware Corporation, as evidenced by
stock certificate OB-81.
7. Genomic Solutions Inc. holds 3,000 shares of the Common Stock
of Gattac Corporation, a Michigan corporation, as evidenced by
stock certificate 16.
122
SCHEDULE 7.i
GENOMIC SOLUTIONS INC.
SEE ATTACHED FINANCIAL STATEMENTS:
SCHEDULE DESCRIPTION
-------- -----------
7.i.1 Audited Financial Statements as of December 31, 1998 and 1997.
7.i.2 Consolidating Balance Sheet as of December 31, 1998.
7.i.3 "Interim" Unaudited Consolidated Financial Statements as of February 28, 1999.
7.i.4 Consolidating Balance Sheet as of February 28, 1999.
123
ARTHUR ANDERSEN LLP SCHEDULE 7.i.1
GENOMIC SOLUTIONS INC.
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998 AND 1997
TOGETHER WITH THE REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
124
ARTHUR ANDERSEN LLP
Report of Independent Public Accountants
To the Board of Directors and Stockholders of
Genomic Solutions Inc.:
We have audited the accompanying consolidated balance sheets of GENOMIC
SOLUTIONS INC. AND SUBSIDIARIES (a Delaware corporation, see Note 1) as of
December 31, 1998 and 1997, and the related consolidated statements of
operations and comprehensive loss, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Genomic Solutions Inc. and
subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Ann Arbor, Michigan,
February 12, 1999, (except with respect
to the matter discussed in Note 13
as to which the date is April 23, 1999).
125
GENOMIC SOLUTIONS INC.
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1998 AND 1997
ASSETS 1998 1997
------ ----------- -----------
CURRENT ASSETS:
Cash and cash equivalents $ 2,879,849 $5,088,799
Accounts receivable 1,361,621 1,251,593
Inventories 2,856,959 786,353
Prepaid expenses and other 663,842 97,684
----------- ----------
Total current assets 7,762,271 7,224,429
PROPERTY AND EQUIPMENT, NET 1,609,449 340,401
GOODWILL AND INTANGIBLE ASSETS, NET 1,577,464 362,602
OTHER ASSETS 242,218 23,165
----------- ----------
$11,191,402 $7,950,597
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Notes payable $ 1,980,822 $ 497,286
Current portion of long-term debt 300,941 136,891
Accounts payable 1,962,065 495,448
Accrued liabilities 1,209,839 1,113,028
Deferred revenue 194,077 157,170
----------- ----------
Total current liabilities 5,647,744 2,399,823
----------- ----------
LONG-TERM DEBT, less current portion 537,262 266,939
----------- ----------
OTHER LONG-TERM LIABILITIES 23,540 -
----------- ----------
COMMITMENTS (NOTE 11)
STOCKHOLDERS' EQUITY
Convertible preferred stock, $0.001 par value,
Series A, B, C, D and M 6,901 5,430
Common stock, $0.001 par value 2,919 2,126
Additional paid-in capital 16,525,232 9,225,877
Note receivable (47,250) -
Accumulated deficit (11,609,784) (3,949,598)
Cumulative translation adjustment 104,838 -
----------- ----------
Total stockholders' equity 4,982,856 5,283,835
----------- ----------
$11,191,402 $7,950,597
=========== ==========
The accompanying notes are an integral part of these consolidated statements.
-2-
126
GENOMIC SOLUTIONS INC.
CONSOLIDATED STATEMENTS OF OPERATI0NS AND COMPREHENSIVE LOSS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1998 1997 1996
------------ ------------ ------------
REVENUE:
Products $ 4,930,727 $ 1,992,385 $ 2,834,833
Services and other 576,634 171,156 421,872
------------ ------------ ------------
Total revenue 5,507,361 2,163,541 3,256,705
COST OF REVENUE 3,266,189 1,062,771 1,311,482
------------ ------------ ------------
Gross profit 2,241,172 1,100,770 1,945,223
------------ ------------ ------------
OPERATING EXPENSES:
Selling, general, and administrative 6,246,451 2,197,690 2,278,022
Research and development 3,353,903 942,237 863,776
Acquisition-related and other non-recurring chargers 340,000 2,205,786 -
------------ ------------ ------------
Total operating expenses 9,940,354 5,345,713 3,141,798
------------ ------------ ------------
Loss from operations (7,699,182) 2,244,943 (1,196,575)
------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest income 236,542 - -
Interest expense (122,490) (184,294) (342,971)
Other expense, net (75,056) (76,739) (54,401)
------------ ------------ ------------
Total other income (expense) 38,996 (261,033) (397,372)
------------ ------------ ------------
Loss before taxes and extraordinary gain (7,660,186) (4,505,976) (1,593,947)
PROVISION (CREDIT) FOR INCOME TAXES - (889,200) 5,685)
------------ ------------ ------------
Loss before extraordinary gain (7,660,186) (3,616,776) (1,599,632)
EXTRAORDINARY GAIN - Forgiveness of debt, net
of tax expense of $ 899,200 - 997,491 -
------------ ------------ ------------
NET LOSS (7,660,186) (2,619,285) (1,599,632)
OTHER COMPREHENSIVE INCOME - Foreign currency
translation adjustment 104,838 - -
------------ ------------ ------------
COMPREHENSIVE LOSS $ (7,555,348) $ (2,619,285) $ (1,599,632)
============ ============ ============
The accompanying notes are an integral part of these consolidated statements.
-3-
127
GENOMIC SOLUTIONS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
Convertible
Preferred Stock Common Stock Additional
------------------ -------------------- Paid-In Note
Shares Amount Shares Amount Capital Receivable
--------- ------- --------- -------- ---------- ----------
BALANCE - DECEMBER 31, 1995 1,250,00 $ 1,250 31,281 $ 31 $ 499,729 $ -
Common stock issued upon exercise of
stock options - - 447 1 3,428 -
Net loss - - - - - -
--------- ------- --------- -------- ---------- ----------
BALANCE - DECEMBER 31, 1996 1,250,000 1,250 31,728 32 502,139 -
Common stock issued upon conversion of
Series A preferred stock (1,250,000) (1,250) 45,821 46 1,204 -
Series B preferred and common stock issued
upon conversion of notes payable 413,169 413 200,986 201 426,624 -
Series B preferred stock issued for cash 1,267,711 1,268 - - 1,266,443 -
Series M preferred stock issued upon
conversion of notes payable 50,000 50 - - 49,950 -
Common stock issued upon conversion of
subordinated debt - - 248,813 249 17,168 -
Common stock issued upon settlement of
accounts payable - - 13,100 13 904 -
Common stock issued in connection with the
acquisition of BioPhotonics, Inc. - - 85,000 85 5,866 -
Series C preferred stock issued for cash 3,698,819 3,699 - - 6,402,080 -
Common stock issued in connection with the
acquisition of PBA Technology Limited - - 1,500,000 1,500 533,500 -
Net loss - - - - - -
--------- ------- --------- -------- ---------- ----------
BALANCE - DECEMBER 31, 1997 5,429,699 5,430 2,125,448 2,126 9,225,877 -
Series C preferred stock issued for cash 371,520 371 - - 649,789 -
Series D preferred stock issued for cash 1,100,000 1,100 - - 6,681,539 -
Common stock issued in exchange for software
license - - 40,000 40 14,760 -
Common stock issued in exchange for services - - 600 - 1,287 -
Common stock issued upon exercise of
stock options - - 753,330 753 61,980 47,250
Foreign currency translation adjustment - - - - - -
Net loss - - - - - -
--------- ------- --------- -------- ---------- ----------
BALANCE - DECEMBER 31, 1998 6,901,219 $ 6,901 2,919,378 $ 2,919 $16,525,232 $ 47,250
========= ======= ========= ======== ========== ==========
Cumulative
Accumulated Translation
Deficit Adjustment Total
------------ ----------- ----------
BALANCE - DECEMBER 31, 1995 $ (459,407) $ - $ 40,593
Common stock issued upon exercise of
stock options - - 3,421
Net loss (1,599,632) - (1,599,632)
------------ ----------- ----------
BALANCE - DECEMBER 31, 1996 (2,059,039) - (1,555,619)
Common stock issued upon conversion of
Series A preferred stock - - -
Series B preferred and common stock issued
upon conversion of notes payable - - 427,238
Series B preferred stock issued for cash - - 1,267,711
Series M preferred stock issued upon
conversion of notes payable - - 50,000
Common stock issued upon conversion of
subordinated debt 644,643 - 662,060
Common stock issued upon settlement of
accounts payable 84,083 - 85,000
Common stock issued in connection with the
acquisition of BioPhotonics, Inc. - - 5,950
Series C preferred stock issued for cash - - 6,405,779
Common stock issued in connection with the
acquisition of PBA Technology Limited - - 555,000
Net loss (2,619,285) - (2,619,285)
------------ ----------- ----------
BALANCE - DECEMBER 31, 1997 (3,949,598) - 5,283,835
Series C preferred stock issued for cash - - 650,160
Series D preferred stock issued for cash - - 6,582,639
Common stock issued in exchange for software
license - - 14,800
Common stock issued in exchange for services - - 1,287
Common stock issued upon exercise of
stock options - - 5,483
Foreign currency translation adjustment - 104,838 104,838
Net loss (7,660,186) - (7,660,136)
------------ ----------- ----------
BALANCE - DECEMBER 31, 1998 $(11,609,784) $ 104,838 $4,982,856
============ =========== ==========
The accompanying notes are an integral part of these consolidated statements.
-4-
128
GENOMIC SOLUTIONS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, 1996
1998 1997 1996
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(7,660,186) $(2,619,285) $(1,599,632)
Adjustments to reconcile net loss to net cash
used in operating activities-
Depreciation and amortization 622,108 216,405 340,160
Acquisition-related and other non-recurring charges 340,000 2,205,756 -
Extraordinary gain on forgiveness of debt - (1,886,691) -
Common Stock issued in exchange for services 1,287 - -
Increase (decrease) in cash resulting from
changes in assets and liabilities, net of
acquisitions-
Accounts receivable (36, 711) 114,497 474,523
Inventories (1,415,669) 133,868 (89,279)
Prepaid expenses and other (534,237) (25,437) (9,215)
Accounts payable 1,469,376 (130,053) 42,327
Accrued liabilities 24,882 653,416 265,583
Deferred revenue (84,977) (25,771) (21,058)
----------- ------------ -----------
Net cash used in operating activities (7,274,127) (1,363,265) (596,591)
----------- ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of assets and stock of various companies (2,607,092) (659,066) -
Purchase of property and equipment (807,215) (47,456) (30,330)
Increase in goodwill and intangible assets (73,248) - -
Increase in other assets (42,744) (39,300) (155,270)
----------- ------------ -----------
Net cash used in investing activities (3,530,299) (745,822) (185,600)
----------- ------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of preferred stock 7,232,799 7,673,490 -
Net borrowings (repayments) under notes payable 7,482,454 (423,811) 43,811
Proceeds from issuance of common stock 5,483 - -
Repayment of long-term debt (143,797) (400,000) -
Proceeds from issuance of long-term debt - 130,000 670,000
----------- ------------ -----------
Net cash provided by financing activities 8,576,939 6,979,679 713,811
----------- ------------ -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 18,537 - -
----------- ------------ -----------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (2,208,950) 4,870,592 (68,380)
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 5,088,799 218,207 286,587
----------- ------------ -----------
CASH AND CASH EQUIVALENTS - END OF YEAR $ 2,879,849 $ 5,088,799 $ 218,207
=========== ============ ===========
The accompanying notes are an integral part of these consolidated statements.
-5-
129
GENOMIC SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) DESCRIPTION OF BUSINESS
Genomic Solutions Inc. ("Genomic Solutions" or the "Company") designs,
develops, manufactures and markets integrated, high-throughput biochip
and proteomic systems and services for analyzing and quantifying
biomolecules, such as DNA, RNA and proteins. The Company's biochip and
proteomic systems include instrumentation, software, and consumables,
which can be sold as integrated systems or as separate modular
components. The Company's products are frequently used for building and
maintaining DNA libraries, quantifying levels of gene expression, and
characterizing proteins. Because the Company's products play a vital
role in discovering genes and identifying drug targets, Genomic
Solutions' customers are typically pharmaceutical, biotechnology and
agriculture companies, universities, and government funded research
institutions. In addition to selling products to customers, the Company
also uses its equipment, software, consumables, and applications
expertise to provide contract biochip and proteomic experimental
services to researchers on a fee-for-service basis.
The Company was incorporated in June 1994 under the name B.I. Systems
Corporation. In July, 1994, the Company purchased certain assets,
including software, inventory and fixed assets, from the Bio Image
business unit ("Bio Image") of Millipore Corporation ("Millipore"). On
December 5, 1997, the Company formed Genomic Solutions Inc. On December
24, 1997, the Company merged with B.I. Systems Corporation, with Genomic
Solutions being the surviving entity.
As of December 31, 1998, the Company has operations in the United States,
Japan and United Kingdom. Genomic Solutions K.K. is a wholly owned
subsidiary of the Company located in Tokyo, Japan, and operates a sales
and technical support office serving Japan. Effective December 31, 1997,
the Company acquired all outstanding stock of PBA Technology Limited (a
UK corporation, "PBA", see Note 12) which subsequently changed its name
to Genomic Solutions Limited ("GSLtd").
The Company is in the early phases of implementing its operating strategy
and its future success is subject to several technical and business risks
including customer acceptance, availability and retention of key
employees, competition, technological changes and additional financing
adequate to support operations.
(2) SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its subsidiaries, Genomic Solutions K.K. and Genomic
Solutions Limited. All significant intercompany balances and
transactions have been eliminated in consolidation.
-6-
130
GENOMIC SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Revenue
Revenue consists of product sales, consisting of instrumentation, hardware,
consumables, software, and services which include revenue from software
and service maintenance agreements. Revenue from product sales, including
revenues generated through distributors, is recognized when a customer
contract is fully executed and product is shipped. Revenue from software
and service maintenance agreements is recognized on a straight-line basis
over the period in which the services are provided.
Research and Development Expenses
Research and development expenses include all employee payroll and related
costs attributable to research and development activities.
Foreign Currency Translation
The financial statements of foreign subsidiaries are translated using
exchange rates in effect at period end for assets and liabilities and at
average rates during the period for results of operations. The resulting
foreign currency translation adjustments are reflected as a separate
component of stockholders' equity. Foreign currency transaction losses
resulting from sales in foreign denominated currencies totaled
approximately $11,000, $40,000 and $96,300 in 1998, 1997, and 1996,
respectively, and are included in other expense in the accompanying
consolidated statements of operations.
Management Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less to be cash equivalents.
Accounts Receivable
As of December 31, 1998, accounts receivable are stated net of an
allowance for doubtful accounts of approximately $73,000. there was no
such allowance as of December 31, 1997.
-7-
131
GENOMIC SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCING STATEMENTS
(Continued)
Inventories
Inventories consist primarily of purchased parts and components and are
stated at the lower of cost, as determined on a first-in, first-out
basis, or market.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is provided on a
straight-line basis over the estimated useful lives of the related assets
which generally range from three to five years. As of December 31,
property and equipment consists of the following:
1998 1997
---------- --------
Furniture and office equipment $1,611,938 $555,182
Computer equipment 753,603 206,447
---------- --------
2,365,541 761,629
Less- Accumulated depreciation 756,092 421,228
---------- --------
$1,609,449 $340,401
========== ========
Goodwill and Intangible Assets
Certain goodwill and intangible assets arose from the acquisitions
completed by the Company in 1998 and 1997 (see Note 12) and in prior
years. These amounts are being amortized on a straight-line basis over
periods ranging from five to ten years. As of December 31, 1998 and 1997,
accumulated amortization totaled $340,000 and $13,000, respectively.
Amortization expense totaled approximately $327,300, $56,000 and $118,000
in 1998, 1997 and 1996, respectively, exclusive of the write-down
discussed below.
At each balance sheet date, the Company evaluates the carrying value of
goodwill and other long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying value may not be
recoverable. In 1997, as a result of this evaluation, the Company
wrote-down approximately $861,000 of goodwill and other intangible assets
that originated from the acquisition of Bio Image from Millipore (see
Note 1). These write-downs are included in acquisition-related and other
non-recurring charges in the accompanying consolidated statements of
operations.
-8-
132
GENOMIC SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Capitalized Software Development Costs
The Company accounts for software development costs in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 86. Under SFAS
No. 86, capitalization of software development costs begins upon the
establishment of technological feasibility. The establishment of
technological feasibility and the ongoing assessment of the
recoverability of these costs require considerable judgment by management
with respect to certain external factors, including, but not limited to,
anticipated future gross product revenue, estimated economic product
lives and changes in software and hardware technology. In 1998, amounts
that would have been capitalized under this statement after consideration
of the above factors were immaterial, and therefore no software
development costs have been capitalized by the Company.
In 1997, the Company wrote-off capitalized software development costs
totaling approximately $328,000 as it was determined that certain
products had no remaining economic life. This write-down is included in
the acquisition-related and other non-recurring charges in the
accompanying consolidated statement of operations. Amortization expense
totaled $47,000 and $76,000 in 1997 and 1996, respectively, exclusive of
the write-down.
Stock-Based Compensation
The Company accounts for stock-based compensation using the intrinsic value
method prescribed under Accounting Principles Board Opinion ("APB") No.
25, "Accounting for Stock Issued to Employees." Accordingly, compensation
cost for stock options is measured as the excess, if any, of the fair
value of the Company's common stock at the date of the grant over the
amount the employee must pay to acquire the stock. As supplemental
information, the Company has provided pro forma disclosure of the fair
value at the date of grant of stock options granted for each period
presented in Note 9, in accordance with the requirements of SFAS No. 123,
"Accounting for Stock-Based Compensation."
Fair Value of Financial Instruments
In accordance with the requirements of SFAS No. 107, "Disclosures About
Fair Value of Financial Instruments," the fair value of financial
instruments is determined by reference to various market data for
comparable financial instruments. Management's estimates of fair value
require considerable judgment and are not necessarily indicative of the
amounts that could be realized in a current market exchange. Unless
otherwise disclosed, the fair value of financial instruments approximate
their recorded values.
-9-
133
GENOMIC SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Comprehensive Income
Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income," which establishes standards for reporting and
display of comprehensive income and its components in a full set of
financial statements. Comprehensive income is the total of net income
and all other non-owner changes in equity. The difference between net
loss, as reported in the accompanying consolidated statements of
operations, and comprehensive loss is the foreign currency translation
adjustment for the respective periods. Accumulated other comprehensive
income consists solely of the cumulative translation adjustment as
presented in the accompanying consolidated balance sheets.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities,"
which establishes accounting and reporting standards for derivative
instruments. The Company does not currently engage in derivative
activities.
(3) NOTES PAYABLE
In August 1998, the Company entered into a new $2,000,000 line-of-credit
agreement with a bank which provides for borrowings through July 1999.
As of December 31, 1998, outstanding borrowings under this agreement
totaled $1,750,000 and bear interest at the bank's prime interest rate
(7.75% as of December 31, 1998). The agreement contains various
covenants, including financial covenants which require the Company to
maintain certain levels of working capital and tangible net worth.
As of December 31, 1998, GSLtd. had line-of-credit agreements with a
bank whereby GSLtd. may borrow up to $324,000. Outstanding borrowings
bear interest at 10% and are collateralized by a letter of credit
issued by the Company and eligible accounts receivable, as defined. As
of December 31, 1998, outstanding borrowings totaled $230,822. The
agreements expire at various dates through August 1999.
-10-
134
GENOMIC SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(4) LONG-TERM DEBT
As of December 31, long-term debt consists of the following:
1998 1997
-------- --------
Note payable by PBA, payable in monthly
installments of approximately $6,900, plus
interest at 10%, through November 2000 $159,341 $239,560
Note payable by PBA, payable in monthly
installments of approximately $4,600, plus
interest at 10%, through January 2001 115,481 164,270
Capital lease obligations, due in varying
amounts with interest rates ranging from
6.2% to 21%, through October 2002 (see
Note 10) 563,381 -
-------- --------
838,203 403,830
Less- Current portion 300,941 136,891
-------- --------
$537,262 $266,939
======== ========
Scheduled future maturities of long-term debt, excluding capital lease
obligations (see Note 10), as of December 31, 1998, are as follows:
1999 $138,566
2000 131,649
2001 4,607
--------
$274,822
========
(5) INCOME TAXES
The components of the provision (credit) for income taxes are as follows:
1998 1997 1996
----------- ----------- -----------
Continuing operations:
Currently payable (refundable) $ - $ (889,200) $ 5,685
Deferred credit (2,432,000) (241,800) (492,400)
Increase in valuation allowance 2,432,000 241,800 492,400
----------- ----------- -----------
- (889,200) 5,685
Extraordinary gain-
Tax expense of gain on
forgiveness of debt - 889,200 -
----------- ----------- -----------
$ - $ - $ 5,685
=========== =========== ===========
-11-
135
GENOMIC SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
The differences between the income tax provision calculated at the United
States Federal statutory rate and the consolidated income tax provision
from continuing operations are summarized as follows:
1998 1997 1996
---- ---- ----
Federal statutory provision $ (2,604,500) $ (1,473,300) $ (542,000)
Nondeductible items 34,000 16,000 49,600
Increase in valuation allowance 2,432,000 321,900 492,400
Write-off of acquired in-process
research and development 115,600 285,600 -
Other 22,900 (39,400) 5,685
------------ ------------ ----------
$ - $ (889,200) $ 5,685
============ ============ ==========
The components of deferred income taxes as of December 31 are as follows:
1998 1997
---- ----
Net operating loss carryforwards $ 2,939,700 $ 647,500
Intangible assets 210,800 242,000
Goodwill 115,000 45,100
Accruals and reserves 101,100 -
----------- ---------
3,366,600 934,600
Less-valuation allowance (3,366,600) (934,600)
----------- ---------
$ - $ -
=========== =========
The Company has available net operating loss carryforwards of approximately
$8,650,000 which can be utilized to offset future taxable income. These net
operating loss carryforwards expire between 2010 and 2018. Additionally,
utilization of net operating loss carryforwards are limited under Section
382 of the Internal Revenue Code. These and other deferred income tax
assets are fully reserved by a valuation allowance as realizability of
these tax benefits is not assured.
-12-
136
GENOMIC SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(6) RECAPITALIZATION
In April 1997, the Company amended its Articles of Incorporation pursuant
to which the majority of the Company's outstanding debt and all
outstanding shares of Series A preferred stock were restructured (the
"Recapitalization"). Significant components of the Recapitalization,
together with the applicable accounting effects, were as follows:
(1) The Company initiated a reverse stock split issuing one share of
common stock for every 97.103 shares of outstanding common
stock. All amounts and shares in the accompanying financial
statements have been restated to reflect the reverse stock split.
(2) Notes payable, bridge loan financing obtained during 1997 and
accrued interest totaling $413,169 were converted to 413,169
shares of Series B preferred stock at $1 per share. The Company
also issued 200,986 shares of common stock to these creditors.
(3) The Company issued 1,267,711 shares of Series B preferred stock
at $1 per share for cash.
(4) All outstanding shares of Series A preferred stock were converted
to 45,821 shares of common stock.
(5) Subordinated convertible debt of $1,200,000 and accrued interest
of $429,027, payable to both stockholders (defined as
stockholders with greater than 10% ownership interest) and
non-stockholders, was converted to 248,813 shares of common stock
at $0.07 per share. The difference between the carrying value of
the debt and the fair value of the common stock issued to
existing stockholders of $644,643 has been credited directly to
retained earnings. The difference between the carrying value of
the debt and the fair value of the common stock issued to
non-stockholders of $966,967 is included in extraordinary gain in
the accompanying consolidated statements of operations.
(6) Accounts payable to stockholders for professional services
rendered totaling $85,000 was converted to 13,100 shares of
common stock at $0.07 per share. The difference, in the amount
of $84,083, between the fair value of the common stock and
amounts owed to these stockholders has been credited directly to
retained earnings.
(7) A note payable to Millipore and accrued interest totaling
$983,764 was converted to 50,000 shares of Series M preferred
stock at $1 per share. The difference, in the amount of $933,764,
between the carrying value of the debt and the fair value of the
common stock is included in extraordinary gain in the
accompanying consolidated statements of operations.
-13-
137
GENOMIC SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(7) PREFERRED STOCK
Preferred stock consists of the following as of December 31:
1998 1997
----------------------------- -------------------------
Issued and Issued and
Authorized Outstanding Authorized Outstanding
---------- ----------- ---------- -----------
Series A - - - -
Series B 2,000,000 1,680,880 2,000,000 1,680,880
Series C 4,070,339 4,070,339 4,070,339 3,698,819
Series D 1,100,000 1,100,000 - -
Series M 50,000 50,000 50,000 50,000
--------- --------- --------- ---------
7,220,339 6,901,219 6,120,339 5,429,699
========= ========= ========= =========
In May 1998, the Company authorized 1,100,000 shares of Series D
convertible preferred stock for issuance. In December 1997, the
Company authorized 4,070,339 shares of Series C convertible
preferred stock for issuance.
The various classes of preferred stock provide the following rights,
preferences, privileges and restrictions:
Dividends
The holders of shares of Series B,C,D and M preferred stock are not
entitled to receive any dividends.
Conversion
Each shares of Series B,C,D and M preferred stock shall be
convertible, at the holder's option, into such number of common
shares as is determined by dividing the original Series B,C,D
and M issue prices by $0.33, $1.75, $6.00, and $1.111,
respectively. These conversion factors are subject to adjustment
upon any recapitalization of the Company's common stock, as
defined, and to anti-dilution rights for certain issuances.
Conversion of Series B,C,D and M preferred stock to the Company's
common stock will occur automatically upon the consummation of
the sale of common stock in a registration statement in
connection with an initial public offering, as defined.
Voting Rights
The holders of Series B,C and D preferred stock have the right to one
vote for each share of common stock into which such Series B,C
and D preferred stock could then be converted. The holders of
Series M preferred stock have no voting rights.
-14-
138
GENOMIC SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Liquidation Preference
In the event of any liquidation, dissolution or winding up of the
affairs of the Company, either voluntarily or involuntarily, the
holders of Series B,C,D and M preferred stock are entitled to
receive, prior to and in preference to any distributions to the
holders of common stock, an amount initially equal to $1, $1.75,
$6, and $6, per share, respectively, subject to adjustment upon
any recapitalization of the Company's common stock, as defined.
The holders of Series B preferred stock are also entitled to
receive, prior to and in preference to any distributions to the
holders of common stock, an amount per share equal to 8% of the
original issuance price of Series B preferred stock.
(8) COMMON STOCK
As of December 31, 1998 and 1997, the Company had authorized
40,000,000 shares of common stock for issuance. The Company has
reserved for issuance such number of shares of its authorized but
unissued common stock necessary to effect conversion of all
outstanding shares of preferred stock and exercise of all
outstanding stock options.
(9) STOCK OPTION PLANS
The Company has three stock option plans: The 1994 Stock Option Plan
("the 1994 Plan"); the 1998 Employee Stock Option Plan ("the 1998
Plan"); and the 1998 Non-Employee Director and Consultant Stock
Option Plan (the "Non-Employee Plan"). Options granted under all
plans are either incentive stock options, which are granted at
the fair market value of the common stock on the date of grant,
or nonqualified stock options, which are generally granted at the
fair market value of the common stock on the date of grant.
Options are granted at the discretion of the Board of Directors
upon recommendation by the Compensation Committee and expire ten
years after the date of grant.
1994 Stock Option Plan
The 1994 Plan provided for the grant of options to employees,
consultants and directors. The maximum number of shares that may
be granted under the 1994 Plan is 1,590,000. Options granted
generally become exercisable at a rate of 33% per year over three
years from the date of grant except that 540,000 options vested
immediately upon issuance and 14,600 options vest over a
five-year period.
1998 Employee Stock Option Plan
In January 1998, the Company established the 1998 Plan to increase
its ability to attract and retain key employees. The maximum
number of shares that may be granted under the Plan is 2,000,000.
Options granted generally become exercisable at a rate of 20% per
year over five years from the date of grant.
-15-
139
GENOMIC SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
1998 Non-Employee Director and Consultant Stock Option Plan
In January 1998, the Company established the Non-Employee Plan to
increase its abi1ity to retain consultants and directors. The
maximum number of shares that may be granted under the Plan is
300,000. Options granted generally become exercisable one year
from date of grant except that 60,000 options vested immediately
upon issuance.
Summary of All Plans
Stock option activity under all of the above plans is summarized below:
Weighted
Average
Number of Exercise
Shares Price
------ -----
Outstanding at December 31, 1995 7, 407 $0.072
Options granted -
Options cancelled -
Options exercised (447) $0.072
-----------
Outstanding at December 31, 1996 6,960 $0.072
Options granted 1,582,100 $ 0.07
Options cancelled (6,960) $0.072
Options exercised -
-----------
Outstanding at December 31, 1997 1,582,100 $ 0.07
Options granted 1, 224,000 $ 1.15
Options cancelled (123,834) $ 1.02
Options exercised (753,330) $ 0.07
-----------
Outstanding at December 31, 1998 1,928,936 $ 0.69
===========
Exercisable at December 31, 1998 721,245
===========
Weighted
Average
Contractual
Number of Price Remaining
Shares Per Share Life Exercisable
------ --------- ---- -----------
785,436 $0.07 8.4 Years 424,035
618,500 $0.37 9.1 Years 154,963
525,000 $2.00 9.4 Years 142,247
--------- --------
1,928,936 721,245
========= ========
-16-
140
GENOMIC SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Using the intrinsic value method under APB 25, no compensation expense
has been recognized in the accompanying consolidated statements
of operations for options granted at fair value. Had compensation
expense been determined based on the fair value at the date of
grant consistent with SFAS No. 123, the reported net loss would
have been increased to the following pro forma amounts, which
may not be representative of that to be expected in future years:
1998 1997 1996
---- ---- ----
Net Loss- As Recorded $(7,660,186) $ (2,619,285) $ (1,599,632)
Pro Forma (7,724,855) (2,621,134) (1,599,979)
The fair value of these options was estimated at the date of grant
using the minimum value option valuation method under SFAS 123
with the following assumptions: weighted average risk free
interest rate ranging from 5.82%; dividend yield of 0%; and
expected life of options of 3 years. Option valuation models
require the input of highly subjective assumption. Because
changes in subjective input assumptions can materially affect the
fair value estimate, in management's opinion, the existing model
does not necessarily provide a reliable single measure of the
fair value of the Company's stock options.
(10) EMPLOYEE BENEFIT PLAN
The Company has a 4019k) plan covering all eligible employees.
Participants may elect to defer a certain percentage of qualified
compensation through voluntary contributions to the plan and the
Company may make discretionary contributions to the plan based on
the gross compensation of qualified participants. The Company
made no contributions to the plan in the 1998, 1997 and 1996.
(11) LEASES
The Company leases most of its office space, transportation, and
laboratory and office equipment under various noncancelable
capital and operating lease agreements. Initial leases vary in
length and several of the leases contain renewal options. The
Company leases certain equipment under long-term lease agreements
that are classified as capital leases, and the leased assets are
included in property and equipment in the accompanying
consolidated balance sheets. These capital leases terminate at
various dates through fiscal 2002. Other leases are classified as
operating leases and are not capitalized.
141
GENOMIC SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Future minimum payments required under all noncancelable capital and
operating leases are as follows:
Operating Capital
Total Leases Leases
---------- ---------- --------
1999 $ 613,400 $ 414,600 $198,800
2000 541,600 349,300 192,300
2001 455,800 285,400 170,400
2002 373,700 293,600 80,100
2003 70,300 70,300 -
---------- ---------- --------
$2,054,800 $1,413,200 641,600
========== ==========
Less- Amount representing
interest 78,219
-------
563,381
Less-Current portion 162,375
--------
$401,006
========
Total rental expense was approximately $425,000, $92,000 and $72,000 in
1998, 1997 and 1996, respectively.
(12) ACQUISITIONS
Electrophoresis Business from ESA, Inc.
In October 1998, the Company acquired the gel electrophoresis and
proteomic business of ESA, Inc. in exchange for approximately
$1,750,000 in cash and a warrant to purchase 125,000 shares of common
stock at an exercise price of $6.00 per share. The acquisition has
been accounted for under the purchase method of accounting. In
connection with the acquisition, the Company recorded a one-time
charge to operations in 1998 of $340,000, associated with the
write-off of in-process research and development acquired in the
transaction that had not reached technological feasibility. The
remaining excess of the aggregate purchase price over the fair value
of the net assets acquired of approximately $906,000 has been
recognized as goodwill and is being amortized over a seven-year
period (See Note 2).
-18-
142
GENOMIC SOLUTIONS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Insight Bio Medical, Inc.
In April 1998, the Company acquired certain assets of Insight
Biomedical Imaging Inc., in exchange for $650,000 in cash. The
acquisition has been accounted for under the purchase method of
accounting. The excess of the purchase price over the fair value of
the net assets acquired of approximately $611,000 has been recognized
as goodwill and is being amortized over a five-year period
(see Note 2).
PBA Technology Limited
Effective December 31, 1997, the Company acquired 100% of the
outstanding capital stock of PBA Technology Limited in exchange for
$150,480 in cash and 1,500,000 shares of the Company's common stock
valued at $555,000, for an aggregate purchase price of $705,480. The
acquisition has been accounted for under the purchase method of
accounting. In connection with the acquisition, the Company recorded
a one-time charge to operations in 1997 of $1,017,000, associated
with the write-off of in-process research and development acquired in
the transaction that had not reached technological feasibility. The
remaining excess of the aggregate purchase price over the fair value
of the net assets acquired of approximately $230,000 has been
recognized as goodwill and is being amortized over a five-year
period (See Note 2).
BioPhotonics, Inc.
In June 1997, the Company acquired substantially all assets of
BioPhotonics, Inc. in exchange for $302,300 in cash and 85,000 shares
of common stock valued at $5,950. The acquisition has been accounted
for under the purchase method of accounting. The excess of the
purchase price over the fair value of the net assets acquired of
approximately $126,000 has been recognized as goodwill as is being
amortized over a five-year period (see Note 2).
(13) SUBSEQUENT EVENT
On April 23, 1999, the Company issued subordinate debentures with
warrants. The subordinated debentures are evidenced by promissory notes
which in aggregate total $6,000,000, together with 1,400,000 warrants
to purchase the Company's common stock. The notes are due April 2004
and bear interest at an annual rate of 12% to be paid quarterly.
While the Company is in the early stages of implementing its operating
plan (see Note 1), management believes that this financing, along with
other sources of credit, will provide adequate liquidity for its
current year.
-19-
143
SCHEDULE 7.i.2
1998 CONSOLIDATING FINANCIALS
As of December 1998
Post
12/31/98 US GAAP 12/31/98 12/31/98 12/31/98 12/31/98
PBA Adjustment GS Ltd (UK) GSl Adjust's GS Inc. (USA)
----------------------------------------------------------------------------------------
BALANCE SHEET
ASSETS
Current Assets
Cash and Cash Equivalents $ - $ - $ - $ 2,659,122 $ - $ 2,659,122
Accounts Receivable 186,126 - 186,126 773,905 - 773,905
Allowance for Doubtful Accounts - - - (73,479) - (73,479)
----------------------------------------------------------------------------------------
Accounts Receivable, net 186,126 - 186,126 700,426 - 700,426
Intercompany receivables 357,183 - 357,183 160,173 - 160,173
Inventory 1,063,234 - 1,063,234 1,780,904 1,780,904
Inventory reserve - - - (60,000) (60,000)
----------------------------------------------------------------------------------------
Inventories, net 1,063,234 - 1,063,234 1,720,904 - 1,720,904
Prepaid expenses 152,580 152,580 112,967 112,967
Other 75,889 231,565 307,454 58,685 - 58,685
----------------------------------------------------------------------------------------
Total current Assets 1,835,011 231,565 2,066,576 5,412,277 - 5,412,277
Property and equipment, cost 662,052 682,052 1,775,832 1,775,832
Accumulated depreciation (247,707) (247,707) (510,723) (510,723)
----------------------------------------------------------------------------------------
Property & equipment, net 414,345 - 414,345 1,265,109 - 1,265,109
Note Receivable - intercompany - 2,910,371 2,910,371
Investment in HD Technologies 152,152 5,040 157,192 -
Investment in KK - 72,059 72,059
Investment in PBA - - 705,480 705,480
PBA Acquisition Costs - 165,029 165,029
Other intangibles (Goodwill) 153,814 (153,814) - 1,393,819 1,393,819
Other long term assets - - 44,683 44,683
----------------------------------------------------------------------------------------
Total Assets $ 2,555,322 $ 82,791 $ 2,638,113 $ 11,968,827 $ - $ 11,968,827
========================================================================================
LIABILITIES & STOCKHOLDERS EQUITY
Current Liabilities
Notes Payable - Bank Overdraft $ 230,822 $ $ 230,822 $ 1,750,000 $ - $ 1,750,000
Current Portion SFLG loan 138,568 (4,299) 134,267
Current Portion Finance Leases 23,406 23,406 -
Current Portion Transamerica - - 143,268 143,268
Accounts Payable 921,002 - 921,002 990,439 990,439
Intercompany Payables 346,988 - 346,998 348,997 348,997
Accrued Warranty - 202,000 202,000
Taxes Payable 36,066 36,066 6,063 6,063
VAT Liability (231,565) 231,565 0 -
Accrued Liabilities 105,839 - 105,839 751,024 (2,700) 748,324
Directors Loan Accounts - - -
Deferred Revenue 67,856 67,856 126,221 126,221
----------------------------------------------------------------------------------------
Total Current Liabilities 1,571,123 295,122 1,866,245 4,318,012 (2,700) 4,315,312
Long Term Liabilities
LTD - SFLG loan 136,256 4,299 140,555 -
LTD - Finance Leases 12,689 12,689 -
LTD - Transamerica - - 384,018 384,018
LTD - Intercompany 2,456,508 2,456,508 -
Other Long Term Liabilities - 23,540 23,540
----------------------------------------------------------------------------------------
Total Long Term Liabilities 2,605,453 4,299 2,609,752 407,558 - 407,558
----------------------------------------------------------------------------------------
Total Liabilities 4,176,576 299,421 4,475,997 4,725,570 (2,700) 4,722,870
Stockholders' equity
Preferred Stock - 6,901 6,901
Common Stock - 2,919 - 2,919
Add'l Paid in Capital - 16,525,232 - 16,525,232
Share capital 1,121,440 1,121,440 -
Beginning Retained Earnings (1,197,068) (259,152) (1,456,220) (3,182,956) (3,182,956)
Current Year PA (1,532,574) 43,264 (1,489,310) (6,060,225) - (6,060,225)
----------------------------------------------------------------------------------------
Ending Retained earnings (2,729,643) (215,888) (2,945,531) (9,243,181) - (9,243,181)
Notes Receivable (49,950) 2,700 (47,250)
Cumulative Translation Adjustment (13,051) (742) (13,793) 1,336 1,336
----------------------------------------------------------------------------------------
Total Stockholders Equity (1,621,253) (216,630) (1,837,884) 7,243,257 2,700 7,245,957
----------------------------------------------------------------------------------------
Total Liabilities and Stockholders Equity $ 2,555,323 $ 82,790 $ 2,638,113 $ 11,968,827 $ - $ 11,968,827
========================================================================================
Assets = Liability + Equity $ (0) $ 0 $ (0) $ - $ - $ -
Investment
12/31/98 12/31/98 & Interco. TOTAL
Japan (K.K.) Nihon BI COMBINED Elimination CONSOLIDATED
-------------------------------------------------------------------------
BALANCE SHEET
ASSETS
Current Assets
Cash and Cash Equivalents $ 77,654 $ 143,163 $ 2,879,849 $ - $ 2,879,849
Accounts Receivable 475,069 1,435,100 1,435,100
Allowance for Doubtful Accounts - (73,479) (73,479)
-------------------------------------------------------------------------
Accounts Receivable, net 475,069 - 1,361,621 - 1,361,621
Intercompany receivables 105,440 262,852 885,648 (885,648) -
Inventory 178,761 3,022,899 (105,940) 2,916,959
Inventory reserve (60,000) (60,000)
-------------------------------------------------------------------------
Inventories, net 178,761 - 2,962,899 (105,940) 2,856,959
Prepaid expenses 846 266,393 266,393
Other 31,311 397,450 397,450
-------------------------------------------------------------------------
Total current Assets 868,991 406,015 8,753,859 (991,588) 7,762,271
-
Property and equipment, cost 1,662 2,439,546 (74,005) 2,365,541
Accumulated depreciation (323) (758,753) 2,661 (756,092)
-------------------------------------------------------------------------
Property & equipment, net 1,339 - 1,680,793 (71,344) 1,609,449
Note Receivable - intercompany 2,910,371 (2,910,371) -
Investment in HD Technologies 157,192 157,192
Investment in KK 72,059 (72,059) -
Investment in PBA 705,480 (705,480) -
PBA Acquisition Costs 165,029 165,029
Other intangibles (Goodwill) 1,393,819 18,616 1,412,435
Other long term assets 40,343 85,026 85,026
-------------------------------------------------------------------------
Total Assets $ 910,673 $ 406,015 $ 15,923,628 $ (4,732,226) $ 11,191,402
=========================================================================
LIABILITIES & STOCKHOLDERS EQUITY
Current Liabilities
Notes Payable - Bank Overdraft $ $ 1,980,822 $ - $ 1,980,822
Current Portion SFLG loan 134,267 134,267
Current Portion Finance Leases 23,406 23,406
Current Portion Transamerica 143,268 143,268
Accounts Payable 50,624 1,962,065 1,962,065
Intercompany Payables 189,712 885,697 (885,697) -
Accrued Warranty 18,571 220,571 220,571
Taxes Payable 33,674 - 75,803 75,803
VAT Liability 0 0
Accrued Liabilities 6,089 53,164 913,416 50 913,466
Directors Loan Accounts - -
Deferred Revenue 194,077 194,077
-------------------------------------------------------------------------
Total Current Liabilities 298,670 53,164 6,533,391 (885,647) 5,647,744
Long Term Liabilities
LTD - SFLG loan 140,555 140,555
LTD - Finance Leases 12,689 12,689
LTD - Transamerica 384,018 384,018
LTD - Intercompany 453,864 2,910,372 (2,910,372) -
Other Long Term Liabilities 23,540 23,540
-------------------------------------------------------------------------
Total Long Term Liabilities 453,864 - 3,471,174 (2,910,372) 560,802
-------------------------------------------------------------------------
Total Liabilities 752,534 53,164 10,004,565 (3,796,019) 6,208,546
Stockholders' equity
Preferred Stock 6,901 6,901
Common Stock 72 2,991 (72) 2,919
Add'l Paid in Capital 71,987 16,597,219 (71,987) 16,525,232
Share capital 1,121,440 (1,121,440) -
Beginning Retained Earnings - 250,358 (4,388,818) 439,220 (3,949,598)
Current Year PA (31,215) 102,493 (7,478,257) (181,929) (7,660,186)
-------------------------------------------------------------------------
Ending Retained earnings (31,215) 352,851 (11,867,076) 257,291 (11,609,784)
Notes Receivable (47,250) (47,250)
Cumulative Translation Adjustment 117,295 - 104,838 104,838
-------------------------------------------------------------------------
Total Stockholders Equity 158,139 352,851 5,919,064 (936,208) 4,982,856
-------------------------------------------------------------------------
Total Liabilities and Stockholders Equity $ 910,673 $ 406,015 $ 15,923,628 $ (4,732,226) $ 11,191,402
=========================================================================
Assets = Liability + Equity $ (0) $ - $ (0) $ 0 $ 0
144
SCHEDULE 7.i.3
GENOMIC SOLUTIONS INC.
INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS:
SCHEDULE DESCRIPTION
-------- -----------
7.i.3.a Consolidated Statement Of Operations For The Two Months Ended
February 28, 1999.
7.i.3.b Consolidated Statement Of Cash Flows For The Two Months Ended
February 28, 1999
7.i.3.c Consolidated Balance Sheet As Of February 28, 1999.
145
SCHEDULE 7.i.3.a
GENOMIC SOLUTIONS INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE TWO MONTHS ENDED FEBRUARY 28, 1999
(Unaudited and in $000's)
Revenue $ 1,580
Cost of revenue 833
---------
Gross profit 747
Gross profit % 47.3%
Operating Expenses
Sales and marketing 702
Research and development 736
General and administrative 472
---------
Total operating expenses 1,910
---------
Loss from operations (1,163)
Other expense 65
---------
Loss before taxes (1,228)
Benefit for income taxes -
---------
Net loss $ (1,228)
=========
146
SCHEDULE 7.i.3.b
GENOMIC SOLUTIONS INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE TWO MONTHS ENDED FEBRUARY 28, 1999
(Unaudited and in $000's)
OPERATING ACTIVITIES
Net loss $(1,228)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 131
Provision for losses on accounts receivable 6
Write-off of capitalized software -
Non-cash interest expense -
Changes in operating assets and liabilities:
Accounts receivable (327)
Inventories (145)
Prepaid expenses and other assets 150
Accounts payable (396)
Accrued liabilities 258
Deferred revenue (41)
-------
Net cash provided by (used in) operating activities (1,592)
INVESTING ACTIVITIES
Capitalization of internal R&D -
Purchase of Capitalized software -
Purchase of property and equipment (196)
Other 1
-------
(195)
Net cash used in investing activities
FINANCING ACTIVITIES
Net borrowings (repayments) under notes payable (132)
Repayment of long-term debt (SFLG Loan and Finance Lease) -
Proceeds from issuance of LTD (SFLG Loan and Finance Lease) 64
Proceeds from Transamerica sale/leaseback 210
Repayment of Transamerica sale/leaseback (28)
Issuance of common stock 2
Other -
-------
Net cash provided by financing activities 116
EFFECT OF EXCHANGE RATE CHANGES 9
-------
NET INCREASE (DECREASE) IN CASH (1,662)
BALANCE AT BEGINNING OF PERIOD 2,880
-------
BALANCE AT END OF PERIOD $ 1,218
=======
147
SCHEDULE 7.i.3.c
GENOMIC SOLUTIONS INC.
CONSOLIDATED BALANCE SHEET
AS OF FEBRUARY 28, 1999
($000's)
ASSETS (UNAUDITED)
------
Cash and cash equivalents $ 1,218
Accounts receivable, net 1,641
Inventories, net 2,953
Prepaid & other current assets 503
---------
Total current assets 6,315
Property and equipment, net 1,705
Other long-term assets:
Intangibles, net 1,870
Other 244
---------
Total other long-term assets 2,114
---------
TOTAL ASSETS 10,134
=========
Liabilities & Stockholders' Equity
----------------------------------
Current liabilities:
Short-term borrowings 1,843
Current portion of long-term debt 161
Accounts payable 1,534
Accrued liabilities 1,650
Deferred revenue 152
Other -
---------
Total current liabilities 5,340
Long-term debt, less current portion 748
Stockholders' Equity
Preferred convertible & common stock 10
Additional paid-in-capital 16,527
Accumulated deficit (12,498)
Currency translation adjustments 57
---------
Total stockholders' equity 4,096
Less: Notes receivable (50)
---------
TOTAL LIABILITIES & STOCKHOLDERS EQUITY $ 10,134
=========
148
SCHEDULE 7.i.4
As of February 28, 1999
Post
2/28/99 US GAAP 2/28/99 2/28/99 2/28/99 2/28/99
GSI Adjustment GSI GSI Adjust's GSI
----------- ---------- ----------- ----------- -------- -----------
BALANCE SHEET
ASSETS
Current Assets
Cash and Cash Equivalents $ - $ - $ - $ 1,005,436 $ - $ 1,085,436
Accounts Receivable 207,372 - 207,372 852,566 - 852,568
Allowance for Doubtful Accounts - - (75,601) - (75,601)
----------- -------- ----------- ----------- ----- -----------
Accounts Receivable, net 207,372 - 207,372 776,965 - 778,965
Intercompany receivables 451,372 - 451,372 527,070 - 527,070
Inventory 1,061,130 - 1,061,130 1,883,167 1,883,167
Inventory reserve - - (80,000) (80,000)
----------- -------- ----------- ----------- ----- -----------
Inventories, net 1,061,130 - 1,061,130 1,803,167 - 1,803,167
Prepaid expenses 57,030 57,030 161,641 161,641
Other 47,155 169,054 216,209 60,698 - 60,698
----------- -------- ----------- ----------- ----- -----------
Total current Assets 1,824,059 169,054 1,993,113 4,414,977 - 4,414,977
Property and equipment, cost 735,344 735,344 1,871,188 1,871,188
Accumulated depreciation (275,240) (275,240) (559,709) (559,709)
----------- -------- ----------- ----------- ----- -----------
Property & equipment, net 460,105 - 460,105 1,311,479 - 1,311,479
Receivable - Intercompany - 3,318,421 3,318,421
Amount in HD Technologies 152,152 4,005 156,157 - -
Amount in KK - 72,059 72,059
Amount in PBA - - 705,480 705,480
Acquisition Costs - 158,153 158,153
Intangibles - (Goodwill) - - 1,693,044 1,693,044
Long term assets - - 49,823 49,823
----------- -------- ----------- ----------- ----- -----------
Assets $ 2,436,015 $173,050 $ 2,609,374 $11,723,436 $ - $11,723,436
=========== ======== =========== =========== ===== ===========
LIABILITIES & STOCKHOLDERS EQUITY
Current liabilities
Notes Payable - Bank Overdraft $ 93,184 $ $ 93,184 $ 1,750,000 $ - $ 1,750,000
Accounts Payable 793,655 793,655 715,508 (426) 715,082
Intercompany Payables 412,772 - 412,772 414,293 414,293
Accrued Warranty - 224,000 224,000
Taxes Payable 78,584 78,584 5,964 5,964
VAT Liability (169,054) 169,054 (0) -
Accrued Liabilities 73,264 - 73,264 1,193,108 - 1,193,108
Directors Loan Accounts - - -
Deferred Revenue 59,175 59,175 92,584 92,584
Finance Leases 27,748 27,748 -
Debt - SFLG loan 133,558 133,558 -
----------- -------- ----------- ----------- ----- -----------
Total Current Liabilities 1,443,711 228,229 1,671,039 4,395,457 (426) 4,395,031
Long Term Liabilities
Debt - SFLG loan 126,881 126,881 -
Deferred Taxation - - -
Finance Leases 73,258 73,258 -
LTD - Intercompany 2,864,557 2,864,557 -
Other Long Term Liabilities - 547,925 547,925
----------- -------- ----------- ----------- ----- -----------
Total Long Liabilities 3,064,696 - 3,064,696 547,925 - 547,925
----------- -------- ----------- ----------- ----- -----------
Total Liabilities 4,508,406 228,229 4,736,635 4,943,382 (426) 4,942,956
Stockholders equity
Preferred Stock - 6,901 6,901
Common Stock - 2,926 - 2,926
Add'l Paid in Capital - 16,526,907 - 16,526,907
Share capital 1,121,440 1,121,440 -
Beginning Retained Earnings (2,883,457) (62,074) (2,945,531) (8,550,755) 426 (8,550,329)
Current Year PA (378,964) 5,495 (373,469) (1,053,360) - (1,053,360)
----------- -------- ----------- ----------- ----- -----------
Ending Retained earnings (3,262,421) (56,579) (3,319,000) (9,604,115) 426 (9,603,689)
Notes Receivable (49,950) (49,950)
Cumulative Translation Adjustment 68,890 1,409 70,299 (102,615) (102,615)
----------- -------- ----------- ----------- ----- -----------
Total Stockholders Equity (2,072,090) (55,170) (2,127,260) 6,780,054 426 6,780,480
----------- -------- ----------- ----------- ----- -----------
Total Liabilities and
Stockholders Equity $ 2,436,316 $173,059 $ 2,609,375 $11,723,436 $ - $11,723,436
=========== ======== =========== =========== ===== ===========
Assets = Liabilities + Equity $ (1) $ 0 $ (0) $ - $ - $ -
=========== ======== =========== =========== ===== ===========
As of February 28, 1999
Post
2/28/99 2/28/99 2/28/99 Intercompany
GSKK Adjust's Japan (K.K.) COMBINED Eliminations CONSOLIDATED
----------- ----------- ------------ ----------- ------------ ------------
BALANCE SHEET
ASSETS
Current Assets
Cash and Cash Equivalents $ 132,084 $ - $ 132,084 $ 1,217,520 $ - $ 1,217,520
Accounts Receivable 657,089 - 657,089 1,717,027 1,717,027
Allowance for Doubtful Accounts - - - (75,601) - (75,601)
---------- ---- ---------- ------------ ----------- ------------
Accounts Receivable, net 657,089 - 657,089 1,641,426 - 1,641,426
Intercompany receivables (3,035) - (3,035) 975,407 (975,407) -
Inventory 193,742 - 193,742 3,138,039 (104,870) 3,033,169
Inventory reserve - (80,000) (80,000)
---------- ---- ---------- ------------ ----------- ------------
Inventories, net 193,742 - 193,742 3,058,039 (104,870) 2,953,189
Prepaid expenses 309 309 218,980 218,980
Other 7,468 - 7,468 284,375 284,375
---------- ---- ---------- ------------ ----------- ------------
Total current Assets 987,657 - 7,395,747 7,395,747 (1,080,277) 8,315,470
Property and equipment, cost 1,583 1,583 2,608,115 (74,005) 2,534,110
Accumulated depreciation (308) (308) (835,257) 5,744 (829,513)
---------- ---- ---------- ------------ ----------- ------------
Property & equipment, net 1,275 - 1,275 1,772,859 (68,261) 1,704,598
Receivable - Intercompany 8,318,421 (3,318,421) -
Amount in xx Technologies - 156,157 156,157
Amount in xx - 72,059 (72,059) -
Amount in PBS - 705,480 (705,480) -
Acquisition Costs - 158,153 158,153
xxx Intangibles - (Goodwill) - 1,693,044 17,842 1,710,666
xxx long term assets 38,433 38,433 88,256 88,256
---------- ---- ---------- ------------ ----------- ------------
$1,027,365 $ - $1,027,365 $ 15,360,175 $(5,228,656) $ 10,133,520
========== ==== ========== ============ =========== ============
LIABILITIES & STOCKHOLDERS EQUITY
Current liabilities
Notes Payable - Bank Overdraft $ - $ - $ 1,843,184 $ - $ 1,843,184
Accounts Payable 25,274 - 25,274 1,534,011 1,534,011
Intercompany Payables 144,590 144,590 971,655 (971,655) -
Accrued Warranty 33,024 33,024 257,024 257,024
Taxes Payable 24,805 24,805 109,353 109,353
VAT Liability - - (0) (0)
Accrued Liabilities 20,725 20,725 1,287,097 (3,751) 1,283,346
Directors Loan Accounts - - -
Deferred Revenue - 151,759 151,759
Finance Leases - 27,748 27,748
Debt - SFLG loan - 133,558 133,558
---------- ---- ---------- ------------ ----------- ------------
Total Current Liabilities 248,418 - 248,418 6,315,388 (975,407) 5,339,982
Long Term Liabilities
Debt - SFLG loan - 126,881 126,881
Deferred Taxation - - -
Finance Leases - 73,258 73,258
LTD - Intercompany 453,864 453,864 3,318,421 (3,318,421) -
Other Long Term Liabilities - 547,925 547,925
---------- ---- ---------- ------------ ----------- ------------
Total Long Liabilities 453,864 - 453,864 4,066,485 (3,318,421) 748,064
---------- ---- ---------- ------------ ----------- ------------
Total Liabilities 702,282 - 702,282 10,381,873 (4,293,828) 6,088,046
Stockholders equity
Preferred Stock - 6,901 6,901
Common Stock 72 72 2,926 (72) 2,926
Add'l Paid in Capital 71,987 71,987 16,598,894 (71,987) 16,526,907
Share capital - 1,121,440 (1,121,440) -
Beginning Retained Earnings (31,215) - (31,215) (11,527,075) 257,291 (11,269,784)
Current Year PA 195,384 - 195,364 (1,231,465) 3,380 (1,228,085)
---------- ---- ---------- ------------ ----------- ------------
Ending Retained earnings 164,149 - 164,149 (12,758,540) 260,671 (12,497,869)
Notes Receivable - (49,950) (49,950)
Cumulative Translation Adjustment 88,875 - 88,875 58,559 58,559
---------- ---- ---------- ------------ ----------- ------------
Total Stockholders Equity 325,083 - 325,083 4,978,303 (932,828) 4,045,474
---------- ---- ---------- ------------ ----------- ------------
Total Liabilities and
Stockholders Equity $1,027,365 $ - $1,027,365 $ 15,360,176 $(5,226,656) $ 10,133,520
========== ==== ========== ============ =========== ============
Assets = Liabilities + Equity $ - $ - $ - $ (0) $ 0 $ (0)
========== ==== ========== ============ =========== ============
149
SCHEDULE 7.k
GENOMIC SOLUTIONS
DEVELOPMENT SINCE "INTERIM" BALANCE SHEET DATE:
Since the "Interim" Balance Sheet Date as of February 28, 1999;
a.) the consolidated cash balance of Genomic Solutions Inc. as of March 31,
1999 was $1,270,726, which included approximately $440,000 received from
certain Lenders, (American Healthcare Fund II, Robert Shepler, and Grove
Investment Partners) and deposited into a separate Genomic Solutions Inc.
bank account, and
b.) the consolidated cash balance of Genomic Solutions Inc., as of April 19,
1999 at 9 a.m., was approximately $1,404,413, which included approximately
$691,505, received from certain Lenders, (American Healthcare Fund, Robert
G. Shepler, Grove Investment Partners, John J. Mackowski, J. Matthew
Mackowski) and deposited into a separate Genomic Solutions Inc. bank
account.
150
SCHEDULE 7.1
ENCUMBRANCES
(Unless previously provided, copies of these documents are available upon
request of the Secretary of the Corporation or the Company's legal counsel.)
Schedule 7.1.1 List of Secured Paries
151
SCHEDULE 7.l.1
(page 1 of 3)
MICHIGAN DEPARTMENT OF STATE DATE APR 19, 1999 TIME 12:51 ACCOUNT NUMBER
UNIFORM COMMERCIAL CODE
LANSING, MICHIGAN 48918 DEBTOR INFORMATION REQUESTOR INFORMATION
SEARCH RESULTS B383383038 R28969
GENOMIC SOLUTIONS INC JAFFE RAITT HEUER & WEISS
4355 VARSITY DR ATTN KIM CASTEEL
ANN ARBOR MI 48108 ONE WOODWARD AVE #2400
DETROIT MI 48226
COPIES REQUESTED
-------------------------------------------------------------------
FILING DATE/TIME DOCUMENT SECURED MICROFILM
NUMBER OF HIRING TYPE PARTY CODFE LOCATION
-------------------------------------------------------------------
D403758 02-28-98 09:00 ORIG H44560 98049-377.03
D405624 08-04-98 09:00 ORIG H44560 98051-1284.02
D432338 10-15-98 09:00 ORIG H44560 98065-2447.03
D441949 11-09-98 09:00 ORIG H44560 98070-2359.03
D464538 01-11-99 09:00 ORIG J18739 99001-1549.03
D484565 03-01-99 09:00 ORIG H44550 99012-536.03
D489019 06-10-99 09:00 ORIG H44560 99014-1662.03
D489043 03-10-99 09:00 ORIG H44560 99014-1691.03
D489058 03-10-99 09:00 ORIG H44560 99014-1706.03
SECURED PARTIES
H44560
TRANSAMERICA BUSINESS CREDIT CORP
76 BATTERSON PARK RD
FARMINGTON CT 06032
JIB239
TRANSAMERICA BUSINESS CREDIT CORP
76 BATTERSON PARK PD
FARMINGTON CT 06032
152
SCHEDULE 7.l.1
(page 2 of 3)
MICHIGAN DEPARTMENT OF STATE DATE APR 19, 1999 TIME 12:51 ACCOUNT NUMBER
UNIFORM COMMERCIAL CODE
LANSING, MICHIGAN 48918 DEBTOR INFORMATION REQUESTOR INFORMATION
SEARCH RESULTS A383383038 R28969
GENOMIC SOLUTIONS/BIO IMAGE JAFFE RAITT HEUER & WEISS
4355 VARSITY DR ATTN KIM CASTEEL
ANN ARBOR MI 48108 ONE WOODWARD AVE #2400
DETROIT MI 48226
COPIES REQUESTED
-----------------------------------------------------------------------------
FILING DATE/TIME DOCUMENT SECURED MICROFILM
NUMBER OF HIRING TYPE PARTY CODE LOCATION
-----------------------------------------------------------------------------
D365088 04-22-98 09:00 ORIG H38552 98024-2052.0
D403880 07-29-98 09:00 ORIG J18739 98049-639.03
SECURED PARTIES
H38552
IKON OFFICE SOLUTIONS
278012790 44TH ST SW
GRAND RAPIDS MI 49509
J18739
TRANSAMERICA BUSINESS CREDIT CORP
76 BATTERSON PARK PD
FARMINGTON CT 06032
153
Schedule 7.x.1
(Page 3 of 3)
MICHIGAN DEPARTMENT OF STATE DATE APR 19, 1999 TIME 12:51 ACCOUNT NUMBER
UNIFORM COMMERCIAL CODE
LANSING, MICHIGAN 48918 DEBTOR INFORMATION REQUESTOR INFORMATION
SEARCH RESULTS SEARCH RESULTS FOR: R28969
GENOMIC SOLUTIONS INC. JAFFE RAITT HEUER & WEISS
ATTN KIM CASTEEL
ONE WOODWARD AVE #2400
DETROIT MI 48226
COPIES REQUESTED
-------------------------------------------------------------------
FILING DATE/TIME DOCUMENT SECURED MICROFILM
NUMBER OF HIRING TYPE PARTY CODE LOCATION
-------------------------------------------------------------------
FEES
1 Debtor(s) -- No TIN supplied: $6.00
30 Print(s) @ $1.00/print: $30.00
Expedited Search Fee: $25.00
1 Total Debtor(s).
TOTAL FEE $61.00
The Undersigned Filing Officer Certifies
that the above is a record of all
presently effective financing statements,
tax liens and assignments which name the
above debtor(s) and which are on file
as of APR 02 1999.
The attached photo copies are true copies
of the requested financing statements,
tax liens and assignments on file.
/s/ Jeffrey C. Nickerson
---------------------------
Signature of Filing Officer
Retain this form for reconciliation to your
monthly stmt. Remit pmt based on statement only.
154
SCHEDULE 7.o
LIST OF AGREEMENTS:
(Unless previously provided, copies of these agreements are available upon
request of the Secretary of the Corporation or its legal counsel.)
ENTITY DESCRIPTION
GSI 1994 Omnibus Equity Incentive Plan
GSI 1998 Employee Stock Option Plan
GSI 1998 Non-Employee Stock Option Plan
GSI 401(k) Profit Sharing Plan and Trust
GSI Jeffrey S. Williams Employment Agreement effective January 1, 1998
GSLtd. Genomic Solutions Ltd. Employee Service Contracts with the following
managers; Kevin Auton, John Pinkney, David Byatt, and Paul Dunkley.
GSI All employees of Genomic Solutions Inc. sign prior to starting employment
with GSI an "Employment Agreement" of confidentiality and non-
disclosure.
GSLtd. All employees of Genomic Solutions Limited ("GSLtd.") sign
prior to starting employment with GSL a "Statement of Main
Terms and Conditions of Employment."
GSLtd. Consultancy Agreement between Genomic Solutions Ltd. and P. Nicholas
King, who also serves as a Director of Genomic Solutions Inc.
GSI Consultancy Agreement between Genomic Solutions Inc. and
Mackowski and Shepler, both Matt Mackowski (GSI)
GSI Punk, Ziegel & Company Services Agreement
Schedule 7.o.1 List of Distribution Agreements
Schedule 7.o.2 List of Genomic Solutions' Facilities
Schedule 7.o.3 List of Non-Disclosure Agreements
Schedule 7.o.4 List of Leases
Schedule 7.o.5 List of Other Contracts
GSI Shareholder Agreement and Amendments
GSI Series B Preferred Stock Purchase Agreements
GSI Series C Preferred Stock Purchase Agreements
GSI Series D Preferred Stock Purchase Agreements
GSI Series M Preferred Stock Purchase Agreement
Schedule 7.o.6 List of Borrowings
Schedule 7.o.7 List of Acquisitions and Strategic Alliance Agreements
155
SCHEDULE 7.o.1
LIST OF DISTRIBUTION AGREEMENTS:
GENOMIC SOLUTIONS DISTRIBUTES THE PRODUCT OF:
DATE OF AGREEMENT WITH LENGTH OF AGREEMENT COMMENTS
AGREEMENT
05/28/98 General Scanning Terminated Exclusive agent for General's Scan
Array, 3000 Biochip scanner
11/17/98 Spotfire, Inc Distribute Spotfire Pro Software
9/2/98 Biospace Mesures Terminates 12/31/99 Product Distribution Agreement
GENOMIC SOLUTION'S PRODUCTS ARE DISTRIBUTED BY THE FOLLOWING:
DATE OF AGREEMENT WITH LENGTH OF AGREEMENT COMMENTS
AGREEMENT
11/16/98 Australian Laboratory Services Australian Distribution Agreement
12/15/98 Science & Technology Ltd. New Zealand Distribution Agreement
2/15/99 Bio/Can Scientific Canada Distribution Agreement
B&L Holland Distribution Agreement with
GSLtd.
AbiMed German Distribution Agreement with
GSLtd.
Kebo Lab Letter of Intent Distributor for Nordic Region
(Denmark, Norway, Sweden, Finland)
156
SCHEDULE 7.o.2
LIST OF GENOMIC SOLUTIONS' FACILITIES:
1.) Main Corporate offices which house - Sales(a), Marketing, Molecular
Biology, Biochip production, Software development, Accounting and
Administration.
Address: 4355 Varsity Drive, Suite E
Ann Arbor, NE 48108
Note (a): Corporate direct sales reps (5), manager (1), and a field service
engineer (1) are located outside of Michigan and work out of their homes.
2.) Imaging systems manufacturing and engineering operations are located in
Lansing, Michigan.
Address: 3120 Sovereign Drive, Suite A
Lansing, MI 48911
3.) Genomic Solutions' 2-D gel electrophoresis and proteomic services business
is located in Chelmsford, Massachusetts. The company subleases approximately
5,200 square feet from ESA, Inc.
Address: 22 Alpha Road
Chelmsford, MA 01824
4.) Genomic Solutions Ltd. ("GSL") is located in Cambridgeshire, England,
providing robot and fluidic handling systems development and manufacturing
as well as European marketing, sales and service. The lease expires June 30,
1999.
Address: Unit 3, Forge Close
Little End Road, St. Neots
Cambridgeshire, PE 19 3TP
United Kingdom
4.a) Genomic Solutions Ltd. has entered into a facility lease agreement in
April 1999 primarily to support increased demand for Genomic robotic
and fluidic products and therefore increased production. The entire GSL
operations will be moved to the following new facility sometime between
May 1999 and August 1999.
Address: 8 Blackstone Road
Huntingdon
Cambridgeshire, PE 19 6EF
United Kingdom
5.) Genomic Solutions K.K., located in Tokyo, Japan, provides domestic
marketing, sales and technical support.
Address: Gotanda Chuo Bldg. 2F
3-5, Higashigotanda 2-chome
Shinagawa-Ku 141-0022
Tokyo, Japan
157
SCHEDULE 7.o.3
LIST OF NON-DISCLOSURE AGREEMENTS:
DATE OF AGREEMENT AGREEMENT WITH
3/17/99 Affymetrix, Inc.
2/12/99 Amersham Pharmacia Biotech (UK) Limited
10/8/98 Amresco
3/24/99 Becton Dickinson & Co.
2/1/99 Bertrand Lemieux
3/12/99 Bio-Rad Laboratories, Inc.
2/2/98 BIOSEQ
10/15/98 BioWhittaker, Inc
6/3/98 Carl Zeiss Jena GmbH.
3/2/99 Chiroscience Group plc
4/2/98 Chromagen, Inc.
12/9/98 Corning, Inc.
3/5/99 Dow Chemical Company
3/5/98 Dr. Michel Schummer
3/17/99 EG&G Wallac
3/15/99 F. Hoffman-LaRoche Ltd.
3/15/99 GATTAC Corporation
12/8/97 Gene Logic Inc
4/15/98 Genosys Biotechnologies Inc
2/8/99 Isis Pharmaceuticals, Inc.
10/5/98 James Burk
3/8/99 Kebo Lab
12/1/97 Kloehn Company Ltd.
3/15/99 MDS Inc.
2/26/99 Micromass Inc.
5/19/98 Monsanto Corporation
3/5/99 Monsanto Corporation
2/11/99 Morgan Stanley Venture capital III, Inc.
10/28/97 Mosaic Technologies
3/2/98 MWG Biotech
11/18/98 Myogen, Inc
3/l/99 NEN Life Science Products, Inc.
10/15/98 Olli Kallioniemi
3/12/99 Packard BioScience Company
2/24/98 Photometrics Ltd
8/12/98 Polyfiltronics, Inc
2/18/98 Richard Fisher
11/2/98 Scanalytics, Inc.
2/9/99 Sigma-Aldrich Corp.
9/3/98 TeleChem International
11/25/98 The Perkin-Elmer Corporation
2/l/99 Timothy Zacharewski
4/2/98 University of Alberta
7/1/98 University of Michigan
2/20/98 WestElder Associates
4/23/98 Zeneca Limited
158
SCHEDULE 7.o.4
LIST OF LEASES
1. GENOMIC SOLUTIONS INC.
DATE OF AGREEMENT WITH LENGTH OF LOCATION MONTHLY COMMENTS
AGREEMENT AGREEMENT- PAYMENT
MONTHS
7/8/97 Highland Industrial Park 60 Ann Arbor Effective 1/1/98
Transamerica Business Credit Corporation Master Lease
7/16/98 Schedule # 1 48 $2,009.57 $77,507.00 leased equipment -
7/16/98 Schedule # 2 36 $2,537.79 $78,444.83 leased equipment
10/12/98 Schedule # 3 48 $2,150.80 $82,954.22 lease equipment
10/27/98 Schedule # 4 48 $4,451.61 $171,693.63 leased equipment
2/11/99 Schedule # 5 48 $5,139.40 $200,109.00 leased equipment
12/17/98 Schedule # 6 36 $3,652.07 $112,888.04 leased equipment
3/1/99 Schedule # 7 48 $5,388.14 $205,886.53 leased equipment
3/5/99 Schedule # 8 36 $2,247.30 $69,465.61 leased equipment
3/1/99 Schedule # 9 36 $4,662.20 $152,758.70 leased equipment
4/1/99 Schedule #10 48 $5,956.00 $229,717.00 leased equipment
7/22/98 Dart Container 60 Lansing Lansing Facility Lease
6/23/98 GMAC 36 $ 424.81 98 Chevy Venture Van
7/15/98 ADT Security Services per year
$ 622.00
10/6/97 Dell Financial Services 36 Ann Arbor $ 137.52 Dell Computer
1/16/98 Dell Financial Services 36 Ann Arbor $ 172.71 Dell Computer
1/22/98 Green Tree Vendor Services 36 $ 151.27 Gateway computer w/ printer
12/18/98 Chrysler Financial 24 Ann Arbor $ 334.35 1999 Grand Caravan
12/18/98 Chrysler Financial 24 Lansing $ 334.35 1999 Grand Caravan
1/5/98 01d Kent Leasing 36 Ann Arbor $ 84.75 Fax Machine
2/26/98 IKON 60 Ann Arbor $ 397.00 Ricoh Copier
10/21/98 Off Tech 36 Chelmsford $ 494.00 Ricoh Copier
1/11/99 Accutemp Engineering Inc 12 Chelmsford $ 36.25 Preventive Maintenance
- Lab Equipment
12/2/98 EZ Mini Storage Chelmsford $ 195.00 Off site storage
3/2/98 EZ Mini Storage Chelmsford $ 195.00 Off site storage
12/30/98 Infotrac 12 Chelmsford $ 30.85
3/9/99 GMAC 36 Ann Arbor $ 743.20 1999 Escalade - Auto Lease
159
SCHEDULE 7.O.4 - CONTINUED
II. GENOMIC SOLUTIONS LTD LEASES
DATE OF AGREEMENT WITH LENGTH OF MONTHLY COMMENTS
AGREEMENT AGREEMENT- PAYMENT
MONTHS
2/6/97 Peugeot Finance 48 Pound Sterling 338.62 Auto Lease - Van
2/2/96 Woodchester Finance Ltd 36 Pound Sterling 298.09 Auto Lease Rover
4/30/98 Caryle Finance 36 Pound Sterling 395.84 Auto Lease Ford Scarpio
1/20/99 Guarantee Finance 36 Pound Sterling 425.50 Auto Lease - Peugeot
11/27/96 Lombard North Central PLC 36 Pound Sterling 208.39 Auto Lease
Mar-97 Caryle Finance 36 Pound Sterling 283.81 Auto Lease - Mondeo
3/5/99 Guarantee Finance 48 Pound Sterling 443.20 Auto Lease - BMW
11/27/98 Caryle Finance 36 Pound Sterling 358.24 Auto Lease -Rover
9/11/98 Schroders Leasing Ltd. 36 Pound Sterling 592.46 NEC MT1020 LCD Projector
2/13/98 Apple Commercial Credit 36 Pound Sterling 688.07 Epic Pentium II Computer
5/29/98 Dell Financial Services 36 Pound Sterling 363.02 Computer Equipment
4/29/97 Danwood Financial Services 60 Pound Sterling 420.06 Sharp Photocopier
4/15/99 Winter thru Life UK Limited 120 Scaled Facility Lease - 8 Blackstone Road
Huntingdon, Cambridgeshire, UK
1996 Turrett Construction and Property June 30, 1999 Facility Lease - Unit 3
Company Ltd St. Neots, Cambridgeshire, UK
12/98 Turrett Construction and Property May 3, 1999 Facility Lease - Unit 2
Company Ltd St. Neots, Cambridgeshire, UK
III. GENOMIC SOLUTIONS K.K. LEASES
DATE OF AGREEMENT WITH LENGTH OF MONTHLY COMMENTS
AGREEMENT AGREEMENT- PAYMENT
MONTHS
4/21/98 Chuo Tochi K.K. 24 Yen 639,000 Facility lease in Tokyo, Japan
May 1, 98 - April 30, 2000
Various General office equipment, fax and copier
160
SCHEDULE 7.o.5
LIST OF OTHER CONTRACTS
DATE OF AGREEMENT WITH LENGTH OF ENTITY OR MONTHLY COMMENTS
AGREEMENT AGREEMENT LOCATION PAYMENT
-MONTHS
6/24/98 AbiMed UK Development of DigestPro and MALDI
Robot
1997 BioSeparations Ann Arbor
1/29/98 Computational Biosciences Inc Terminated Ann Arbor Software License Agreement
7/1/98 Dr. Liang Li Chelmsford
(University of Alberta)
2/23/99 GATTAC Ann Arbor PCR Machines - agency relationship -worid
wide exclusive right to market
2/23/99 GATTAC Ann Arbor Supply PCR products.
3/17/99 White Pines Management Ann Arbor Letter of Intent - Financing agreement
L.L.C.
Frontier Communications Inc. Long distance telephone carrier.
11/20/98 Granger Container Lansing 40.00 Recycling and refuse service
2/10/99 Bergstrom's Inc 12 Ann Arbor 113.67 Preventive Maintenance - Heating & Air
conditioning Equipment
12/3/98 Pitney Bowes 16 Ann Arbor 195.00 Postage meter
4/99 Myogen Inc. Genomic & Proteomic Analysis Contract
Services Agreement
2/26/98 HD Technologies Ltd. UK Co-operate on exclusive basis - Mass
Spectrometry Instrumentation (see
Schedule 7.o.7)
5/5/98 WestElder Associates 75/hr Consulting Contract
12/31/97 MRC License Agreement UK License of robot from Sanger Centre.
9/1 /98 University of Alberta 9/1/99 UK Global Research Agreement in Proteomics
Pending
April 99 Molecular Probes Chelmsford Term sheet signed progressing to License
Agreement
161
SCHEDULE 7.o.6
LIST OF BORROWINGS:
a.) Genomic Solutions Inc. has a $2,000,000 bank borrowing facility evidenced by
a line of credit agreement with Comerica Bank. Outstanding borrowings bear
interest at the Bank's prime interest rate. This facility is subject to
various covenants including the maintaining certain levels of tangible net
worth and working capital.
b.) Genomic Solutions Inc. has a fixed asset master lease agreement whereby it
may finance up to $1,500,000 in various laboratory, office and computer
equipment. Current funding is available through May 15, 1999, but may be
extended by the Lessor.
c.) Genomic Solutions Ltd. has an overdraft facility with a bank whereby Genomic
Solutions Ltd. may borrow up to approximately 120,000 pound sterling
($200,000). Outstanding borrowings bear interest at the bank's prime rate
plus 3.75% and are collateralized primarily by a stand-by letter of credit
issued by the parent company's (Genomic Solutions Inc.) bank.
d.) Genomic Solutions Ltd. has a line of credit agreement with a bank whereby
Genomic Solutions Ltd. may borrow up to 75,000 pound sterling (approximately
$120,000). Outstanding borrowings bear interest at 10.5% and are
collateralized by eligible accounts receivable.
e.) Note payable by Genomic Solutions Ltd. payable in monthly installments of
$4,167 plus interest at 10.5% through November 2000.
f.) Note payable by Genomic Solutions Ltd. payable in monthly installments of
$2,778, plus interest at 10.5% through January 2001.
162
SCHEDULE 7.o.7
LIST OF ACQUISITIONS AND STRATEGIC ALLIANCE AGREEMENTS:
BIOPHOTONICS, INC.:
ACQUISITION OF THE ELECTROPHORESIS RELATED ASSETS OF BIOPHOTONICS CORPORATION
BY B.I. SYSTEMS CORPORATION, D/B/A BIO IMAGE INCLUDING ASSET PURCHASE AGREEMENT
AND ALL OTHER DOCUMENTS ASSOCIATED WITH ACQUISITION.
In June 1997, Genomic Solutions Inc. acquired substantially all assets of
BioPhotonics, Inc. in exchange for $302,300 in cash and 85,000 shares of common
stock at $0.07 per share. The acquisition has been accounted for under the
purchase method of accounting. The excess of the purchase price over the fair
value of the net assets acquired has been recognized as goodwill and is being
amortized over a five-year period.
PBA TECHNOLOGY LTD.:
AGREEMENT FOR THE SALE AND PURCHASE OF THE ENTIRE ISSUED SHARE CAPITAL OF PBA
TECHNOLOGY LIMITED AND ASSOCIATED DOCUMENTS IN CONNECTION WITH THIS TRANSACTION.
Effective December 31, 1997, Genomic Solutions Inc. acquired 100% of the
outstanding capital stock of PBA Technology Limited. The aggregate purchase
price of approximately $705,480 consisted of $150,480 in cash and 1,500,000
shares of the Company's common stock valued at $555,000. The acquisition has
been accounted for under the purchase method of accounting. In connection with
the acquisition, the Company recorded a one-time charge to operations in 1997 of
$1,017,000, associated with the write-off of in-process research and development
acquired in the transaction that had not reached technological feasibility. The
remaining excess of the aggregate purchase price over the fair value of the net
assets acquired of approximately $230,000, including acquisition costs of
approximately $206,000, has been recognized as goodwill and will be amortized
over a five-year period.
HD TECHNOLOGIES, LTD.:
SUBSCRIPTION AND COLLABORATION AGREEMENT BETWEEN GENOMIC SOLUTIONS INC. AND HD
TECHNOLOGIES, LTD. AND ALL OTHER DOCUMENTS ASSOCIATED WITH THIS TRANSACTION.
On April 15, 1998, HD Technologies, Ltd., of Manchester, England, and Genomic
Solutions Limited entered into a Subscription Agreement whereby Genomic acquired
for 91,000 pound sterling Preference Shares of HD Technologies. In addition the
companies entered into a Collaboration Agreement to design, construct and
develop a MALDI-TOF mass spectrometer (and related computer software) for use in
the field of proteomics and genomics.
INSIGHT BIOMEDICAL IMAGING SYSTEMS:
ACQUISITION OF THE MERIDIAN ASSETS OF INSIGHT BIOMEDICAL IMAGING, INC. BY
GENOMIC SOLUTIONS INC. INCLUDING ASSET PURCHASE AGREEMENT, SHARING AGREEMENT,
AND ALL OTHER DOCUMENTS ASSOCIATED WITH ACQUISITION.
On April 22, 1998, Genomic Solutions Inc. acquired certain assets of Insight
Biomedical Imaging Systems, Inc. for $65,000 cash. Genomic acquired from Insight
the laser scanning confocal imaging business unit located in Lansing, Michigan.
Assets acquired by Genomic were inventory and fixed assets, and assumed the
existing service contracts.
163
SCHEDULE 7.o.7 - CONTINUED
LIST OF ACQUISITIONS AND STRATEGIC ALLIANCE AGREEMENTS:
ESA, INC.:
ACQUISITION OF THE ELECTROPHORESIS ASSETS OF ESA, INC. BY GENOMIC SOLUTIONS INC.
INCLUDING ASSET PURCHASE AGREEMENT, WARRANT, MANUFACTURING AGREEMENT, ROYALTY
AGREEMENT AND CONSENT FROM MILLIPORE, SUBLEASE AND ALL OTHER DOCUMENTS
ASSOCIATED WITH ACQUISITION
In October 1998, Genomic Solutions Inc. acquired the gel electrophoresis and
proteomic business of ESA, Inc. located in Chelmsford, Massachusetts. The
aggregate purchase price of approximately $1,750,000 in cash and a warrant to
purchase 125,000 shares of the Company's common stock at an exercise price of
$6.00 per share. The acquisition has accounted for under the purchase method of
accounting.
B. I. SYSTEMS CORPORATION:
AGREEMENT AND PLAN OF MERGER BETWEEN B.I. SYSTEMS CORPORATION, A DELAWARE
CORPORATION WITH AND INTO GENOMIC SOLUTIONS INC., A DELAWARE CORPORATION, AND
ALL RELATED DOCUMENTS.
On December 24, 1997, Genomic Solutions Inc. merged with B.I. Systems,
Corporation, with Genomic Solutions Inc., being the surviving entity.
164
SCHEDULE 7.p
GENOMIC SOLUTIONS INC.
INTELLECTUAL PROPERTY
PATENTS AND KNOW-HOW
The Company owns or has rights to certain proprietary information relating to
the products, systems and databases that it develops and markets. The Company
intends to actively seek, when appropriate, protection for its products and
proprietary information by means of United States and international patents,
trademarks and contractual arrangements. In addition, the Company plans to rely
upon trade secrets and contractual arrangements to protect certain of its
proprietary information and products.
The Company owns three issued patents and approximately five pending patent
applications worldwide relating to its biochip and proteomic products. There can
be no assurance that patents will issue from such applications, or, with respect
to issued or allowed patents, that they will provide the Company with
significant protection. In addition, the patent law relating to the areas of the
Company's research efforts is still developing which adds further uncertainty to
the protection afforded by existing patents and any additional patents the
Company may obtain.
Much of the know-how of importance to the Company's technology and many of its
processes are dependent upon the knowledge, experience and skills, which are not
patentable, of key scientific and technical personnel- To protect its rights to
its proprietary know-how and technology, the Company requires all employees,
consultants and advisors to enter 'into confidentiality agreements, which
prohibit the disclosure of confidential information to anyone outside the
Company. There can be no assurance that these agreements will effectively
prevent disclosure of the Company's confidential information or will provide
meaningful protection for the Company's confidential information if there is
unauthorized use or disclosure. In the absence of patent or other protection of
intellectual property, the Company's business may be adversely affected by
competitors who develop substantially equivalent or superior technology or
know-how.
I. PATENTS GRANTED
U.S. Patent 4,592,089: ELECTROPHORETOGRAM ANALYTICAL IMAGE PROCESSING
SYSTEM
Date of Patent: May 27, 1986
Describes an analytical image processing system for analyzing spots on
color electrophoretograms.
U.S. Patent 4,966,667: GEL TRANSFER PROCESS AND COMPOSITE
Date of Patent: Oct. 30, 1990
Describes an apparatus and process for transferring a gel shaped as a
cylinder from a first to a second electrophoresis step for the purpose
of creating 2-D electrophoresis gels.
US. Patent 5,281,322: ELECTROPHORESIS CASSETTE
Date of Patent: Jan. 25, 1994
Describes a cassette used to conduct gel electrophoresis separation of
samples.
165
SCHEDULE 7.p - CONTINUED
II. PATENTS APPLIED FOR (USPO EARLY DISCLOSURE)
LINE SCANNING IMAGER (11/11/97)
Describes an imaging system used for the collection of images from
high-density arrays of fluorescently tagged polynucleotides or protein
spots.
A THERMAL/FLUIDIC CYCLING DEVICE FOR THE PURPOSE OF NUCLEIC ACID
HYBRIDIZATION (8/10/98)
Describes an instrument designed to precisely control the
thermodynamics of nucleic acid hybridization reactions, thereby
significantly improving hybridization yields over manual methods.
LID LIFT SYSTEM (2/20/99)
Describes a system for the automated lifting of lids from microtitre
plates to gain access to material deposited in the plates.
AN AUTOMATED SYSTEM FOR EXCISING PROTEINS FROM TWO-DIMENSIONAL
ELECTROPHORESIS GELS (2/17/99)
Describes a novel laboratory robot-based solution for extracting
protein molecules from electrophoresis gels for further study.
A Laser Scanning Instrument for the Purpose of Acquiring Images of
Fluorescent Samples (4/22/99)
Describes a laser-based imaging system optimized for acquiring images
of fluorescent samples, especially fluorescently labeled cDNA.
III. PATENTS APPLIED FOR (UNITED KINGDOM)
UK PATENT APPLICATI0N NO. 9815457.8:IMPROVED MASS SPECTROMETER
Describes the design of an instrument used to measure the mass of
large biological molecules.
IV. PATENT APPLICATIONS IN PROGRESS (TO BE SUBMITTED TO THE USPO,
EARLY DISCLOSURE)
1. Hybridization Station (Autohybridizer) - several claims.
2. Flexys Laboratory Robot - several claims:
- Pneumatic Picking Tool
- Microarray Gridding Tool(s)
- Optical Fiber Gridding Tool
- A novel approach to cooling biological storage compartments
3. GeneTAC 1000 CCD-based biochip Imaging System - several claims
4. Biochip Production/Analysis - several claims, including:
- The novel application of specific genetic material onto biochips
for the purposes of quality assurance and landmark detection
- A technique for cleaning biochips to minimize background and
cross-channel contamination.
- A technique for detecting landmark spots on biochips
166
SCHEDULE 7.p - CONTINUED
LICENSED TECHNOLOGY
The technology used to create the Flexys(R) Robotic System was originally
developed in the United Kingdom in collaboration with the Sanger Centre. Genomic
Solutions holds an exclusive license, granted by the Medical Research Council,
London, United Kingdom ("MRC"), which represents the Sanger Centre in matters of
technology transfer, granting Genomic Solutions a worldwide exclusive right to
use technology created by the Sanger Centre for the Flexys(R) Robot. These
rights include any and all knowledge, experience, design data, construction
data, operating data, or other information or know how possessed by the Sanger
Centre which relates to the Flexys(R) Robot. In addition, improvements to the
underlying technology are covered by the license agreement. In consideration for
these rights, Genomic Solutions pays the MRC a royalty of 0.5% of the sale price
of instrumentation utilizing the licensed technology. The license agreement will
remain in-place so long as Genomic Solutions continues to use the licensed
technology.
COPYRIGHTS
The Company copyrights all of its software, software source code, applications
protocols, and operator and service manuals. Also, the Company copyrights
various other documents that Genomic Solutions believes may benefit from
copyright protection.
TRADEMARKS
The Company is the owner of the registered trademarks "Bio Image(R)" and
"Flexys(R)". Genomic Solutions has applied for registration of the trademarks
"GeneTAC", "GelPrint", and "Genomic Solutions". The Company also uses the common
law trademarks Investigator(TM), ProGest(TM), Genomic Integrator(TM), Scout(TM),
Advanced Quantifier(TM), and Intelligent Quantifier(TM)".
167
SCHEDULE 7.p.1
GENOMIC SOLUTIONS INC.
OFFICERS, AND SIGNIFICANT EMPLOYEES
WITH ARRANGEMENTS OR AGREEMENTS WITH FORMER EMPLOYERS RELATING TO
CONFIDENTIAL INFORMATION
Jeffrey S. Williams had an employment agreement covering, among other things,
non-disclosure of confidential information and non-recruiting of key employees
with both IRIS Corporation and Boehringer Mannheim Company. Both IRIS and
Boehringer principal business operates within the clinical diagnostics market.
Michael P. Kurek has a non-disclosure agreement with Gene Codes Corporation, an
Ann Arbor based bioinformatics company.
As of this date of closing and to the best of our knowledge, no other officer or
significant employees (as listed on Schedule 7.g.9 of this agreement) of Genomic
Solutions and its subsidiaries has any agreements or arrangements with former
employers relating to confidential information.
168
SCHEDULE 7.x
INFORMATION SUPPLIED TO LENDERS:
(Unless previously provided, copies of these documents are available upon
request of the Secretary of the Corporation.)
SCHEDULE DESCRIPTION
7.x.1 Confidential Descriptive Memorandum ("CDM"), dated February 1999.
7.x.2 Consolidated Financial Projection (the "Update") updated to
incorporate this $6,000,000 subordinated debt financing, dated
April 14,1999.
169
SCHEDULE 7.z
COMPANY HISTORY OF NAMES AND LOCATIONS:
1. GENOMIC SOLUTIONS INC. (UNITED STATES)
The Company history during the most recent five years is as follows:
- Genomic Solutions Inc ........................December 5, 1997 to present
Address: 4355 Varsity Drive, Suite E
Ann Arbor, MI 48108
- Genomic Solutions Inc. merges with B.I. Systems Corporation with
Genomic Solutions the surviving entity .......December 24, 1997
- B.I. Systems Corporation
(Doing Business as Bio Image) ................August 1994 to December 23, 1997
- B.I. Systems Corporation......................July 1996 to December 1997
Address: 525 Avis Drive, Suite 10
Ann Arbor, MI 48108
- B.I. Systems Corporation .....................July 1994 to July 96
Address: 777 Eisenhower Parkway, Suite 900
Ann Arbor, MI 48108
B.I. Systems Corporation operated several offices outside the United
States, operating as Michigan Corporations which were wholly owned by
B.I. Systems and operated as branch offices. Each of these branches
have been closed and subsequently dissolved as follows:
- Bio Image UK, Inc ............................operations from February 1995 to October,
1997, liquidation in process.
Address: Business & Technology Centre
Radway Green,
Crewe, Cheshire CW2 5PR
- Bio Image France .............................operations from February 1995 to May 1996,
liquidation completed.
Address: ZI Paris Nord 11
385 rue de la Belle Etoile BP 40053
Parc des Nations
95913 Roissy CDG Cedex
France
- Bio Image Systems Deutschland Inc. (Germany)..operations from January 1996 to
May 1996, liquidation completed.
Address: Eschenriederstr. 24
82194 Greobenzell
Germany
170
SCHEDULE 7.z - CONTINUED
- Nihon Bio Image Ltd .....operations from February 1995 to June 1998,
liquidation in process.
Address: Wistaria Higashigotanda, Bldg 5F
21-9 Higashigotanda 1-Chrome
Shinagawa-Ku
Tokyo, Japan
II. GENOMIC SOLUTIONS LTD (UNITED KINGDOM)
Located in Cambridgeshire, England the history of PBA Technologies,
during the most recent five years is as follows:
- Genomic Solutions Ltd ......................March 9, 1998 to present
- PBA Technology Ltd ................December 1, 1995 to March 8, 1998
- Pinkney Byatt Ltd ................November 1998 to November 30, 1995
III. GENOMIC SOLUTIONS K.K. (JAPAN)
The Company history during the most recent five years is as follows:
- Genomic Solutions K.K ......................June 1, 1998 to present
Prior to Genomic Solutions K.K., the sales and marketing activities in
Japan were previously conducted under the name of Nihon Bio Image Ltd.,
a Michigan corporation wholly owned by B.I. Systems Corporation for the
period February 1995 to June 1998.
