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EXHIBIT 10.14
INVESTMENT CONTRACT
Agreement concerning the Establishment of a Silent Partnership
between
SEQUENOM Instruments GmbH, Xxxxxxxxxxxxxx. 00x, 00000 Xxxxxxx
- hereinafter referred to as Technology Company (TC) -
and
Technologie-Beteiligungs-Gesellschaft mbH
of Deutsche Xxxxxxxxxxxxxx, Xxxxxxxxxx. 0, 53170 Bonn
- hereinafter referred to as Silent Partner (tbg) -
(S) 1
Objectives of the Partnership, Partners
1. Within the programme "Shareholders' equity for small technology companies"
carried out with the Federal German Ministry of Education, Science,
Research and Technology (BMBF) and Deutsche Ausgleichsbank, tbg supports
commercial technology companies, provided they are not older than 10 years
and comply with the EU definition of small and medium enterprises (SME) in
the new Federal States and Berlin (East) or are small enterprises in the
other Federal States, i.e.
- have no more 50 (50) employees, and
- have either
- an annual turnover more than 40 million DM (10 million DM), or
- total assets of not more than 20 million DM (4 million) DM, and
- in which not more than 25% of the share capital is owned by one or
several companies not meeting one of several of these criteria
(exception: public investment corporations, venture capital companies
and institutional investors insofar as they have no control in the
enterprise).
All three conditions must be met simultaneously, i.e. an enterprise
qualifies as SME only if it is independent specified, does not have more
than the defined number of employees, and does need at least one of the
ceiling values for annual turnover and/or total assets.
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tbg participates in the financing of innovations in accordance with the
investment principles of tbg which are a constituent part of this Agreement
and to which the TC has agreed, namely:
- for applied research and development up to a logical instant prior to the
start-up of commercial production in accordance with the EU definition,
with the following delimitations:
Applied research comprises research and experimental work with the
objective of obtaining new insights to facilitate the achievement of
specific, practical goals such as creation of new products, production
processes or services. As a rule, it will terminate with the creation of a
first prototype. Development comprises work based on the applied research
with the aim of introducing innovative, or substantially improved products,
production processes or services up to, but not including, industrial
application and commercial use. This stage normally includes pilot and
demonstration projects as well as required additional development work,
ultimately resulting in a package of information permitting the start-up of
production.
- for investments for introduction into the market.
2. a) According to the Articles of Incorporation in their valid version
dated Nov. 10, 1994, the TC, which is registered under No. B 57315 in
the Company Roll of the District Court of Hamburg, operates a
commercial enterprise with the aim of:
Development, production and marketing of devices for the sequencing of
DNA, sale of sequencing information, and development of medical
diagnostics and therapeutics.
b) In accordance with these Articles of Incorporation, the TC is engaged
in the Development of a technology for the diagnosis of genetic
defects.
3. tbg participates in the TC in the legal form of a silent partnership with
the intention of promoting the objectives described under Section 2(b)
above.
(S) 2
Capital Injection
1. For the exclusive use of promoting the innovative project described under
(S) 1 Section 2(b), and based upon the information provided by the TC in
the Application for Investment dated 30 June 1995, tbg makes an injection
of DM 3,000,000.-, provided that the TC substantiates the following agreed
investment conditions:
Investment of DM 3,000,000.-- by SEQUENOM, Inc., Boston, x/x XXX Xxxxxx
Xxxxxxx Management L.P., 000 Xxxx Xxxxxx, Xxxxxx XX 00000, XXX (referred
to as Associated Company - "AC" in the following), and the AC has signed a
Cooperation Agreement with tbg.
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The AC will consult TVM Techno Venture Management Gesellschaft mbH & Co KG,
Xxxxxxxxxx. 00 X, 00000 Xxxxxx concerning the management of the investment
in the TC.
2. The injection by tbg shall be used for the co-financing of the project
related planning as specified in the annex. The annex constitutes an
integral part of this Investment Agreement.
In the event that the project costs are reduced vis-a-vis those above
stated, or if additional public funding is acquired retroactively, tbg is
entitled to reduce its injection respectively in the proportion by which
the investment volume is reduced. The amount by which the injection is
reduced shall be returned to tbg at once.
3. The TC is entitled to draw down the capital after the company becomes
operational (cf. (S)4, Section 1), provided that its immediate designated
utilization and a proportional use of funds together with the other means
of financing foreseen in Section 2, and overall financing of the investment
project are guaranteed. The withdrawal must have appended a confirmation
by the AC that the withdrawal prerequisites have been met.
4. This Agreement shall expire in the event that the capital is not drawn
down, at least in part, latest by June 30, 1996.
5. tbg is entitled to withhold a processing fee in the amount of 1% of the
total injection specified in this Agreement. Such fee will be withheld
from the first partial withdrawal.
6. The TC shall establish a separate deposit account for the injection by tbg.
Withdrawals from this account by tbg are precluded.
(S) 4
Proof of Utilisation
The TC shall confirm the designated use of the capital on the form also appended
to this Agreement, within 3 months after termination of the project period as
stipulated in this Agreement, unless such period is extended by tbg. The
confirmation of use shall be submitted to tbg via the AC. The TC shall document
the designated use upon request by the AC and tbg.
(S) 4
Beginning and Lifetime of the Partnership
1. The Silent Partnership shall commence as soon as both parties have signed
this Agreement.
2. The Silent Partnership shall terminate on December 31, 2005.
3. Repayment of tbg's capital and of any outstanding profit shares shall
become due upon termination of the Partnership.
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4. In the event that the funds granted by the AC are repaid before December
31, 2005, repayment of the tbg deposit shall be due at the same time and in
the same proportion.
(S) 5
Management
1. tbg shall have no control in the management of the TC insofar as not
stipulated otherwise in the following.
2. The TC shall obtain the approval of tbg in respect of:
(a) any amendment to the Articles of Incorporation, in particular any
modification of the purpose of the company, acceptance of new
shareholders, or agreement of new investments;
(b) the appointment and dismissal of executive managers of the TC;
(c) the conclusion, amendment and termination of contracts governing the
granting or acquisition of licences, patents, prototypes, samples,
trademarks or know-how insofar as they relate to the innovation
project promoted by tbg;
(d) the conclusion, amendment and termination of major sales contracts;
(e) the partial or entire relocation, leasing or sale of the operation;
(f) the conclusion and termination of control and profit pooling
contracts.
3. Approval in accordance with (S) 5, Section 2, shall be obtained directly
from tbg. Insofar as tbg fails to give written notice of its refusal of
approval within a period of 14 days after receipt of the notification
advising it of the measure requiring approval, such approval shall be
deemed as given.
(S) 6
Reporting and Control
1. The TC shall report to tbg semi-annually, by March 31 and September 30,
respectively, the financial situation of the TC and the status of the
innovation project described in (S) 1, Section 2b, until such time when tbg
waives such reports, because the AC exercises control of TC also on behalf
of tbg. In addition, the TC shall file with tbg brief monthly status
reports in the form appended hereto.
2. Regardless whether the AC exercises control in the TC also on behalf of
tbg, the TC shall notify tbg directly and immediately of all measures
exceeding the scope of the normal business transactions. In addition to
the measures defined in (S) 5, Section 2, measures exceeding the scope
normal business transactions include specifically:
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(a) Partial or complete stoppage of operations;
(b) Abandonment or substantial modifications of the innovation project
described in (S) 1, Section 2;
(c) The entering into commitments, also for investments, in excess of DM
150,000.- or, insofar as such commitments arise from lease, rental, or
leasehold contracts, in excess of DM 50,000.-- per month, and are not
stated in the present business plan.
3. Furthermore, tbg is entitled to exercise its rights of control in
accordance with (S) 716 of the German Civil Code. This shall apply also
after termination of the Partnership to the extent required for the
verification of the to be distributed.
tbg is further entitled to review all the documentation of the TC
pertaining to the innovation project described in (S) 1, Section 2. To
exercise its rights of control, tbg is entitled to avail itself of the
services of third parties.
4. The TC concedes to BMBF and its designated representative the rights to
presentation, information and inspection to the same extent as conceded to
tbg. The TC entitles tbg to forward for scientific evaluation of the
programme described in (S) 1, Section 1, of this Agreement all data
concerning its enterprise and the promoted innovation project to BMBF or an
institute designated by BMBF. It agrees further, to disclose directly also
to BMBF and an institute designated by BMBF all information required for
the scientific evaluation of the programme, if necessary also after
termination of the Silent Partnership. The BMBF is entitled to forward the
disclosed data to the EU Commission to enable the Commission to exercise
the right of supervision and control. In the event of the processing
and/or publication of data concerning the programme it shall be ensured
that the TC incurs no damages.
5. In accordance with (S) 91 of the Federal Budget Law the Federal Auditor
General's Department has a right to inspection. For the purposes of
inspection the TC will furnish the Federal Auditor General's Department and
tbg with all documents deemed necessary by the Federal Auditor General's
Department and disclose respective information.
(S) 7
Advisory Board
tbg may at any time request the establishment of an advisory board.
tbg shall participate in this board to an extent commensurate with the amount of
its capital.
The advisory board shall advise the TC concerning commercial and technical
issues, in particular with regard to the project described in (S) 1, Section 2b.
The board shall be entitled to the same rights to information and control as are
granted to tbg under this Agreement.
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(S) 8
Financial Year, Annual Accounts
1. The financial year of the Silent Partnership concurs with the financial
year of the TC. The financial year of the TC shall end on 31 December of
each year.
2. The TC shall prepare its annual financial statements (balance sheet, profit
and loss account, notes) in accordance with (S)(S) 238-289 of the Code of
Commercial Law within six months after the end of the financial year and
shall submit one signed original specimen to tbg together with the
confirmation of a certified public accountant or auditor.
3. If admissible under the Code of Commercial Law, the annual financial
statements shall comply with the regulations for profit calculation in
accordance with the income tax law.
(S) 9
Profit and Loss Sharing
1. tbg shall receive on its capital, irrespective of the TC's annual earnings,
a minimum return of 6% p.a. This shall be payable retroactively every six
months, on March 31 and September 30 of each year, the initial payment
falling due on 30 June 1997.
2. In the event that the TC's annual profits from the date of draw down of the
capital exceed DM 100,000.--, but for the first time in financial year
1997, tbg shall receive 9% p.a. of such profits, but not more than 6% of
the actual capital injected.
For such time as tbg holds more than one share in the TC, however, it shall
receive in addition to the respective minimum-compensation only 9% in
total for all shares, but not more than a maximum of 7% of the total
actual deposits.
This share in profits is payable within two weeks after approval of the
financial statements by the shareholder ((S)8, Section 2).
3. The calculations as per Section 2 shall be based on annual profits as per
the financial statements prepared in accordance with (S) 8, Section 2,
prior to the consideration of the profit share of tbg according to the
preceding Section 2.
a) The following shall be added to the annual profits:
- Taxes paid on profits insofar as they reduce annual profits shown;
- If the TC is a partnership, interest debited to the shareholders of
the TC not taken into account in arriving at the taxable profits of
the Partnership;
- Extraordinary expenditure insofar as it relates to business
transacted prior to the beginning of the Silent Partnership;
- Losses caused by the sale or destruction of property, plant and
equipment insofar as the latter had already existed at the time of
the beginning of the Partnership.
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b) The following shall be deducted from the annual profits:
- Funds from the release of tax-free reserves set up prior to the
beginning of the Silent Partnership;
- Compensation for services or interest credited to the TC's
shareholders, insofar as the TC is a partnership, without having
reduced the taxable profits of the Partnership;
- Extraordinary revenues insofar as they relate to business
transacted prior to the beginning of the Silent Partnership;
- Revenues from the sale of property, plant and equipment insofar as
such goods had already existed at the time of the beginning of the
Partnership.
c) In the year in which the deposit is drawn down, the annual profit for
the calculation of the profit sharing in accordance with Section 2
shall be deemed to have occurred evenly throughout the year.
4. tbg shall be entitled to demand at the end of the lifetime of the
investment a one-off payment of 30% of the investment, plus an additional
6% of the amount of the investment for each year after the end of the fifth
full year of the investment. The annual profit shares in accordance with
(S) 9, Section 2, are deducted from the final remuneration due.
tbg shall exercise this right only in the event that it deems such
remuneration justified in view of the overall financial situation of the
TC, especially in view of its profits achieved in the last three years
prior to the termination of the investment and the hidden reserves
accumulated during the lifetime of the investment.
5. tbg shall not share in any losses of the TC.
(S) 10
Taxes
The TC shall be responsible for the payment of the legally prescribed
withholding tax, plus the Solidarity levy, in respect of the remuneration for
the capital provided, and shall withhold from the respective payments to tbg the
withholding tax and the Solidarity levy and shall remit this directly to the
relevant tax office. Following such remittance, the TC shall furnish tbg with
the respective certificates in accordance with (S) 45a, para. 2 of the Income
Tax Law, using the blank forms provided by tbg.
(S) 11
Dissolution of the Silent Partnership
1. The Silent Partnership shall be dissolved in the event that the TC is
liquidated. In this case the capital provided shall be repaid.
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2. (S) 9, Section 4 is also applicable in this event.
(S) 12
Notice
1. The TC is entitled to redeem the shares of tbg entirely or in part at 3
months' notice as per June 30 or December 31 of each year. Where such
redemption is effected before the end of the fifth full year of the
investment, the capital of tbg shall be paid back with a premium of 30%.
From the beginning of the sixth year of the investment, (S) 9, Section 4
shall apply. tbg may waive payment of the premium if the notice of
redemption is given for the reason that the promoted innovation project is
abandoned.
2. Furthermore, the Silent Partnership may be dissolved with immediate effect
by either of the Partners with written notice if there is "important
reason"/1/. In the event that the deposit is not paid in either fully or
in part, tbg shall be released from its commitment to deposit with effect
from the date of such notice.
tbg has the right to give notice for important reasons, in particular in
the event that
a) the TC made false representations in the Investment Application;
b) it becomes evident that the prerequisites upon which the investment
was undertaken did not exist, or that the prerequisites for continuing
the investment are no longer fulfilled, in particular if the
innovation project described in (S) 1, Section 2b, proves non-feasible
or is abandoned by the TC or is substantially modified. In the event
that the innovation project described in (S) 1, Section 2, proves to
be non-feasible in technical or financial terms, tbg may wholly or in
part waive repayment of the investment if by such waiver the TC can
continue its operations;
c) the TC fails, despite written reminder, to submit the confirmation of
use in accordance with (S) 3 within three months after such
confirmation is due;
d) any xxxx of exchange accepted by the TC is disputed, the TC stops
payments, or it instigates bankruptcy proceedings, or settlement
proceedings are opened in court, or insolvency is declared in any
other form;
e) the senior specialist or specialists possessing the know-know at the
TC at the time of the conclusion of the Investment Agreement is/are no
longer full-time members of the management of the TC;
f) one of the measures defined in (S) 5, Section 2 is implemented without
the prior consent of tbg, and such measure jeopardizes the existence
of the company or the implementation of the promoted innovation
project.
_______________________
/1/ This is a special term in the German Civil Code.
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(S) 13
Payments Due
All payments due shall incur interest at the rate of 4% p.a. from the effective
date of default until the time of receipt by tbg.
(S) 14
General Provisions
1. Amendments or supplements to this Agreement must be in writing. Any
supplementary verbal agreements relating to this Agreement shall be
invalid.
2. In the event that one provision of this Agreement becomes invalid, this
shall not affect the validity of any other provision. The TC and tbg
undertake to replace invalid provisions by legally valid clauses that
reflect to the greatest possible extent the sense and purpose of the
invalid provisions.
3. Bonn shall be the legal venue for all disputes that may arise from this
Agreement or its execution.
Bonn, December 14, 1995 Hamburg, (undated)
Technologie-Beteiligungs- SEQUENOM
Gesellschaft mbH der Instruments GmbH
Deutschen Ausgleichsbank
(signed) (signed) (signed: Xxxxxx Xxxxxxxxx)
(Signature illegible)
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tbg Fax No. +49/228/000 0000
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TC: SEQUENOM Instruments GmbH
Xxxxxxxxxxxxxx. 00x
00000 Xxxxxxx
tbg 01023
Brief Status Report for the Month/2/ of................ 199.....
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CURRENT STATUS in '000 DM
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Sales revenues
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Material expense
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Personnel costs
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Preliminary result
--------------------------------------------------------------------------------
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Orders on the books
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Customer credit facility
whereof utilized
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Matters of particular interest in past month:
Future developments anticipated by Management:
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. Much better . better . the same . less positive . much worse
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Place, Date:
________________________________________________
(Signature Managing Director and Company Seal)
______________________
/2/ To be submitted by the end of the subsequent month.
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----------------------------------------------------
INVESTMENT PRINCIPLES
of
Technologie-Beteiligungs-Gesellschaft m.b.H.
of Deutsche Ausgleichsbank
----------------------------------------------------
1. tbg as Shareholder
Technologie-Beteiligungs-Gesellschaft m.b.H. (tbg) is a subsidiary of
Deutsche Ausgleichs- bank. Within the promotion programme "Investment
capital for small technology enterprises" supported by the Federal Ministry
of Education, Science, Research and Technology tbg enters into silent
partnerships in technology companies (TC) for the financing of innovative
projects, as a rule without exercising any control in the management of the
TC.
The main prerequisite for the involvement is the participation of another
investor (lead investor) in the TC with a share totalling at least that
acquired by tbg and management of the tbg investment by the lead investor
in accordance with a respective cooperation agreement.
2. Purpose of the Investment
The participation has the objective of financing innovative projects (cf.
item 3.1), specifically
- for applied research and development up to a logical instant before the
start-up of commercial production
- for investments in market penetration.
3. Investment Conditions
3.1 Innovation Projects
- The innovation project is to promote the use of innovative technologies
so far not used in the enterprise.
- The development shares relating to the innovative core, are provided by
the enterprise itself. In the event that external services are required
for the development phase, relevant specifications have to be elaborated
by the enterprise.
- The main features of the new product (process/service) differ in its
functions from the existing products (processes / services) of the
enterprise.
- The new product (process/service) will create competitive advantages
(functions, quality, price) and market potential in the relevant market
(regional, national, European, world) for the enterprise.
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3.2 Eligible Enterprises
Enterprises eligible for tbg participation are commercial companies,
provided they meet the following requirements:
Small enterprises
- Place of operation in the Federal Republic of Germany, and
- Not more than 50 employees, and
- Either maximum annual turnover of 10 million DM, or a balance sheet total
of 4 million DM max.
Medium enterprises
- Place of operation in the new federal states and Berlin (East), and
- Not more than 250 employees, and
- Either maximum annual turnover of 40 million DM, or a balance sheet max.
total of 20 million DM.
Economic independence
A maximum of 25 % of the equity total of the enterprise may be held by
other companies which do not meet the criteria of small and medium
enterprises.
(Exception: Public investment corporations, venture capital companies, and
- provided no control is exercised - institutional investors.)
Age
10 years max.
Technical and commercial know-how
The TC must have the technical know-how necessary for implementing
development and production and demonstrate the required business know-how.
Commercial know-how may also be acquired by involving third parties - e.g.
the lead investor - if the TC has not achieved any substantial turnover
until the date of application.
3.3 Cooperating Investor (Lead Investor)
Lead investors cooperating with tbg may be investment companies as well as
natural persons and/or legal entities which provide equity for enterprises.
The lead investor has to acquire shares in the TC equalling at least the
amount invested by tbg. He shall advise and assist the TC in all
commercial and financial matters and, if necessary, also be in a position
to provide management and marketing assistance. On principle, he should be
prepared and able to provide additional financing.
Prior to the acquisition of an investment, the lead investor shall check
and document, also on behalf of tbg, the general eligibility of the TC.
During the lifetime of the investment the lead investor shall supervise the
management of the TC, monitor the development of the innovation project and
advise tbg of the TC's financial situation and the innovation
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project. Furthermore, he shall be involved in the preparation of the
confirmation of use (cf. 3.4). Details are stipulator in the cooperation
agreement between the lead investor and tbg.
3.4 Overall Financing
Total financing for the innovation project must be secured. The investment
funds may be used only for the financing of the innovation project(s) for
which such investment was granted. The lead investor is to be advised
immediately of changes in the innovation project or its funding.
In the event of a retroactive cost reduction for the innovation project, or
in the event that further public funds are acquired retroactively for the
financing of such project so that total funding exceeds 100%, the
investment may be recalled. The TC undertakes to document the appropriate
use of the funds upon completion of the innovation project. Such
documentation shall be submitted to tbg via the lead investor and with his
statement of confirmation.
3.5 Non-Cumulation
The simultaneous investment by tbg and KfW in an innovation project in the
scope of this programme is not permitted.
If the lead investor utilises public funds for his investment, such
investment shall be subject to the regulations of financial assistance of
the European Commission.
4. Conditions of Participation
4.1 Form of Participation
tbg undertakes investments as silent partner in TC. No securities are
required.
4.2 Maximum Investment
The investment by tbg serves the subsidiary financing of innovation
projects. It is limited to DM 3,000,000 per TC. This maximum amount may
be used to promote several innovation projects.
4.3 Disbursement
The investment is generally disbursed in accordance with the progress
achieved in the innovation project.
4.4 Lifetime
The lifetime of an investment by tbg is up to 10 full calendar years and
is, on principle, coupled to the lifetime of the participation by the lead
investor.
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4.5 Notice of Termination
tbg is entitled to recall investments on important grounds.
The TC may be entitled to recall its investment prematurely with a term of
notice of 3 months per June 30 and December 31 of each year. In the event
of such notice prior to the completion of the 5th year of investment, the
investment by tbg shall be repayable with a premium of currently 25%, if
notice is given for reasons other than the termination of the promoted
innovation project.
4.6 Handling Charge
Upon disbursement of its investment, tbg shall receive once only from the
TC a handling fee in the amount of currently 1% of the amount invested.
4.7 Remuneration
As a rule, tbg demands in compensation for its investment an amount of
currently 6% p.a. irrespective of the annual results of the TC, and
remuneration based on the profits of the TC in accordance with the
financial situation of the TC. At the end of the investment, tbg may
demand a once-only remuneration to compensate for the reserves generated by
the TC during the lifetime of the investment. Respective details are
stipulated in the Agreement between tbg and the TC.
4.8 Acceptance of Risk
The lead investor may be entitled in the cooperation agreement to demand
from tbg the partial payment of losses incurred from his investment in the
TC up to five years from the beginning of the participation by tbg in the
TC.
In this case tbg will pay the lead investor an amount of up to 50% of the
total investment of tbg - up to 70% in the new Federal states and Berlin
(East)-. tbg may then demand the transfer either in part or wholly of
the investment of the lead investor to itself or to a third party. The
participation in risk is based upon the condition that
- the TC is declared bankrupt, or is subject to execution, or proceedings
have been denied because of deficiency of estate,
- an affidavit is filed on behalf of the TC, or
- persisting insolvency of the TC is otherwise substantiated,
- demands for payment on the part of the lead investor based on his
investments in the TC have partially been neglected due to court
proceedings or waiver.
The remaining risk on the part of the lead investor shall be borne solely
by the lead investor.
