Investment Contract - Sequenom Instruments GmbH and Technologie-Beteiligung-Gesellschaft mbH of Deutsche Ausgleichsbank
INVESTMENT CONTRACT
Agreement concerning the Establishment of a Silent Partnership
between
SEQUENOM Instruments GmbH, Stapelstr. 5B, 22529 Hamburg
hereinafter referred to as : Young Technology Company ("YTC")
and
Technologie-Beteiligung-Gesellschaft m.b.H.
of Deutsche Ausgleichsbank, Wielandstr. 4, 53170 Bonn
- hereinafter: Silent Partner ("tbg") -
(S) 1
Objectives of the Partnership, Partners
1. Within the scope of the pilot programme "Equity capital for young
technology enterprises" carried out with the Federal Minister of Education,
Science, Research and Technology (BMBF) and Deutsche Ausgleichsbank, tbg
promotes young technology enterprises by making investments for the funding
of investments and operating assets
- for research and development work up to the manufacture and testing of
prototypes (germination phase), and
- for adaptation developments and the preparation of production,
including the market introduction of innovative technological
products, processes or services (buildup phase).
2. a) According to the Articles of Incorporation in their valid version
dated Nov. 10, 1994, the YTC, 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 this objective of the enterprise, the YTC is
engaged in the new development and integration of DNA-related chemical,
molecular-biology and physical processes for the production of a functional
model of a patented, automated DNA sequencing instrument, specifically for
the sequencing of the human genome.
3. tbg invests in the YTC 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
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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 YTC in
the Application for Investment dated Nov. 28, 1994, tbg makes an investment
in the amount of DM 1,000,000.--, provided that the YTC can document an
investment of DM 1,000,000 by SEQUENOM Inc., Boston, c/o TVM Techno Venture
Management L.P., 101 Arch , Street, Boston MA 021 10, USA (referred to as
Associated Company "AC" in the following), and that the AC has concluded a
cooperation agreement with tbg.
The AC will consult TVM Techno Venture Management Gesellschaft mbH & Co.
KG, Leopoldstr. 28 A, 80802 Munich, regarding the management of the
investment.
2. The injection by tbg shall be used for the co-financing of the investment
and financing schedule described 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 YTC is entitled to draw down the capital after the company becomes
operational (cf. (S)3, Section 1), provided that its immediate designated
utilisation and a proportional use of funds together with the other means
of financing foreseen in Section 2 are guaranteed. The withdrawal must
have appended a confirmation by the AC that the prerequisites for the
withdrawal have been met.
4. This Agreement shall expire in the event that the capital is not drawn
down, at least in part, latest by Sept. 31, 1995. [can that be an error in
the contract?]
5. tbg is entitled to withhold a processing fee in the amount of I % of the
total injection specified in this Agreement. Such fee will be withheld
from the first partial withdrawal.
6. The YTC shall establish a separate desposit account for the injection by
tbg. Withdrawals from this account by tbg are precluded.
(S) 3
Beginning and Lifetime of the Partnership
1. The Silent Partnership shall commence as soon as both parties have signed
this Contract.
2. The Silent Partnership shall terminate on Dec. 31, 2005.
3. tbg's capital and any outstanding profit shares shall be due for payment to
tbg upon termination of the Partnership.
4. In the event that the funds invested by the AC are repaid before Dec. 31,
2005, the investment made by tbg shall be repayable at the same time and to
the same extent.
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(S) 4
Management
1. tbg shall have no control in the management of the YTC insofar as not
stipulated otherwise in the following.
2. The YTC 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 YTC;
(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) 4, Section 2, shall be obtained directly
from tbg.
Insofar as tbg fails to give written notice of its refusal of approval
within a period of 14 days after receipt of the notification advising it of
the measure requiring approval, such approval shall be deemed as given.
(S) 5
Reporting and Control
1. The YTC shall report to tbg semi-annually, by March 31 and September 30,
respectively, the financial situation of the YTC 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 the YTC also on
behalf of tbg. In addition, the YTC shall file with tbg brief monthly
status reports in the form appended hereto.
2. Regardless whether the AC exercises control in the YTC also on behalf of
tbg, the YTC shall notify tbg directly immediately of all measures
exceeding the scope of the normal business transactions. In addition to
the measures defined in (S) 4, Section 2, measures exceeding the scope of
business transactions include specifically:
(a) Partial or complete stoppage of operations;
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(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 funds to be distributed.
tbg is further entitled the review all the documentation of the YTC
pertaining to the innovation project described in (S) 1, Section 2b. To
exercise its rights of control, tbg is entitled to avail itself of the
services of third parties.
4. The YTC concedes to BMBF and its designated representative the rights to
presentation, information and inspection to the same extent as conceded to
tbg. The YTC entitles tbg to forward for scientific evaluation of the
model test 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 model programme. In the event of the
processing and/or publication of data concerning the programme it shall be
ensured that the YTC incurs no damages.
5. Upon request, the YTC shall furnish tbg with all documentation deemed
necessary by the Department of the AuditorGeneral for the purpose of audit.
(S) 6
Advisory Board
tbg may at any time request the establishment of an advisory board.
tbg shall participate in this board to an extent commensurate with the amount of
its capital.
The advisory board shall advise the YTC concerning commercial and technical
issues, in particular with regard to the project described in (S) 1, Section 2b.
The board shall be entitled to the same rights to information and control as
they are granted to tbg under this Agreement.
(S) 7
Financial Year, Annual Accounts
1. The financial year of the Silent Partnership concurs with the financial
year of the YTC. The financial year of the YTC shall end on 31 December of
each year.
2. The YTC 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
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six months after the end of the financial year and shall submit one signed
original specimen together with the confirmation of a certified public
accountant or auditor.
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. In the event that values other than
those given in the original financial statements are determined in
accordance with tax regulations, or based upon a tax audit, these shall be
valid also for the relationship between the YTC and tbg.
(S) 8
Profit and Loss Sharing
1. tbg shall receive on its capital, irrespective of the YTC'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 YTC's annual profits from the date of draw down of
the deposit 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 YTC, however, it
shall receive in addition to the respective minimum-compensation only 9 %
in total for all investments, but not more than a maximum of 7 % of the
total capital injected.
This share in profits is payable within two weeks after approval of the
financial statements ((S)7, Section 2) by the shareholders.
3. The calculations as per Section 2 shall be based on annual profits as per
the financial statements prepared in accordance with (S) 7, Section 3,
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 reduced annual profits
shown;
- If the YTC is a partnership, interest debited to the shareholders
of the YTC not taken into account in arriving at the annual
profits of the Partnership;
- Extraordinary expenditure insofar as it is incurred from.
business transacted prior to the beginning of the Silent
Partnership;
- Losses caused by the sale or destruction of property, plant and
equipment insofar as the latter had already existed at the time
of the beginning of the Partnership.
b) The following shall be deducted from the annual profits:
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- 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 YTC's
shareholders, insofar as the YTC 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 remuneration of 25 % of the total of the investment,
plus an additional 6 % of the investment for each year after the end of the
fifth full year of the Partnership during which tbg was not given a share
in the profits according to (S)8, Section 2.
tbg shall exercise this right only in the event that it deems such
remuneration justified in view of the overall financial situation of the
YTC, 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 YTC.
(S) 9
Taxes
The YTC 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 YTC 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) 10
Sale and Acquisition of Shares
1. tbg is entitled to sell its investment either in part or entirely to the AC
or a cooperation partner succeeding the AC.
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The cooperation partner is entitled to demand at the end of each financial
year that the silent partnership holding which he took over from tbg be
converted into a liable share in the company. The conditions for such
conversion shall be agreed between the YTC and the AC.
2. tbg is furthermore entitled to take itself the share of another company
participating in the YTC with which tbg has made a cooperation agreement,
or demand its transfer to a third party to be nominated by tbg.
(S) 11
Dissolution of the Silent Partnership
1. The Silent Partnership shall be dissolved in the event that the YTC is
liquidated.
2. (S) 3, Section 3 and (S) 8, Section 4 shall be applicable also in this
event.
(S) 12
Notice
1. The YTC is entitled to redeem the shares of tbg entirely or in part at 3
months' notice as per June 30 or December 31 of each year. Where such
redemption is effected before the end of the fifth full year of the
investment, the capital of tbg shall be paid back with a premium of 25 %.
From the beginning of the sixth year of the investment, (S) 8, Section 4
shall apply. tbg may waive payment of the premium if the notice of
redemption is given for the reason that the promoted innovation project is
abandoned.
2. Furthermore, the Silent Partnership may be dissolved for important reason
with immediate effect by either of the Partners with written notice. In
the event that the capital has not yet been paid in either fully or in
part, tbg shall be released from its commitment to make an injection with
effect from the date of such notice.
tbg has the right to give notice for important reasons, in particular in
the event that
a) the YTC made false representations in the Investment Application;
b) it becomes evident that the prerequisites upon which the investment
was undertaken did not exist, or that the prerequisites for continuing
the investment have are no longer fulfilled, in particular if the
innovation project described in (S) 1, Section 2b, proves non-feasible
or is abandoned by the YTC or is substantially modified. In the event
that the innovation project described in (S) 1, Section 2, proves to
be nonfeasible in technical or financial terms, tbg may waive
repayment of the investment wholly or in part if by such waiver the
YTC can continue its operations;
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c) any bill of exchange accepted by the YTC is disputed, the YTC stops
payments, or the YTC instigates bankruptcy proceedings, or settlement
proceedings are opened in court, or insolvency is declared in any
other form;
d) the senior specialist or specialists possessing the know-know at the
time of the conclusion of the Investment Agreement is/are no longer
full-time members of the management of the YTC;
e) one of the measures defined in (S) 4, Section 2 is implemented without
the prior consent of tbg, and such measure jeoparized the existence
of the company or the implementation of the promoted innovation
project.
(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 YTC and tbg
undertake to replace invalidated provisions by legally valid clauses that
reflect to the greatest possible extent the sense and purpose of the
invalid provisions.
3. Bonn shall be the legal venue for all disputes that may arise from this
Agreement or its execution.
Bonn, June 23, 1995 Hamburg, May 18, 1995
Technologie-Beteiligungs- SEQUENOM
Gesellschaft mbH der Instruments GmbH
Deutsche Ausgleichsbank
(signed) (signed) (signed: Helmut Schuhsler)
(Signatures illegible)
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COST AND FINANCING SCHEDULE
for the Period 1995 - 1996
Cost Schedule
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Investments Operating Costs
Furnishings 200,000 Wages/Salaries 1,500,000 DM
DM Supplies 200,000 DM
Equipment 1,200,000 Sundry 100,000 DM
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DM
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Total 1,400,000 Total 1,800,000 DM
DM
Expenditures Total: 3,200,000 DM
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Financing Plan
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Investments Operating Costs
-----------------------------------------------------------------------------------------------
Own resources Own resources 50,000 DM
tbg 500,000 tbg 500,000 DM
DM Lead investor 500,000 DM
Lead investor 500,000 Grants/subsidies 750,000 DM
DM
Grants/subsidies 400,000
DM
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Total 1,400,000 Total l,800,000 DM
DM
Financing Total 3,200,000 DM
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