-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NzqU+Gv6FMdt676+GWFicx3akTcpIC1lj0mVfXTtZgxo8TFFsg7DbDsxyNLWBw96 39H0SiicRomeUjW7ORWpSQ== 0000950116-95-000483.txt : 19951121 0000950116-95-000483.hdr.sgml : 19951121 ACCESSION NUMBER: 0000950116-95-000483 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951113 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEW BRUNSWICK SCIENTIFIC CO INC CENTRAL INDEX KEY: 0000071241 STANDARD INDUSTRIAL CLASSIFICATION: 3821 IRS NUMBER: 221630072 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-06994 FILM NUMBER: 95589785 BUSINESS ADDRESS: STREET 1: 44 TALMADGE RD STREET 2: PO BOX 4005 CITY: EDISON STATE: NJ ZIP: 08818-4005 BUSINESS PHONE: 9082871200 MAIL ADDRESS: STREET 1: 44 TALMADGE ROAD STREET 2: PO BOX 4005 CITY: EDISON STATE: NJ ZIP: 08818-4005 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For The Quarter Ended September 30, 1995 Commission File No. 0-6994 ------ NEW BRUNSWICK SCIENTIFIC CO., INC. State of Incorporation - New Jersey E. I. #22-1630072 ----------- 44 Talmadge Road, Edison, N.J. 08818-4005 Registrant's Telephone Number: 908-287-1200 ------------ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding twelve (12) months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past ninety (90) days. Yes X No . ------ ------ There are 3,588,932 Common shares outstanding as of November 10, 1995. NEW BRUNSWICK SCIENTIFIC CO., INC. Index PAGE NO. -------- PART I. FINANCIAL INFORMATION: Item 1: Consolidated Condensed Balance Sheets - September 30, 1995 and December 31, 1994 3 Consolidated Statements of Operations - Three and Nine Months Ended September 30, 1995 and 1994 4 Consolidated Condensed Statements of Cash Flows - Nine Months Ended September 30, 1995 and 1994 5 Notes to Consolidated Condensed Financial Statements 6 Item II: Management's Discussion and Analysis of Results of Operations and Financial Condition 7 PART II. OTHER INFORMATION 9 NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (In thousands, except for share data)
ASSETS ------ September 30, December 31, 1995 1994 -------- -------- (Unaudited) Current Assets - - -------------- Cash and cash equivalents $ 5,188 $ 7,142 Accounts receivable, net 7,318 7,700 Deferred income tax benefit 302 302 Inventories: Raw materials and sub-assemblies 7,380 7,126 Work-in-process 2,505 1,826 Finished goods 4,422 3,757 -------- -------- Total inventories 14,307 12,709 Prepaid expenses and other current assets 1,343 1,218 -------- -------- Total current assets 28,458 29,071 -------- -------- Property, plant and equipment, net 5,058 4,922 Other assets 511 511 -------- -------- $ 34,027 $ 34,504 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Current Liabilities - - ------------------- Current installments of long-term debt $ 126 $ 176 Accounts payable and accrued expenses 5,272 5,928 -------- -------- Total current liabilities 5,398 6,104 -------- -------- Long-term debt, net of current installments 603 665 -------- -------- Shareholders' equity: Common stock, $.0625 par, authorized 25,000,000 shares; shares issued and outstanding, 1995 - 3,588,932 and 1994 - 3,581,283 net of shares held in treasury, 338,500 224 224 Capital in excess of par 19,246 19,213 Retained earnings 8,800 8,495 Currency translation adjustment (244) (197) -------- -------- Total shareholders' equity 28,026 27,735 -------- -------- $ 34,027 $ 34,504 ======== ========
See notes to consolidated condensed financial statements. NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, ------------- ------------- 1995 1994 1995 1994 ---- ---- ---- ---- Net sales $ 8,266 $ 9,436 $ 27,224 $ 28,666 Operating costs and expenses: Cost of sales 4,973 5,868 16,431 17,881 Selling, general and administrative expenses 2,754 2,768 8,797 8,594 Research, development and engineering expenses 536 429 1,510 1,316 -------- -------- -------- -------- Total operating costs and expenses 8,263 9,065 26,738 27,791 -------- -------- -------- -------- Income from operations 3 371 486 875 Other income (expense): Interest income 52 39 172 94 Interest expense (12) (19) (44) (51) Other income (expense), net (6) (3) (9) (7) -------- -------- -------- -------- 34 17 119 36 -------- -------- -------- -------- Income before income taxes 37 388 605 911 Income taxes 7 117 121 273 -------- -------- -------- -------- Net income $ 30 $ 271 $ 484 $ 638 -------- -------- -------- -------- Earnings per Common share $ .01 $ .08 $ .14 $ .18 -------- -------- -------- -------- Weighted average number of shares outstanding 3,589 3,575 3,584 3,571 ======== ======== ======== ========
See notes to consolidated condensed financial statements. NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Nine Months Ended September 30 1995 1994 ------- ------- Cash flows from operating activities: Net income $ 484 $ 638 Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation 404 481 Change in related balance sheet accounts: Accounts receivable 354 (216) Inventories (1,619) 1,201 Prepaid expenses and other current assets (130) (295) Accounts payable and accrued expenses (1,299) 177 Advance payments from customers 579 (534) ------- ------- Net cash used by operating activities (1,227) 1,452 ------- ------- Cash flows from investing activities: Additions to property, plant and equipment (567) (412) Sale of equipment 16 -- ------- ------- Net cash used by investing activities (551) (412) ------- ------- Cash flows from financing activities: Dividends (179) -- Repayment of long-term debt (107) (137) Proceeds from issuance of Common stock under Employee Stock Purchase Plan 33 24 Proceeds from issuance of Common stock under Stock Option Plan for nonemployee directors -- 2 ------- ------- Net cash used by financing activities (253) (111) ------- ------- Net effect of exchange rate changes on cash 77 108 ------- ------- Net decrease in cash and cash equivalents (1,954) 1,037 Cash and cash equivalents at beginning of period 7,142 4,773 ------- ------- Cash and cash equivalents at end of period $ 5,188 $ 5,810 ======= ======= Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 49 $ 60 Income taxes 172 161
See notes to consolidated condensed financial statements. NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited) Note 1 - Interim Results: In the opinion of the Company, the accompanying unaudited consolidated condensed financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly, its financial position as of September 30, 1995 and the results of its operations and cash flows for the nine months ended September 30, 1995 and 1994. Interim results may not be indicative of the results that may be expected for the year. Note 2 - Earnings per share: Earnings per Common share are based on the weighted average number of shares outstanding. Stock options are not included in the calculation as they had no significant dilutive effect on earnings per share. Note 3 - Consolidated Condensed Statements of Shareholders' Equity: Nine Months Ended September 30, 1995 1994 ------ ------ (In thousands) Balance at beginning of period $27,735 $26,253 Net income 484 638 Currency translation adjustment (47) 472 Dividends ($.05 per share) (179) -- Issue of shares under Employee Stock Purchase Plan 33 24 Issue of shares under Stock Option Plan for nonemployee directors -- 2 ------- ------- Balance at end of period $28,026 $27,389 ======= ======= NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The following is Management's discussion and analysis of significant factors that have affected the Company's operating results and financial condition during the quarter and nine months ended September 30, 1995. Results of Operations ---------------------- Quarter Ended September 30, 1995 vs. Quarter Ended September 30 1994. - - --------------------------------------------------------------------- For the quarter ended September 30, 1995, net sales were $8,266,000 compared with net sales of $9,436,000 for the quarter ended September 30, 1994. Net income for the 1995 quarter was $30,000 or $.01 per share compared with net income of $271,000 or $.08 per share for the third quarter of 1994. The decline in net sales resulted primarily from a decrease in domestic sales due to soft market conditions in the United States, the traditionally weak summer months and delays in some planned shipments which will not be made until the fourth quarter. Income from operations decreased to $3,000 from $371,000 in the 1994 quarter as a result of the sales decline, an increase in research, development and engineering expenses due to the establishment late in 1994 of a bioprocess equipment division and partially offset by an increase in the gross profit percentage from 37.8 in 1994 to 39.8% in 1995 as a result of the Company's continuing efforts to improve operating efficiencies and to control costs as well as the positive effects of the weaker dollar on the product costs of the Company's European subsidiaries. Interest income increased to $52,000 from $39,000 in the 1994 quarter due primarily to higher interest rates. Interest expense declined to $12,000 from $19,000 in 1994 due to the continuing amortization of the principal on the Company's long-term debt. Provision for income taxes as a percentage of income before taxes decreased in the 1995 period due to a larger proportion of the 1995 income coming from the Company's foreign subsidiaries, a significant portion of which is not subject to income taxes due to carryforward tax losses on which income tax benefits were not previously recognized. Nine Months Ended September 30, 1995 vs. Nine Months Ended September 30 1994. - - ----------------------------------------------------------------------------- For the nine months ended September 30, 1995, net sales were $27,224,000 compared with net sales of $28,666,000 for the nine months ended September 30, 1994. Net income for the 1995 period was $484,000 or $.14 per share compared with net income of $638,000 or $.18 per share for the first nine months of 1994. The decline in net sales resulted primarily from a decrease in domestic sales due to soft market conditions in the United States, the traditionally weak summer months and delays in some planned shipments which will not be made until the fourth quarter. The shortfall in domestic sales has been partially offset by stronger export sales and higher sales by the Company's European subsidiaries. Income from operations decreased to $486,000 from $875,000 in the 1994 period as a result of the decline in sales, an increase in research, development and engineering expenses due to the establishment late in 1994 of a bioprocess equipment division and partially offset by an increase in the gross profit percentage from 37.6% in 1994 to 39.6% in 1995 due to the Company's continuing efforts to improve operating efficiencies and to control costs as well as the positive effects of the weaker dollar on the product costs of the Company's European subsidiaries. Interest income increased to $172,000 from $94,000 in the 1994 period due to higher average cash and cash equivalents and higher interest rates. Provision for income taxes as a percentage of income before taxes decreased in the 1995 period due to a larger proportion of the 1995 income coming from the Company's foreign subsidiaries, a significant portion of which is not subject to income taxes due to carryforward tax losses on which income tax benefits were not previously recognized. Financial Condition ------------------- Liquidity and Capital Resources - - ------------------------------- During the period ended September 30, 1995, Cash and Cash Equivalents decreased to $5,188,000 from $7,142,000 at December 31, 1994. The decrease in cash resulted primarily from an increase in inventories from $12,709,000 at December 31, 1994 to $14,307,000 at September 30, 1995. Inventories increased primarily as a result of the in-process construction of custom fermentation systems which are expected to be shipped during the fourth quarter and to the need to be in a stock position for many core products in anticipation of the traditionally strong fourth quarter. Cash also decreased due to the reduction in Accounts Payable and Accrued Expenses from $5,928,000 at December 31, 1994 to $5,272,000 at September 30, 1995 as a result of normal cyclical payments. New Business Activity - - --------------------- On October 18, 1995, the Company announced that it was entering the drug lead discovery business by forming a new company to develop a novel, small molecule drug discovery platform. The company, called DGI BioTechnologies LLC (DGI), is majority-owned and fully funded by the Company and will utilize specially designed new laboratory space at the Company's headquarters facility in Edison, New Jersey. DGI's operations are expected to have a significant negative impact on the Company's earnings during its development phase, which is estimated at between two and three years. Cash Flows from Operating Activities - - ------------------------------------ During the period ended September 30, 1995 net cash used by operating activities amounted to $1,227,000 vs. net cash provided by operating activities of $1,452,000 for the period ended September 30, 1994. The primary reasons for the $2,679,000 decrease between the two periods were: (a) inventories increased $1,619,000 vs. a decrease of $1,201,000 in 1994; (b) accounts payable and accrued expenses decreased $1,299,000 vs. an increase of $177,000 in 1994 and were offset by (a) a decrease in accounts receivable of $354,000 vs. an increase of $216,000 in 1994 and (b) an increase in advance payments from customers of $579,000 vs. a decrease of $534,000 in 1994. Cash Flows from Investing Activities - - ------------------------------------ Net cash used by investing activities amounted to $551,000 in 1995 vs. $412,000 in 1994, primarily as a result of additions to property, plant and equipment. Cash Flows from Financing Activities - - ------------------------------------ Net cash used by financing activities amounted to $253,000 in the 1995 period vs. $111,000 in the 1994 period. The major reason for the difference resulted from a Common stock dividend paid by the Company in the amount of $179,000 in 1995. Management believes that the resources available to the Company, including its line of credit which has been extended to May 1997, are sufficient to meet its near and intermediate-term needs, including present funding commitments for DGI, and its strong unleveraged balance sheet provides the basis for any long-term financing if the need should arise. NEW BRUNSWICK SCIENTIFIC CO., INC. AND SUBSIDIARIES PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K - - ------------------------------------------ (a) (10.1) Termination Agreement with Samuel Eichenbaum. (10.2) Organizational Structure and Development Agreement. No reports on Form 8-K have been filed during the quarter ended September 30, 1995. SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NEW BRUNSWICK SCIENTIFIC CO., INC. ----------------------------------- (Registrant) Date: November 13, 1995 /s/ Ezra Weisman --------------------------------------- Ezra Weisman President (Chief Executive Officer) /s/ Samuel Eichenbaum --------------------------------------- Samuel Eichenbaum Vice President - Finance (Principal Accounting Officer) EX-10.1 2 EXHIBIT 10.1 (EXHIBIT 10.1) June 1, 1995 Mr. Samuel Eichenbaum 304 Lincoln Avenue Highland Park, NJ 08904 Dear Mr. Eichenbaum: In recognition of your services, New Brunswick Scientific Co., Inc. ("the Company") shall, in the event that your employment with the Company shall be involuntarily terminated for any reason after the occurrence of a Change in Control (as defined below), pay to you an amount equal to 100% of your current annual base salary at the time of such termination. The payment will be made in a single sum within 30 days of your termination of employment. In addition, the Company will continue to provide you with medical and dental insurance for twelve (12) months following your termination to the same extent as such insurance is provided to other executive employees of the Company. For the purposes of this agreement "Change of Control" generally is defined to take place when disclosure of such a change would be required by rule(s) promulgated by the Securities and Exchange Commission or when either (i) a person (other than a current officer or director nominated, selected or elected by the board) acquires beneficial ownership (as defined in SEC Rule 13d-3) of 25% or more of the combined voting power of the Company's voting securities, (ii) less than a majority of the directors are persons who were either nominated or selected by the current Board, (iii) a merger tender offer or sale or exchange of securities involving the Company occurs which results in ownership of more than 50% of the Company's voting stock by a holder or holders not currently owning more than 10% of the outstanding shares of stock of the Company, or (iv) a plan of liquidation or sale of substantially all the assets of the Company occurs. Following a Change in Control, in addition to actual termination of your employment by the Company, you will be considered to have been involuntarily terminated if you resign after any of the following occurs: a material reduction in your responsibilities or authority which is expected to last or in fact continues for more than one month; a reassignment to another geographic location more than 50 miles from 44 Talmadge Road, Edison, New Jersey; a reduction of at least 5% in your compensation; abusive or demeaning conduct toward you that amounts to a constructive discharge under the common law of the State of New Jersey; or failure by a successor employer following a sale, merger, exchange or other disposition of the Company, or any subsidiary, facility, or operation at which you are employed to assume the obligations of the Company under this Agreement. Nothing contained herein shall be construed as conferring upon you the right to continue in the employ of the Company as an executive or in any other capacity. Any severance pay benefits payable under this letter shall not be deemed salary or other compensation to you for the purpose of computing benefits to which you may be entitled under any pension plan or other arrangement of the Company for the benefit of its employees. Mr. Samuel Eichenbaum June 1, 1995 Page 2 You shall be responsible for payment of any tax liability which results from payment to you of any amount under this letter. Any payment(s) shall be subject to Federal, State and local withholding rules in effect at the time a payment is made. The parties hereto agree that this Agreement shall supercede any and all other agreements between the parties relating to severance pay except the termination agreement between you and the Company dated March 15, 1985, a copy of which is attached hereto as an Exhibit A. Sincerely, NEW BRUNSWICK SCIENTIFIC CO., INC. ATTEST: Ezra Weisman President - - ---------------------------------- Adele Lavender Secretary Acknowledged and Accepted as of the day of - - --------- ------------------- - - ----------------------------------- Samuel Eichenbaum EW/SEVERANC bcc: Ernest Gross David Freedman Personnel File EX-10.2 3 EXHIBIT 10.2 (EXHIBIT 10.2) ORGANIZATIONAL STRUCTURE AND DEVELOPMENT AGREEMENT THIS ORGANIZATIONAL STRUCTURE AND DEVELOPMENT AGREEMENT (the "OSD Agreement") dated October 17, 1995 by and among DGI BIOTECHNOLOGIES, L.L.C., a New Jersey limited liability company ("DGI"), New Brunswick Scientific Co., Inc., a New Jersey corporation ("NBS"), each of Richard J. Murphy, Arthur J. Blume, Bill Kavanagh, Manus O'Donnell and Bernard Leon (collectively the "Founders") and, to the extent it continues to exist, DGI TECHNOLOGIES INC., a New Jersey corporation ("Inc."). All capitalized terms not otherwise defined herein shall have that meaning ascribed to them in the Acquisition Agreement. W I T N E S S E T H: ------------------- WHEREAS, NBS, Founders and Inc. are parties to a certain Technology Acquisition Agreement (the "Acquisition Agreement") dated October 17, 1995 under which NBS will acquire the Technology from Inc.; and WHEREAS, it is a condition to the obligation of Inc. and of the Founders under the Acquisition Agreement, including the obligation of Inc. to transfer the Technology to NBS, that this OSD Agreement be executed and delivered by each party hereto; and WHEREAS, NBS and the Founders have formed DGI to develop the Technology; and WHEREAS, NBS has entered into an Assignment Agreement pursuant to which NBS shall assign all of its right, title and interest under the Acquisition Agreement to DGI; and WHEREAS, NBS has agreed to provide certain funds to DGI to exercise the rights of NBS under the Acquisition Agreement as assigned to DGI, for operations, to acquire and lease certain equipment to DGI and to provide laboratory space to DGI, all on the terms and conditions set forth herein; and WHEREAS, the Founders require and NBS and DGI agree to the organizational structure of DGI as set forth in its Operating Agreement. NOW, THEREFORE, in consideration of the mutual covenants and obligations hereinafter set forth, the parties hereto agree as follows: 1. Structure of DGI and Exercise of Assigned Rights. ------------------------------------------------- (a) DGI is organized as a New Jersey limited liability company and is governed by its Operating Agreement, dated October 17, 1995, in substantially the form set forth in Exhibit A attached hereto. (b) DGI shall, under the Assignment Agreement, exercise the rights of NBS under the Acquisition Agreement. To that end NBS shall contribute, as a capital contribution, $113,000 to DGI contemporaneously with the execution of this Agreement. 2. Equipment. ---------- Subject to Section 11 of this OSD Agreement, NBS shall acquire laboratory equipment identified by the Founders as necessary to the development of the Technology up to a maximum aggregate cost of $775,000. NBS shall lease such equipment to DGI on reasonable terms or DGI shall directly lease such equipment with an NBS guarantee. NBS shall disburse funds (advanced as capital contributions) in amounts sufficient to enable DGI to make lease payments for equipment leased by or on behalf of DGI. DGI shall assist NBS in acquiring equipment at the lowest reasonable cost. The Founders shall, prior to the execution hereof, have delivered to DGI and NBS a list of equipment together with the time such equipment is necessary, indicating which equipment is necessary for each milestone set forth in the Technology Plan attached hereto as Exhibit B (the "Technology Plan"). 3. Laboratory Space. ----------------- Prior to the execution and delivery hereof, the Founders shall deliver a written statement of laboratory requirements, indicating any special requirements for the laboratory space and stating when the laboratory is necessary in terms of achieving the milestones set forth in the Technology Plan. Subject to Section 11 of this OSD Agreement, NBS will modify an area of its existing facility in Edison, New Jersey reasonably necessary to serve as the laboratory for DGI. NBS shall be responsible for all costs associated with such modification, provided, however, that such costs shall not exceed $125,000. The laboratory is intended to provide reasonably suitable facilities for DGI to develop the Technology. 4. Operating Funds. ---------------- (a) Subject to Section 11(c) of this OSD Agreement, NBS shall provide up to $2,825,000 (the "Maximum Amount") to DGI for operations, with such funds to be advanced as capital contributed to DGI as required to fund budgeted operating costs as certified by the Chief Operating Officer of DGI for the ordinary business operations of DGI (including but not limited to salaries, consulting fees and overhead). Funds under this Section shall be contributed by NBS as follows: (i) Up to $1,000,000 shall be contributed to DGI (as required and subject to this Section) within the nine months (Phase I) following the Starting Date (as defined in Section 5 hereof) to be used for the creation of a universal biological library of scanners of target surfaces. (ii) Additional funds up to the Maximum Amount shall be contributed to DGI (as required and subject to this Section) during the period from 9 to 24 months (Phase II) following the Starting Date to be used for the development of I.D. Simple Target Active Scanners, provided, however, that DGI shall first have completed Phase I. (iii) Remaining funds up to the Maximum Amount shall be contributed to DGI (as required and subject to this Section) during the period from 10 to 24 months (Phase III) following the Starting Date to be used for I.D. Complex Target Active Scanners and Sequence Related Scanners, provided, however, that DGI shall first have completed Phase II. In connection with the foregoing, the Chief Operating Officer of DGI shall have submitted a budget for the twenty four month period next following the month in which the Closing occurs to the Managers of DGI and to NBS prior to the execution and delivery of this OSD Agreement. Thereafter, NBS shall monitor the budget on a monthly basis to ensure adherence to the budgeted expenses and compliance with progress in meeting the established milestones. Neither DGI nor any Manager shall incur an unbudgeted expense and NBS shall have no obligation to provide funds for the same, subject to the authority under the Operating Agreement of any Class A Manager specifically to authorize an unbudgeted expenditure. (b) NBS shall also provide funds to DGI as additional capital contributions sufficient to pay the rental payments due on the leases of equipment entered into consistent with Section 2 of this Agreement. 5. Establishment of Starting Date. ------------------------------- For purposes of this OSD Agreement and particularly for the Technology Plan and the milestones, the Starting Date shall be the date as promptly as possible after the Closing when (i) DGI will have space at NBS' Edison facility adequate to its immediate needs (which during Phase I need not include the laboratory space NBS is to provide under Section 3 hereof); and (ii) the equipment identified by the Founders on the equipment list (submitted to DGI pursuant to Section 2 hereof) as necessary for Phase I shall be present and operating at the DGI space at NBS' Edison facility. DGI shall certify the Starting Date by a majority vote of its Board of Managers. 6. Representations and Warranties of the Founders and Inc. ------------------------------------------------------- (a) Inc. and each of the Founders hereby reaffirm the accuracy and completeness of each representation and warranty set forth in Article 3 of the Acquisition Agreement. (b) To the best of the knowledge of Inc. and each Founder, the development of the Technology as contemplated hereunder does not conflict with or require licensure under any Federal or New Jersey statute or regulation or any order or judgment of any court or other tribunal with jurisdiction over Inc. or the Founders. 7. Representations and Warranties of DGI. -------------------------------------- This OSD Agreement and the performance by DGI hereunder have been duly authorized and do not conflict with its Operating Agreement or, to the best knowledge of DGI, any Federal, New Jersey or local statute, regulation or ordinance applicable to DGI or any order or judgment of any court or other tribunal with jurisdiction over DGI. 8. Representations and Warranties of NBS. -------------------------------------- This OSD Agreement and the performance by NBS hereunder have been duly authorized and do not conflict with its Certificate of Incorporation or Bylaws or, to the best knowledge of NBS, any Federal, New Jersey or local statute, regulation or ordinance applicable to NBS or any order or judgment of any court or other tribunal with jurisdiction over NBS. 9. Survival of Representations and Warranties and Indemnification. --------------------------------------------------------------- The representations and warranties contained in Sections 6, 7 and 8 hereof shall continue during the term of this Agreement and survive termination for a period of five (5) years from the Closing. Inc. and each of the Founders hereby indemnifies and holds DGI and NBS harmless for any loss, liability, damage or expense (including reasonable attorney's fees and other litigation costs, regardless of outcome) resulting from any material breach, misstatement or inaccuracy contained in Section 6 if, after receiving notice, such breach, misstatement or inaccuracy is not cured or otherwise resolved within 45 days. DGI and NBS hereby indemnify Inc. and hold each of the Founders harmless for any loss, liability, damage or expense (including reasonable attorney's fees and other litigation costs, regardless of outcome) resulting from any material breach, misstatement or inaccuracy contained in Sections 7 and 8 if, after receiving notice, such breach, misstatement or inaccuracy is not cured or otherwise resolved within 45 days. 10. Claim of Infringement. ---------------------- If any person at any time asserts any claim with respect to the Technology either that such other person has any right, title or interest in or to the Technology and its exploitation by DGI or that the exploitation of the Technology by DGI infringes upon or conflicts with any legally protected right, title or interest of any other person (any of the foregoing being a "Claim of Infringement"), the party hereto receiving such Claim of Infringement shall promptly notify all other parties hereto. 11. Term and Termination. --------------------- (a) The term of this Agreement shall commence upon the date of the Closing and shall continue for a period of five (5) years unless earlier terminated in accordance with this Section, unless the term is extended by written agreement of the parties. (b) If NBS breaches in any material respect its obligations under Sections 2, 3 or 4 hereof or if DGI, having received adequate funds from NBS, fails in any material respect to disburse funds for budgeted expenses in a timely manner, then the Founders may give notice to NBS and DGI of such breach. If such breach is not cured within 45 days, the Founders shall have the right, upon tendering to DGI an amount in cash or cash equivalent, equal to the sum of (x) all operating funds received by DGI from NBS and disbursed by DGI, and (y) all funds advanced to DGI by NBS for all equipment lease payments, to reacquire all right, title and interest in and to the Technology, as is, without any express or implied warranty by DGI. (c) If (i) any milestone specified in the Technology Plan is not timely achieved in any material respect; or (ii) the Founders fail to perform under this OSD Agreement in any material respect; or (iii) any Founder is in breach of any of his confidentiality or non-competition obligations under Article 7 of the Acquisition Agreement; or (iv) any representation of the Founders or Inc. in the Acquisition Agreement or in this OSD Agreement is false or misleading in any material respect; or (v) any Claim for Infringement is made, then DGI shall promptly notify all parties to this OSD Agreement and if such non-achievement, failure to perform, breach, falsehood or inaccuracy or Claim for Infringement is not cured or otherwise resolved to the satisfaction of DGI (or in the case of a Claim for Infringement, resolved pursuant to Section 11(g) of this Agreement), NBS shall have the option to terminate its obligation to contribute funds, lease equipment and provide space to DGI under Sections 2 or 4 of this OSD Agreement or to expend funds to modify its Edison facility under Section 3 of this OSD Agreement. In the case of (i), (ii) or (v) in the prior sentence, the Founders may, thereafter, seek an alternative funding source if NBS chooses to terminate its obligations hereunder. If such a source of funds is found and such source and the terms of the alternative financing are reasonably acceptable to DGI, DGI shall grant such source an interest in DGI. (d) If Dr. Blume is no longer employed as President and Chief Operating Officer of DGI, NBS shall have the option of terminating its obligations to fund DGI, to lease equipment and to provide space under this OSD Agreement. If NBS chooses to terminate its obligations hereunder, the Founders may thereafter seek an alternative funding source. If such a source of funds is found and such source and the terms of the alternative financing are reasonably acceptable to DGI, DGI shall grant such source an interest in DGI. (e) In any case under Section 11(b), (c)(i), (c)(ii) or (c)(v) or (d), NBS shall in any event and notwithstanding a decision by NBS to cease further support of DGI, for a period of up to six (6) months (i) continue to lease the equipment then being leased to DGI; and (ii) continue to provide space to DGI, such space to be provided at no cost to DGI. (f) The determination as to whether a breach in any material respect has occurred under subsection (b) of this Section or whether any of (i), (ii), (iii) or (iv) in the first sentence of subsection (c) has occurred shall be made by the party giving notice. If within 45 days any party receiving notice gives written notice of disagreement, in all instances except a Claim of Infringement, the matter shall be submitted for mediation to a professor at Rutgers, the State University of New Jersey, Princeton University or other major university (or another recognized figure in the appropriate scientific discipline) as recommended by DGI's Scientific Advisory Board and reasonably acceptable to the parties hereto. If after one (1) month from submission the parties have not reached an amicable written resolution, the matter shall be submitted for binding determination by a retired jurist from a recognized alternative dispute resolution agency. During the period of any such mediation and/or binding determination, DGI shall continue development of the Technology in accordance with the Technology Plan and this Agreement and NBS shall continue its funding obligations hereunder. DGI shall be responsible for costs of the mediator or of the person making the binding determination. (g) Any Claim of Infringement must be resolved with the person or entity asserting the Claim of Infringement to the reasonable satisfaction of NBS and DGI within 45 days. 12. Founders' Representative. ------------------------- The Founders hereby designate Richard J. Murphy as the Founders' Representative to whom notices, reports or other correspondence to the Founders under this OSD Agreement shall be sent. Further, the Founders' Representative is expressly authorized by each of the Founders to execute and deliver any modification, alteration, waiver or change to this OSD Agreement and to give any consent or agreement permitted or required under this OSD Agreement, which if executed and delivered or given, shall be binding upon and enforceable against each of the Founders as though executed and delivered or given by him. This authority given to the Founders' Representative to act as attorney in-fact for each Founder is irrevocable and is coupled with an interest. 13. Miscellaneous. -------------- (a) This OSD Agreement shall be governed by and interpreted in accordance with the laws of the State of New Jersey. (b) Any notice report or other correspondence required or permitted to be given hereunder shall be in writing and shall be sufficient if delivered personally (including by means of recognized courier service for which a written receipt is given) or by registered or certified mail, return receipt requested, postage prepaid, as follows (or to such other address as shall be set forth in a notice given in the same manner): if to DGI: DGI BioTechnologies, L.L.C. 40 Talmadge Road Edison, New Jersey 08818 if to NBS: New Brunswick Scientific Co., Inc. 44 Talmadge Road Edison, New Jersey 08818 with a required copy to: Peter D. Hutcheon, Esq. Norris, McLaughlin & Marcus 721 Route 202-206 P.O. Box 1018 Somerville, New Jersey 08876-1018 if to Inc.: DGI Technologies, Inc. 605 Valley Road Upper Montclair, New Jersey 07042 if to Founders: Dr. Arthur J. Blume c/o DGI BioTechnologies, Inc. 40 Talmadge Road Edison, New Jersey 08818 Richard Murphy 344 Highland Avenue Ridgewood, New Jersey 07450 Bernard Leon 30 Buckingham Circle Pine Brook, New Jersey 07058 Bill Kavanagh c/o Kavanagh Organizational Planning 2nd Floor 605 Valley Road Upper Montclair, New Jersey 07043 Manus O'Donnell 11 Cedar Green Lane Berkeley Heights, New Jersey 07922 with a required copy to: Bernard Leon, Esq. 30 Buckingham Circle Pine Brook, New Jersey 07058 Any party may change the address by notification to the other parties as provided in this Section. (c) The OSD Agreement, the Acquisition Agreement, the Operating Agreement, the Blume Employment Agreement and the Assignment Agreement, including Exhibits attached thereto and hereto represent the entire understanding of the parties with respect to the subject matter hereof, and supersedes all prior agreements, negotiations, understandings, letters of intent, representations, statements and writings between the parties. No modification, alteration, waiver or change in any of the terms of this Agreement shall be valid or binding upon the parties hereto unless made in writing and duly executed by the party or parties to be charged. In the case of the milestones established under the Technology Plan, NBS and DGI may by written agreement signed by each of NBS and DGI, and without the consent of the Founders, extend the time for DGI to reach a milestone and/or increase the amount of funds contributed by NBS or costs borne by NBS in modifying its Edison facility. (d) The invalidity or unenforceability of any term, provision or clause of this OSD Agreement shall not impair or affect the validity or enforceability of any other provision of this OSD Agreement. (e) This OSD Agreement shall be binding upon and inure to the benefit of the successors and permitted assigns of the parties hereto. Without the prior consent of DGI and NBS, neither any Founder nor Inc. may assign any of his or its respective rights or obligations hereunder. Without the prior consent of the Founders neither DGI nor NBS may assign any of its respective rights or obligations hereunder. The foregoing shall not, however, have any impact upon any change in ownership or control of NBS, which (should it occur) shall not affect this OSD Agreement or the ownership of the Technology by DGI. (f) This OSD Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one OSD Agreement. If this OSD Agreement is executed in counterparts, no party shall be bound until all parties have duly executed and delivered a counterpart of this OSD Agreement. IN WITNESS WHEREOF each of the parties hereto has signed or caused its thereto duly authorized person to sign this OSD Agreement on and as of the date first above written. NEW BRUNSWICK SCIENTIFIC CO., INC. By: ----------------------------------------- David Freedman Chairman of the Board DGI TECHNOLOGIES, INC. By: ------------------------------------------- Richard J. Murphy Chairman of the Board/CEO DGI BIOTECHNOLOGIES, L.L.C. By: ------------------------------------------- David Freedman Chairman of the Board of Managers Founders ------------------------------------------- Arthur J. Blume ------------------------------------------- Richard J. Murphy ------------------------------------------- Bill Kavanagh ------------------------------------------- Manus O'Donnell ------------------------------------------- Bernard Leon EX-27 4
5 3-MOS DEC-31-1995 SEP-30-1995 5,188,000 0 7,318,000 0 14,307,000 28,458,000 5,058,000 0 34,027,000 5,398,000 0 224,000 0 0 27,802,000 34,027,000 27,224,000 27,224,000 16,431,000 26,738,000 41,000 0 44,000 605,000 121,000 484,000 0 0 0 484,000 .14 0
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