-----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, UhQteow/kFqondryv9sI37/lJYszVn50gAWXxb899wv+qNxr3h/WPBsBTyhK37Tu G0Gl1bTgxaO389X4ZzESHg== 0000950124-97-004913.txt : 19970929 0000950124-97-004913.hdr.sgml : 19970929 ACCESSION NUMBER: 0000950124-97-004913 CONFORMED SUBMISSION TYPE: S-1 PUBLIC DOCUMENT COUNT: 30 FILED AS OF DATE: 19970926 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BIOANALYTICAL SYSTEMS INC CENTRAL INDEX KEY: 0000720154 STANDARD INDUSTRIAL CLASSIFICATION: LABORATORY APPARATUS & FURNITURE [3821] IRS NUMBER: 351345024 STATE OF INCORPORATION: IN FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: S-1 SEC ACT: SEC FILE NUMBER: 333-36429 FILM NUMBER: 97685761 BUSINESS ADDRESS: STREET 1: 2701 KENT AVENUE CITY: WEST LAFAYETT STATE: IN ZIP: 47906-1382 BUSINESS PHONE: 3174634527 MAIL ADDRESS: STREET 1: 2701 KENT AVENUE CITY: WEST LAFAYETTE STATE: IN ZIP: 47906-1382 S-1 1 S-1 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 26, 1997 REGISTRATION NO. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ BIOANALYTICAL SYSTEMS, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) INDIANA (STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) 3815 (PRIMARY S.I.C. CODE NUMBER) 35-1345024 (I.R.S. EMPLOYER IDENTIFICATION NO.) ------------------------ 2701 KENT AVENUE WEST LAFAYETTE, INDIANA 47906 (765) 463-4527 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ------------------------ PETER T. KISSINGER PRESIDENT BIOANALYTICAL SYSTEMS, INC. 2701 KENT AVENUE WEST LAFAYETTE, INDIANA 47906 (765) 463-4527 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) ------------------------ COPIES TO: BERKLEY W. DUCK ICE MILLER DONADIO & RYAN ONE AMERICAN SQUARE, BOX 82001 INDIANAPOLIS, INDIANA 46282-0002 (317) 236-2270 MARK SHAEVSKY HONIGMAN MILLER SCHWARTZ & COHN 2290 FIRST NATIONAL BUILDING 660 WOODWARD AVENUE DETROIT, MICHIGAN 48226-3583 (313) 256-7562 ------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this Registration Statement becomes effective. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [ ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] ------------------------ CALCULATION OF REGISTRATION FEE
================================================================================================================================= PROPOSED MAXIMUM PROPOSED TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE MAXIMUM AGGREGATE AMOUNT OF SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE - --------------------------------------------------------------------------------------------------------------------------------- Common Shares........................ 1,725,000 $11.00 $18,975,000 $5,750 ==============================================================================================================================
(1) Includes 225,000 Common Shares that may be sold if the over-allotment option granted to the Underwriters is exercised in full. See "Underwriting." (2) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(a) under the Securities Act of 1933. ---------------------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. ================================================================================ 2 Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. SUBJECT TO COMPLETION, DATED SEPTEMBER , 1997 PROSPECTUS 1,500,000 COMMON SHARES BIOANALYTICAL SYSTEMS LOGO BIOANALYTICAL SYSTEMS, INC. All of the 1,500,000 Common Shares offered hereby (the "Shares") are being sold by Bioanalytical Systems, Inc. (the "Company"). Prior to this offering there has been no public market for the Common Shares of the Company (the "Common Shares"). It is currently estimated that the initial public offering price will be between $9.00 and $11.00 per share. See "Underwriting" for a discussion of information relating to the factors to be considered in determining the initial public offering price. Application has been made to list the Shares on the Nasdaq National Market under the symbol "BASI." SEE "RISK FACTORS" AT PAGE 5 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES OFFERED HEREBY. ------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
============================================================================================================= UNDERWRITING PRICE TO DISCOUNTS AND PROCEEDS TO PUBLIC COMMISSIONS(1) COMPANY(2) - ------------------------------------------------------------------------------------------------------------- Per Share......................... $ $ $ - ------------------------------------------------------------------------------------------------------------- Total(3).......................... $ $ $ =============================================================================================================
(1) The Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the "Securities Act"). See "Underwriting." (2) Before deducting expenses of the offering payable by the Company, estimated at $500,000. (3) The Company has granted the Underwriters a 30-day option to purchase up to 225,000 additional Shares, on the same terms and conditions set forth above, solely for the purpose of covering over-allotments, if any. If this option is exercised in full, the total Price to Public, Underwriting Discounts and Commissions, and Proceeds to Company will be $ , $ , and $ , respectively. See "Underwriting." ------------------------ The Shares are offered by the several Underwriters named herein, subject to prior sale, when, as and if accepted by them, subject to their right to reject any orders in whole or in part and subject to certain conditions. It is expected that delivery of certificates representing the Shares will be made at the offices of Roney & Co. L.L.C., One Griswold, Detroit, Michigan, 48226 on or about , 1997. ------------------------ RONEY & CO. THE OHIO COMPANY , 1997 3 [A COLLAGE OF PHOTOGRAPHS OF THE COMPANY'S PRODUCTS AND OF THE COMPANY'S SCIENTISTS PERFORMING SERVICES WILL BE INSERTED HERE] ------------------------- The Company intends to distribute to its shareholders annual reports containing audited financial statements and will make available copies of quarterly reports containing unaudited financial information for the first three quarters of each fiscal year. ------------------------- CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SHARES, INCLUDING STABILIZING BIDS, SYNDICATE COVERING TRANSACTIONS OR THE IMPOSITION OF PENALTY BIDS. FOR A DISCUSSION OF THESE ACTIVITIES, SEE "UNDERWRITING." IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE SHARES ON NASDAQ IN ACCORDANCE WITH RULE 103 OF REGULATION M. SEE "UNDERWRITING." ------------------------- BAS(R) is a registered trademark of the Company. This Prospectus also includes trade names and trademarks of other companies. 2 4 PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information, including "Risk Factors" and the Company's Consolidated Financial Statements and related notes thereto, appearing elsewhere in this Prospectus. Except as otherwise noted, all information in this Prospectus, including financial information, share and per share data: (i) reflects the conversion of all of the Company's outstanding Convertible Preferred Shares (the "Convertible Preferred Shares") into Common Shares upon the completion of this offering; (ii) assumes no exercise of the Underwriters' over-allotment option; and (iii) reflects a 4.514 for 1 share split to be effected prior to the completion of this offering. Terms used but not otherwise defined herein are defined in the Glossary included herein. THE COMPANY The Company is a leading contract research organization providing research and development resources through both its services and products to the worldwide pharmaceutical, medical device and biotechnology industries. Founded in 1974, the Company has over 23 years of experience in developing products and methodologies to support the analytical chemistry requirements of the drug discovery process. At its inception, the Company focused on providing new products and procedures which facilitated research progress at client sites. Recently, pharmaceutical companies have experienced increasing pressures to bring products to market on a cost-effective and accelerated basis. Accordingly, many clients have requested the Company to carry out proprietary projects at the Company's facilities. As a result, the Company now derives its revenues from (i) research services provided to clients and (ii) the sale of its analytical instruments and other products. The Company believes that among contract research organizations that provide in house statistical, clinical, and medical services, it is the only one that designs and sells analytical instrumentation products and, on the analytical instrument side, it is one of very few firms that maintains a separate business for contract analytical services. The Company intends to continue to take advantage of this unique industry niche. The Company's services are marketed to pharmaceutical and other biotechnical companies involved in later stages of drug testing and the Company's products are marketed to both public and private research organizations engaged in the early stages of drug development. On the services side, according to the Pharmaceutical Research and Manufacturing Association, in 1997 pharmaceutical and biotechnology companies will spend approximately $18.9 billion worldwide on research and development of which approximately 18% or $3.4 billion will be outsourced to independent contract service providers such as the Company. On the products side, the Company competes in the $11 billion analytical instrument industry. Over the past five years, the Company has provided its services and/or products to all of the top 25 pharmaceutical companies in the world, as ranked by 1996 research and development spending. As a result of its client focus; reputation for high-quality services and products; capital investment in state-of-the-art instrumentation and facilities; skilled and experienced professional staff; and expertise in performing critical development and support services, the Company believes that it is a value-added partner in solving its clients' complex product development problems. The Company's operating strategies are derived from a strong base of expertise in analytical chemistry. The Company will continue to (i) leverage the synergy between the Company's services and products; (ii) invest in state-of-the-art instrumentation; (iii) emphasize high-end testing services; (iv) enhance client relationships; and (v) work with large innovator pharmaceutical companies in the development of analytical methods for new drug candidates as early as possible in the drug development process. The Company's objective is to continue to grow as a leading provider of high-quality analytical chemistry support services to the worldwide pharmaceutical, medical device and biotechnology industries. In order to continue its growth, the Company intends to leverage its personnel, facilities, technological expertise and information systems. The Company believes that it will continue to differentiate itself from its competitors by increasing the array of services and products offered to its clients, further enhancing the Company's reputation of offering a turnkey approach to accurately and quickly meet product development challenges faced by 3 5 clients. The Company has developed and implemented a business strategy intended to accelerate growth and profitability, consisting of the following five principal elements: - Increase technical staff to expand the volume of services provided - Implement a comprehensive marketing and sales program - Broaden the range of complimentary services provided - Expand geographically in strategic locations - Identify and effect key acquisitions The Company was incorporated under the laws of Indiana in 1975. The Company's principal executive offices are located at 2701 Kent Avenue, West Lafayette, Indiana, 47906, and its telephone number is (765) 463-4527. THE OFFERING Shares offered by the Company................... 1,500,000 Shares Common Shares to be outstanding after the offering...................................... 4,500,000 Common Shares(1) Use of proceeds................................. Repayment of indebtedness, purchase of laboratory equipment, hiring of additional personnel, upgrade of information systems, expansion of current facilities, working capital and other general corporate purposes, including potential acquisitions. See "Use of Proceeds." Proposed Nasdaq National Market symbol.......... BASI
SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA)
NINE MONTHS YEAR ENDED SEPTEMBER 30, ENDED JUNE 30, ---------------------------------------------- ---------------- 1992 1993 1994 1995 1996 1996 1997 ---- ---- ---- ---- ---- ---- ---- STATEMENT OF INCOME DATA: Product revenue.......................... $8,668 $ 9,124 $ 8,903 $ 9,627 $ 9,113 $6,725 $ 7,347 Services revenue......................... 904 1,663 1,800 2,725 3,681 2,670 3,691 ------ ------- ------- ------- ------- ------ ------- Total revenue.......................... 9,572 10,787 10,703 12,352 12,794 9,395 11,038 Operating income......................... 677 1,128 609 784 701 328 1,199 Net income available to common shareholders........................... $ 400 $ 886 $ 495 $ 497 $ 347 $ 136 $ 644 Net income per Common Share.............. $ .14 $ .30 $ .16 $ .16 $ .11 $ .04 $ .21 Weighted average Common Shares outstanding............................ 2,971 2,993 3,048 3,066 3,089 3,089 3,074
JUNE 30, 1997 ------------------------------ ACTUAL AS ADJUSTED(2) ------ -------------- BALANCE SHEET DATA: Working capital............................................. $ 3,362 $12,379 Total assets................................................ 14,423 22,840 Long-term debt, less current portion........................ 4,383 -- Convertible Preferred Shares................................ 1,231 -- Shareholders' equity........................................ 5,628 20,259
- ------------------------- (1) Based on Common Shares outstanding at June 30, 1997, excluding 277,184 Common Shares issuable upon exercise of options outstanding as of June 30, 1997, of which 234,297 were exercisable as of that date. See "Capitalization," "Management -- Option Plans" and Note 6 of Notes to Consolidated Financial Statements. Also reflects the conversion of all outstanding Convertible Preferred Shares into 752,399 Common Shares to be effected immediately prior to the issuance of the Shares offered hereby. (2) Adjusted to reflect (i) the conversion of all outstanding Convertible Preferred Shares into Common Shares to be effected immediately prior to the issuance of the Shares offered hereby, and (ii) the sale of 1,500,000 Shares offered hereby (after deducting the estimated underwriting discounts and commissions and offering expenses payable by the Company), assuming an initial public offering price of $10.00 per share (the midpoint of the range set forth on the cover page of this Prospectus). 4 6 RISK FACTORS An investment in the Shares offered hereby involves a high degree of risk. Prospective investors should consider carefully the following risk factors, in addition to the other information contained in this Prospectus, prior to making an investment in the Shares. DEPENDENCE ON CERTAIN INDUSTRIES AND CLIENTS The Company's revenues are highly dependent on research and development expenditures and compliance testing expenditures by the pharmaceutical, biotechnology and medical device industries and by universities and government research institutions worldwide. Decreases in such expenditures, including those resulting from a general economic decline in these industries, could have a material adverse effect on the Company. The Company has benefited from the growing tendency of companies to engage independent organizations to conduct development and testing projects. Any reduction in the outsourcing of research, development or testing activities, or any reduction in public funding of science and technology could have a material adverse effect on the Company's business, operations and financial condition. There has been substantial consolidation in recent years in the pharmaceutical industry, both in the United States and Europe. It is not possible to assess the impact upon the Company of future pharmaceutical industry consolidation since the effect may depend on an acquiror's inclination to outsource or its existing relationship with the Company or a competitor. See "Business -- Changing Nature of Pharmaceutical Industry." During 1996, a major United States-based pharmaceutical company and the Company's Japanese distributor accounted for approximately 18% and 19%, respectively, of the Company's total revenues. There can be no assurance that the Company's business will not continue to be dependent on continued relationships with certain clients or distributors or that annual results will not be dependent upon performance of a few large projects. In addition, there can be no assurance that significant clients or distributors in any one period will continue to be significant clients or distributors in other periods. See "Business -- Clients" and "-- Sales and Marketing." NEED TO ATTRACT, DEVELOP, MANAGE AND RETAIN PROFESSIONAL STAFF The Company's business is labor intensive and involves the delivery of highly specialized professional services. The Company's future growth and success depends in large part upon its ability to attract, develop, manage and retain highly skilled professional, scientific and technical operating staff. There is significant competition from the Company's competitors as well as from the in-house research departments of pharmaceutical and biotechnology companies and other enterprises for employees with the skills required to perform the services offered by the Company. Although the Company has confidentiality agreements with its scientific and technical operating personnel, the Company does not have in place covenants not to compete that would directly preclude the employees from being employed by a competitor. There can be no assurance that the Company will be able to attract, develop, manage and retain a sufficient number of highly skilled employees in the future or that it will continue to be successful in training, retaining and managing its current employees. The loss of a significant number of employees or the Company's inability to hire sufficient numbers of qualified employees could have a material adverse effect on the Company's business, operations and financial condition. See "Business -- Employees." DEPENDENCE ON KEY EXECUTIVES The Company relies to a significant extent on a number of key executives, including Peter T. Kissinger, Ph.D., its President and Chairman of the Board. The Company maintains key man life insurance on Dr. Kissinger in the amount of $1.0 million. The loss of the services of any of the Company's key executives could have a material adverse effect on the Company's business, operations and financial condition. DEPENDENCE ON AND EFFECT OF GOVERNMENT REGULATION The Company's business depends in part on government regulation of the drug development process by the United States and foreign governments. More stringent governmental regulation of the drug development 5 7 process increases the need for services and products provided or produced by the Company. Recently, legislation has been proposed that would substantially modify the current requirements for FDA administration of the drug and device approval process. Under the proposed legislation, applications for approval of new drugs could be made to private accredited facilities in lieu of the FDA. As a result, the number of clinical trials of new drugs would be reduced and other rules administered by the FDA would be simplified. Any change in the scope of regulatory requirements or the introduction of simplified drug or device approval procedures could affect the Company's business, operations and financial condition. The Company's revenues are also dependent, in part, upon continued compliance with governmental requirements applicable to facilities and techniques used in the manufacture of products for clinical use. The Company's facilities are subject to scheduled periodic regulatory inspections to ensure compliance with FDA requirements. Failure on the part of the Company to comply with applicable requirements could result in the termination of ongoing research, the disqualification of data for submission to regulatory authorities and fines and penalties being assessed against the Company. See "Business -- Changing Nature of Pharmaceutical Industry" and "Business -- Government Regulation." COMPETITION With respect to its products, the Company primarily competes with several large equipment manufacturers and, with respect to its services, the Company primarily competes against in-house research departments of pharmaceutical and biotechnology companies, universities and teaching hospitals and other full-service CROs. Many of the Company's competitors possess substantially greater capital, technical and other resources than the Company. Competitive factors with respect to the Company's products include quality, reliability and price. CROs generally compete on the basis of previous experience, medical and scientific expertise in specific therapeutic areas, the quality of contract research, the ability to organize and manage large-scale trials on a global basis, medical database management capabilities, the ability to provide statistical and regulatory services, the ability to recruit investigators, the ability to integrate information technology with systems to improve the efficiency of contract research, an international presence with strategically located facilities, financial viability and price. The Company's failure to compete effectively in any one or more of these areas could have a material adverse effect on the Company's business, operations and financial condition. See "Business -- Changing Nature of Pharmaceutical Industry" and "Business -- Competition." NATURE OF CONTRACTS Generally, the Company's service contracts are terminable by the client upon notice at any time. Contracts may be terminated for a variety of reasons, including the client's decision to forego a particular study, failure of products to satisfy safety requirements and unexpected or undesired product testing results. The loss of business from a significant client or the cancellation of a major contract or series of commitments could have a material adverse effect on the Company's business, operations and financial condition. See "Business -- Contractual Arrangements." UNCERTAINTY OF INTERNATIONAL MARKETS In the nine months ended June 30, 1997, approximately 40% of the Company's revenues were derived from customers located outside the United States. The Company expects to increase its geographical diversification outside the United States, including entering new markets in Asia and South America. Significant governmental, regulatory, political, economic and cultural issues could affect the growth or profitability of the Company's business activities in any such market. In addition, although currently all of the Company's contracts are required to be paid in United States dollars, in the event future contracts were denominated in a foreign currency the Company could be faced with currency fluctuations in the conversion to United States dollars. 6 8 PROPRIETARY TECHNOLOGY; UNPREDICTABILITY OF PATENT PROTECTION The Company's business is dependent, in part, on its ability to obtain patents in various jurisdictions on its current and future technologies and products, to defend its patents and protect its trade secrets and to operate without infringing on the proprietary rights of others. There can be no assurance that the Company's patents will not be challenged by third parties or that, if challenged, those patents will be held valid. In addition, there can be no assurance that any technologies or products developed by the Company will not be challenged by third parties owning patent rights and, if challenged, will be held to not infringe those patent rights. The expense involved in any patent litigation can be significant. The Company also relies on unpatented, proprietary technology, and there can be no assurance that others will not independently develop or obtain similar products or technologies. FUTURE CAPITAL REQUIREMENTS; UNCERTAINTY OF ADDITIONAL FUNDING The Company expects capital and operating expenditures to increase over the next several years. Although the Company believes that the net proceeds from this offering, existing cash and cash equivalents and anticipated cash flow from operations will be sufficient to support the Company's operations for the foreseeable future, the Company's actual future capital requirements will depend on many factors, including its future profitability, the rate of its internal growth and the timing, size and terms of acquisitions made by the Company, if any. The Company may require significant additional financing in the future, which it may seek to raise through public or private equity offerings or debt financings. There can be no assurance that additional financing will be available when needed or that, if available, such financing can be obtained on terms favorable to the Company. To the extent the Company raises additional capital by issuing equity securities, ownership dilution to existing shareholders will result and may be substantial. See "Use of Proceeds," "Business -- Growth Strategy" and "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." RISK RELATED TO GROWTH THROUGH ACQUISITIONS The Company's growth strategy includes identifying and effecting selected acquisitions. The Company has limited acquisition experience, and growth through acquisition involves numerous risks, including the potential inability of the Company to effectively assimilate the operations of acquired companies, the expenses incurred in connection with failed acquisition attempts, the diversion of management's attention from other business concerns and, in the case of acquisitions of foreign companies, the risks presented by language and cultural barriers and currency exchange rate fluctuations. There can be no assurance that the Company will complete any future acquisitions or that acquisitions, if any, will contribute favorably to the Company's business, operations and financial condition. See "Business -- Growth Strategy." IMMEDIATE AND SUBSTANTIAL DILUTION The purchasers of the Shares will experience immediate and substantial dilution of the net tangible book value per share from the initial offering price. See "Dilution." VOLATILITY OF QUARTERLY OPERATING RESULTS The Company's results of operations have been and will continue to be subject to quarterly fluctuations, principally as a result of the commencement, completion, cancellation or duration of large contracts, the progress of ongoing contracts, changes in the mix of products and services, the incurrence of significant expenses upon commencement of product or service contracts before any significant revenues are recognized from such activities, and seasonality in the business. For this reason, there is a risk that comparisons of quarterly operating results on a year-to-year basis, or on a quarter-to-quarter basis, will not provide a meaningful indication of future performance. In addition, fluctuations in quarterly results could affect the market price of the Common Shares in a manner unrelated to the longer-term operating performance of the Company. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Overview." 7 9 LIABILITY RISKS RELATED TO PRODUCTS AND THE PROVISION OF SERVICES Although the Company does not provide products or services directly to the public, its business involves the sale of instruments for use by others and the provision of contract analytical services. It is possible that claims could be made against the Company by either its clients or the customers of its clients for damages suffered as a result of the use of the Company's products or for errors made in the performance of the Company's analytical services. The Company maintains product liability and errors and omissions insurance with respect to these risks, but there can be no assurance that the insurance would cover all risks. The Company also seeks to reduce its exposure through indemnification agreements with its clients. The scope of those agreements may vary from client to client, and the performance of the clients' obligations thereunder are not secured. There can be no assurance that these measures will be adequate to protect the Company from damages resulting from defects in its products or services. See "Business -- Product Liability and Insurance." MANAGEMENT DISCRETION REGARDING NET PROCEEDS OF THE OFFERING The Company has not yet allocated a substantial portion of the net proceeds of the offering to specific uses. Accordingly, management will have broad discretion as to the application of the offering proceeds. Pending the Company's use of such proceeds, the net proceeds of the offering will be invested in high-quality, short-term, interest-bearing investment-grade debt securities, certificates of deposit or direct or guaranteed obligations of the United States. It is possible that the return on such investments will be less than that which would be realized were the Company immediately to use such funds for other purposes. See "Use of Proceeds." CONCENTRATION OF OWNERSHIP Upon the completion of this offering, certain of the Company's executive officers will beneficially own approximately 35% of the outstanding Common Shares, and certain of the Company's non-employee directors will beneficially own approximately 20% of the outstanding Common Shares. Accordingly, those persons will be in a position to significantly influence the election of the Company's directors and the outcome of corporate actions requiring shareholder approval. This concentration of ownership may have the effect of delaying or preventing a change in control of the Company. See "Management" and "Principal Shareholders." SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS The sale of substantial amounts of the Common Shares in the public market following the offering could have an adverse effect on prevailing market prices of the Common Shares. Immediately after the offering, the 1,500,000 Shares (1,725,000 Shares if the Underwriters' over-allotment option is exercised in full) offered hereby will be freely tradeable without restriction, and approximately 600,000 additional Common Shares will be eligible for sale in the public market pursuant to Rule 144(k) under the Securities Act. All of the Company's directors and executive officers and certain of the Company's shareholders have agreed with the Underwriters not to sell an aggregate of 2,334,592 Common Shares held by them for a period of 180 days from the date of this Prospectus without the prior consent of the Underwriters. After such time, or earlier with the written consent of the Underwriters, those Common Shares will be eligible for sale, subject to the volume and other restrictions under Rule 144 promulgated under the Securities Act. See "Shares Eligible For Future Sale." The Company also intends to file a registration statement covering the sale of Common Shares reserved for issuance under the Company's stock option plans approximately 30 days following the date of this Prospectus. As of June 30, 1997, there were aggregate options outstanding under the Bioanalytical Systems, Inc. 1990 Employee Incentive Stock Option Plan (the "1990 Employee Option Plan") and the Bioanalytical Systems, Inc. Outside Director Stock Option Plan (the "Director Option Plan") to purchase 277,184 Common Shares at a weighted average price of $1.27 per share, of which 234,297 Common Shares were then vested and exercisable. The holders of 171,772 of the options exercisable as of June 30, 1997 have signed Lock-Up Agreements. The Company also may issue and sell up to 95,000 Common Shares under the 1997 Employee Incentive Stock Option Plan (the "1997 Employee Option Plan" and together with the 1990 8 10 Employee Option Plan and the Director Option Plan, the "Option Plans"). See "Management -- Option Plans," and "Underwriting." Certain shareholders have the right to require the registration of their Common Shares under the Securities Act at any time subject to certain limitations but those shareholders have agreed not to exercise those rights for a period of 180 days from the date of this Prospectus. See "Description of Capital Stock -- Registration Rights." If those shareholders were to cause a large number of Common Shares to be registered and sold in the public market thereafter, the market price for the Common Shares could be materially adversely affected. Additionally, those shareholders have the right to require the Company to include their Common Shares in any Company-related registration under the Securities Act, and the exercise of these "piggyback" registration rights could have a material adverse effect on the Company's ability to raise capital in the future. See "Certain Transactions." NO PRIOR MARKET; POTENTIAL STOCK PRICE VOLATILITY Prior to this offering, there has been no public market for the Common Shares and there can be no assurance that an active trading market will develop or be sustained after this offering. The initial public offering price will be determined through negotiations between the Company and the Underwriters and may not represent prices that will prevail in the trading market. See "Underwriting." The market price of the Common Shares could be subject to wide fluctuations in response to variations in operating results from quarter to quarter, changes in earnings estimates by analysts, market conditions in the industry and general economic conditions. See "Risk Factors -- Volatility of Quarterly Operating Results." Furthermore, the stock market has experienced significant price and volume fluctuations unrelated to the operating performance of particular companies. These market fluctuations may have an adverse effect on the market price of the Common Shares. Following the offering, the Company will have approximately 4.5 million Common Shares outstanding, of which approximately 2.0 million Common Shares could be considered to be part of the "float." Based on the anticipated initial public offering price of between $9.00 and $11.00 per share, the market capitalization of the Company would be approximately $40.5 million to $49.5 million. As a result of the small "float" and market capitalization, the Company's Common Shares will be subject to volatility. The price volatility of the Common Shares could be accentuated by quarterly fluctuations in earnings. See "Risk Factors -- Volatility of Quarterly Operating Results." POSSIBLE ISSUANCE OF PREFERRED SHARES The Board of Directors of the Company has the authority to issue preferred shares in the future without further shareholder approval and upon such terms and conditions, and having such rights, privileges and preferences, as the Board of Directors may determine. The issuance of preferred shares, while providing desirable flexibility in connection with possible acquisitions and other corporate purposes, could adversely affect the market price of the Common Shares and could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from acquiring, a majority of the outstanding voting securities of the Company. The Company has no present plans to issue any preferred shares. See "Description of Capital Stock." DIVIDEND POLICY The Company has never paid any cash dividends to holders of its Common Shares and does not anticipate paying any cash dividends in the foreseeable future, but intends instead to retain any future earnings for reinvestment in its business. Any future determination as to the payment of dividends will be made at the discretion of the Board of Directors of the Company and will depend upon the Company's operating results, financial condition, capital requirements, general business conditions and such other factors as the Board of Directors deems relevant. See "Dividend Policy." 9 11 USE OF PROCEEDS The net proceeds to the Company from the sale of the 1,500,000 Shares offered hereby are estimated to be $13.4 million ($15.5 million if the Underwriter's over-allotment option is exercised in full), assuming an initial public offering price of $10.00 per share (the midpoint of the range set forth on the cover page of this Prospectus) and after deducting the underwriting discounts and commissions and estimated offering expenses payable by the Company. The Company intends to utilize approximately $5.0 million to repay bank indebtedness and approximately $3.0 million to purchase laboratory equipment. The Company also intends to utilize a portion of the net proceeds to hire additional technical staff and to upgrade its information systems. These expenditures will primarily supplement and expand capabilities for existing services offered to clients. In addition, the Company intends to use a portion of the proceeds from the offering to expand its present facilities as well as to fund future geographic expansion. The Company will use the remainder of the net proceeds for working capital and other general corporate purposes, including potential acquisitions. Pending such uses, the Company intends to invest the remaining proceeds of the offering in high-quality, short-term, interest-bearing, investment-grade debt securities, certificates of deposit or direct or guaranteed obligations of the United States. As part of its business strategy, the Company reviews many acquisition candidates in the ordinary course of business, although the Company currently has no agreements or arrangements in place with respect to any future acquisition. There can be no assurance that the Company will complete any acquisitions. DIVIDEND POLICY The Company has never paid cash dividends on its Common Shares and does not anticipate paying any cash dividends in the foreseeable future. The Company currently intends to retain any future earnings to develop and expand its business. The Company is currently restricted from paying cash dividends under the terms of its lines of credit without the prior written consent of the bank. 10 12 DILUTION The net tangible book value of the Company as of June 30, 1997 was approximately $6.6 million or $2.22 per share after giving effect to the conversion of the outstanding Convertible Preferred Shares into Common Shares and the 4.514 for 1 share split to be effected prior to the issuance of the Shares offered hereby. The net tangible book value per share is equal to the book value of the Company's total tangible assets less its total liabilities, divided by the total number of Common Shares outstanding. After giving effect to the sale by the Company of 1,500,000 Shares offered hereby at an assumed public offering price of $10.00 per share (resulting in estimated net proceeds of $13.4 million after deducting the estimated underwriting discounts and commissions and estimated offering expenses), the net tangible book value of the Company as of June 30, 1997 would be approximately $20.0 million, or $4.45 per share. This represents an immediate increase of $2.23 per share to existing shareholders and an immediate dilution of $5.55 per share to new investors. The following table illustrates this per share dilution: Initial public offering price per share..................... $10.00 Net tangible book value per share before the offering..... $2.22 Increase in net tangible book value per share attributable to new investors....................................... 2.23 ----- Net tangible book value per share after offering............ 4.45 ------ Dilution per share to new investors......................... $ 5.55 ======
To the extent that the Underwriters' over-allotment option is exercised in full, the net tangible book value of the Company at June 30, 1997 would have been approximately $22.1 million, or $4.69 per share, representing an immediate increase in net tangible book value per share of $2.47 to existing shareholders and an immediate dilution of $5.31 per share to new investors. The following table summarizes, as of June 30, 1997, the differences in the number of Common Shares purchased from the Company, the total consideration paid to the Company and the average price per share paid by the existing shareholders and by the new investors with respect to the Shares offered hereby, assuming an initial public offering price of $10.00 per share and before deduction of estimated underwriting discounts and commissions and estimated offering expenses:
SHARES PURCHASED TOTAL CONSIDERATION(1) AVERAGE -------------------- ---------------------- PRICE NUMBER PERCENT AMOUNT PERCENT PER SHARE ------ ------- ------ ------- --------- Existing shareholders(1).................. 3,000,000 66.7% $ 1,907,350 11.3% $ 0.64 New investors............................. 1,500,000 33.3 15,000,000 88.7 $10.00 --------- ----- ----------- ----- Total..................................... 4,500,000 100.0% $16,907,350 100.0% ========= ===== =========== =====
- ------------------------- (1) The above computations exclude options outstanding at June 30, 1997 to purchase a total of 277,184 Common Shares at a weighted average exercise price of $1.27 per share. To the extent these options are exercised, there will be further dilution to new investors. See "Capitalization," "Management -- Option Plans" and Note 6 of Notes to Consolidated Financial Statements. 11 13 CAPITALIZATION The following table sets forth the consolidated capitalization of the Company as of June 30, 1997, on an actual basis and as adjusted (i) to give effect to the conversion of all outstanding Convertible Preferred Shares into Common Shares immediately prior to the issuance of the Shares offered hereby and (ii) to reflect the sale of the 1,500,000 Shares offered hereby at an assumed initial public offering price of $10.00 per share and the receipt of the estimated net proceeds therefrom. See "Use of Proceeds."
JUNE 30, 1997 ---------------------- AS ACTUAL ADJUSTED ------ -------- (IN THOUSANDS, EXCEPT SHARES DATA) Short-term debt............................................. $ 600 $ -- ======= ======= Long-term debt, less current portion........................ $ 4,383 $ -- Preferred Shares: 1,000,000 Preferred Shares authorized and 166,667 Convertible Preferred Shares outstanding (actual), none outstanding (as adjusted)......................... 1,231 -- Shareholders' equity: Common Shares, 19,000,000 shares authorized and 2,247,601 shares outstanding (actual); 4,500,000 shares outstanding (as adjusted)(1)........................... 498 997 Additional paid-in capital................................ 178 14,310 Retained earnings......................................... 4,965 4,965 Currency translation adjustment........................... (13) (13) ------- ------- Total shareholders' equity........................... 5,628 20,259 ------- ------- Total capitalization................................. $11,242 $20,259 ======= =======
- ------------------------- (1) Does not include 277,184 Common Shares issuable upon exercise of options outstanding as of June 30, 1997, of which 234,297 were exercisable as of that date. See "Management -- Option Plans" and Note 6 of Notes to Consolidated Financial Statements. 12 14 SELECTED CONSOLIDATED FINANCIAL DATA The following selected consolidated statement of income data for the years ended September 30, 1994, 1995 and 1996 and the balance sheet data as of September 30, 1995 and 1996 are derived from and should be read in conjunction with the financial statements and notes thereto included elsewhere herein, audited by Ernst & Young LLP. The selected statement of income data for the years ended September 30, 1992 and 1993 and selected balance sheet data as of September 30, 1992, 1993 and 1994 also are derived from audited financial statements, which are not included herein. The selected statement of income data for the nine months ended June 30, 1996 and 1997 and the selected balance sheet data as of June 30, 1997 are derived from unaudited financial statements of the Company. In the opinion of the Company, the unaudited financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the periods. The financial results for the nine months ended June 30, 1997 are not necessarily indicative of the results to be expected for any other interim period or the full year. See "Management's Discussion and Analysis of Financial Condition and Results of Operations."
NINE MONTHS ENDED YEAR ENDED SEPTEMBER 30, JUNE 30, ---------------------------------------------- ---------------- 1992 1993 1994 1995 1996 1996 1997 ---- ---- ---- ---- ---- ---- ---- (IN THOUSANDS, EXCEPT PER SHARE DATA) STATEMENT OF INCOME DATA: Product revenue......................... $8,668 $ 9,124 $ 8,903 $ 9,627 $ 9,113 $6,725 $ 7,347 Services revenue........................ 904 1,663 1,800 2,725 3,681 2,670 3,691 ------ ------- ------- ------- ------- ------ ------- Total revenue......................... 9,572 10,787 10,703 12,352 12,794 9,395 11,038 Cost of product revenue................. 3,662 3,479 3,418 3,448 3,227 2,335 2,268 Cost of services revenue................ 496 833 1,039 1,834 2,141 1,609 2,157 ------ ------- ------- ------- ------- ------ ------- Total cost of revenue................. 4,158 4,312 4,457 5,282 5,368 3,944 4,425 ------ ------- ------- ------- ------- ------ ------- Gross profit............................ 5,414 6,475 6,246 7,070 7,426 5,451 6,613 ------ ------- ------- ------- ------- ------ ------- Operating expenses: Selling............................... 3,023 3,366 3,531 3,940 3,937 2,987 3,094 Research and development.............. 931 1,099 1,122 1,124 1,424 1,089 1,110 General and administrative............ 783 882 984 1,222 1,364 1,047 1,210 ------ ------- ------- ------- ------- ------ ------- Operating income, net................... 677 1,128 609 784 701 328 1,199 Other income (expense).................. 15 28 192 111 (18) (6) (58) ------ ------- ------- ------- ------- ------ ------- Income before income taxes.............. 692 1,156 801 895 683 322 1,141 Income taxes............................ 239 216 253 344 283 132 470 ------ ------- ------- ------- ------- ------ ------- Net income.............................. $ 453 $ 940 $ 548 $ 551 $ 400 $ 190 $ 671 ====== ======= ======= ======= ======= ====== ======= Net income available to common shareholders.......................... $ 400 $ 886 $ 495 $ 497 $ 347 $ 136 $ 644 Net income per Common Share............. $ .14 $ .30 $ .16 $ .16 $ .11 $ .04 $ .21 Weighted average Common Shares outstanding........................... 2,971 2,993 3,048 3,066 3,089 3,089 3,074
SEPTEMBER 30, JUNE 30, ------------------------------------------ ---------- 1992 1993 1994 1995 1996 1997 ---- ---- ---- ---- ---- ---- (IN THOUSANDS) BALANCE SHEET DATA: Working capital........................... $3,503 $3,897 $4,392 $4,080 $3,059 $3,362 Property and equipment, net............... 2,178 2,494 2,736 3,707 6,479 8,633 Total assets.............................. 6,809 7,800 8,163 9,428 11,374 14,423 Long-term debt, less current portion...... 488 239 187 416 2,512 4,383 Preferred shares.......................... 1,940 1,994 2,047 2,100 1,530 1,231 Shareholders' equity...................... 2,661 3,547 4,056 4,609 4,956 5,628
13 15 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with Selected Consolidated Financial Data and the Company's Consolidated Financial Statements and notes thereto included elsewhere in this Prospectus. In addition to the historical information contained herein, the discussions in this Prospectus may contain forward-looking statements that involve risks and uncertainties. The Company's actual results could differ materially from those discussed herein. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and in the section entitled "Risk Factors," as well as those discussed elsewhere in this Prospectus. OVERVIEW The Company provides a broad range of value-added products and services focused on chemical analysis to the worldwide pharmaceutical, medical device and biotechnology industries. The Company's customer-focused approach and its high quality products and services enable it to serve as a value-added partner in solving complex scientific problems by providing cost-effective results to its customers on an accelerated basis. Founded in 1974 in Lansing, Michigan and relocated to West Lafayette, Indiana in 1975, the Company has experienced growth primarily through internal expansion, supplemented by strategic acquisitions. As part of its internal growth strategy, the Company has developed technical specialties in such areas as chromatography, electrochemistry, in vivo sampling and mass spectrometry. The Company's growth has strategically positioned it to take advantage of globalization in the marketplace and to provide new services and areas of technical expertise to its customers. During this phase, the Company has been continuously profitable since 1987. Throughout its history, the Company has taken steps to position itself as a global leader in the analytical chemistry field. Development of the Company's infrastructure began in 1975 when it established relationships with several customers and multiple international distributors. In 1981, the Company increased its sphere of influence to include Japan with the creation of BAS Japan, an independent distributor. In 1988, the Company enhanced its computer software expertise by acquiring Interactive Microware Inc. in State College, Pennsylvania. In 1990, the Company began offering contract services to customers that lacked the time or expertise to perform certain analyzes using the Company's analytical products. In 1991, the Company further expanded its global presence by establishing an office in Brussels, Belgium, and in 1995, the Company acquired a distributor, BAS Technicol Ltd., to further solidify its presence in the United Kingdom. Revenues are derived principally from (i) the sale of the Company's analytical instruments and other products, and (ii) analytical services provided to customers. Both methods of generating revenue utilize the Company's ability to identify, isolate and resolve client problems relating to the separation and quantification of individual substances in complex mixtures. The Company's analytical products are sold primarily to pharmaceutical firms and research organizations. The Company supports the pharmaceutical industry by focusing on analytical chemistry for biomedical research, diagnostics, electrochemistry and separations science. Principal customers include scientists engaged in drug metabolism studies, as well as those engaged in basic neuroscience research. The Company was the first to commercialize the liquid chromatography and electrochemistry technology which is now the worldwide standard for the determination of neurotransmitter substances. Research products include in vivo sampling devices, reagent chemicals, electrochemical apparatus and sensors. Revenue from the sale of the Company's products and the related costs are recognized upon shipment of the products to customers. The Company's pharmaceutical service contracts generally have terms ranging from several months to several years. A portion of the contract fee is generally payable upon receipt of the initial samples with the balance payable in installments over the life of the contract. The contracts are broken down into discrete units of deliverable services for which a fixed fee for each unit is established, and revenue and related direct costs are recognized as specific contract terms are fulfilled under the percentage of completion method utilizing units of delivery. The termination of a contract results in no material adjustments to revenue or direct costs previously recognized, and the Company is entitled to payment for all work performed through the date of notice of termination and all costs associated with termination of a contract. 14 16 The Company's management believes that fluctuations in the Company's quarterly results are caused by a number of factors, including the Company's success in attracting new business, the size and duration of service contracts, the timing of its client's decisions to enter into new contracts, the cancellation or delays of on-going contracts, the timing of acquisitions and other factors, many of which are beyond the Company's control. See "Risk Factors - -- Volatility of Quarterly Operating Results." RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, certain statement of income data as a percentage of total revenue.
PERCENTAGE OF REVENUE ------------------------------------------------- NINE MONTHS ENDED YEAR ENDED SEPTEMBER 30, JUNE 30, --------------------------- ---------------- 1994 1995 1996 1996 1997 ---- ---- ---- ---- ---- Product revenue.................................... 83.2% 77.9% 71.2% 71.6% 66.6% Services revenue................................... 16.8 22.1 28.8 28.4 33.4 ----- ----- ----- ----- ----- Total revenue.................................... 100.0 100.0 100.0 100.0 100.0 Cost of product revenue............................ 31.9 27.9 25.2 24.9 20.5 Cost of services revenue........................... 9.7 14.9 16.8 17.1 19.6 ----- ----- ----- ----- ----- Total cost of revenue............................ 41.6 42.8 42.0 42.0 40.1 Gross profit....................................... 58.4 57.2 58.0 58.0 59.9 Operating expenses: Selling.......................................... 33.0 31.9 30.8 31.8 28.0 Research and development......................... 10.5 9.1 11.2 11.6 10.1 General and administrative....................... 9.2 9.9 10.7 11.1 11.0 ----- ----- ----- ----- ----- Operating income................................... 5.7 6.3 5.5 3.5 10.8 Other income (expense), net........................ 1.8 0.9 (0.2) 0.1 (0.5) ----- ----- ----- ----- ----- Income before income taxes......................... 7.5 7.2 5.3 3.4 10.3 Income taxes....................................... 2.4 2.8 2.2 1.4 4.3 ----- ----- ----- ----- ----- Net income......................................... 5.1% 4.4% 3.1% 2.0% 6.0% ===== ===== ===== ===== =====
Nine Months ended June 30, 1997 Compared with Nine Months ended June 30, 1996 Total revenue for the nine months ended June 30, 1997 increased 17.5% to approximately $11.0 million from approximately $9.4 million for the nine months ended June 30, 1996. Of this $1.6 million increase, approximately $1.0 million was attributable to increased revenue from the services unit as a result of the expansion of the types and volume of services provided by the Company. The remaining $600,000 related to increased product sales resulting from increased sales of electrochemical products, primarily in the Far East. Costs of revenue include costs related to the products sold and services rendered including compensation and related fringe benefits for non-administrative employees. These costs increased 12.2% to approximately $4.4 million for the nine months ended June 30, 1997 from approximately $3.9 million for the nine months ended June 30, 1996. This increase of approximately $500,000 was due to the hiring of additional support staff in the services unit to meet client needs. Costs of revenue for the Company's products decreased to 30.9% as a percentage of product revenue for the nine months ended June 30, 1997 from 34.7% of product revenue for the nine months ended June 30, 1996, due to a shift toward the sale of more profitable products. Costs of revenue for the Company's services decreased to 58.4% as a percentage of services revenue for the nine months ended June 30, 1997 from 60.3% of services revenue for the nine months ended June 30, 1996, due to an increase in the level of services revenue. 15 17 Selling expenses for the nine months ended June 30, 1997 increased 3.5% to approximately $3.1 million from approximately $3.0 million during the nine months ended June 30, 1996 due to increased commissions on foreign sales. General and administrative expenses include all expenses other than selling and research and development expenses not directly chargeable to a specific product or service. General and administrative expenses for the nine months ended June 30, 1997 increased 15.6% to approximately $1.2 million from approximately $1.0 million during the nine months ended June 30, 1996 as a result of increased real estate taxes incurred in connection with the Company's purchase and construction of additional facilities. The loss from other income (expense), net, increased in the nine months ended June 30, 1997 from the nine months ended June 30, 1996 primarily as a result of a reduction in interest income due to a reduction in cash and cash equivalents resulting from the redemption of Redeemable Preferred Shares owned by Middlewest Ventures II, L.P. and Primus Capital Fund II, L.P.(collectively, the "Venture Funds") in accordance with their terms. The Company's effective tax rate for the first nine months of 1997 is estimated to be 42% as compared to 41% for the first nine months of 1996. Year ended September 30, 1996 Compared with Year ended September 30, 1995 Total revenue for the year ended September 30, 1996 increased 3.6% to approximately $12.8 million from approximately $12.4 million in the year ended September 30, 1995. The net increase of approximately $400,000 related to increased revenue from services, which increased to approximately $3.7 million in the year ended September 30, 1996 from approximately $2.7 million in the year ended September 30, 1995 as a result of the expansion of types and volume of services provided by the Company. During this same period, product revenue decreased to approximately $9.1 million for the year ended September 30, 1996 from approximately $9.6 million for the year ended September 30, 1995 primarily as a result of increased industry competition in the liquid chromatography market. Costs of revenue increased 1.6% to approximately $5.4 million for the year ended September 30, 1996 from approximately $5.3 million for the year ended September 30, 1995. This increase of approximately $100,000 was due to the hiring of additional support staff in the services unit. Costs of revenue for the Company's products decreased to 35.4% as a percentage of product revenue for the year ended September 30, 1996 from 35.8% of product revenue for the year ended September 30, 1995, due to a change in product mix. Costs of revenue for the Company's services decreased to approximately 58.2% as a percentage of service revenue for the year ended September 30, 1996 from approximately 67.3% of services revenue for the year ended September 30, 1995 due to an increase in the level of services revenue. Research and development expenses for the year ended September 30, 1996 increased 26.7% to $1.4 million from approximately $1.1 million for the year ended September 30, 1995 due to the development of the in vitro product line. General and administrative expenses for the year ended September 30, 1996 increased 11.6% to approximately $1.4 million from approximately $1.2 million for the year ended September 30, 1995, primarily as a result of increased property taxes incurred in connection with the Company's purchase and construction of additional facilities. Other income (expense), net, decreased to approximately $(18,000) in the year ended September 30, 1996 from approximately $111,000 in the year ended September 30, 1995 as a result of a reduction in interest income due to a reduction in cash and cash equivalents resulting from the redemption of Redeemable Preferred Shares owned by the Venture Funds in accordance with their terms. The Company's effective tax rate for 1996 was 41.4% as compared to 38.5% for fiscal 1995. This increase was due, in part, to operating losses from operations in the United Kingdom for which there is no corresponding income tax deduction and to increased state income taxes. Year ended September 30, 1995 Compared with Year ended September 30, 1994 Total revenue for the year ended September 30, 1995 increased 15.4% to approximately $12.4 million from approximately $10.7 million in the year ended September 30, 1994. Of this $1.7 million increase, 16 18 approximately $900,000 was attributable to increased revenue from the services unit as a result of the expansion of types and volume of services provided by the Company and approximately $800,000 related to increased product sales resulting from increased sales of electrochemical products, primarily in the Far East. Costs of revenue increased 18.5% to approximately $5.3 million for the year ended September 30, 1995 from approximately $4.5 million for the year ended September 30, 1994. This increase of approximately $800,000 was due to the hiring of additional support staff in the services unit in anticipation of new business in future periods. Costs of revenue for the Company's products decreased to 35.8% as a percentage of product revenue for the year ended September 30, 1995 from 38.4% of product revenue for the year ended September 30, 1994, due to a change in product mix. Costs of revenue for the Company's services increased to 67.3% as a percentage of services revenue for the year ended September 30, 1995 from 57.8% of services revenue for the year ended September 30, 1994 due to the addition of support staff in the services unit to meet client needs. Selling expenses for the year ended September 30, 1995 increased 11.6% to approximately $3.9 million from approximately $3.5 million for the year ended September 30, 1994, due primarily to increased commissions on foreign sales. General and administrative expenses for the year ended September 30, 1995 increased 24.2% to approximately $1.2 million from approximately $984,000 during the year ended September 30, 1994 as a result of operations in the United Kingdom. Other income (expense), net, decreased to approximately $111,000 for the year ended September 30, 1995 from approximately $192,000 for the year ended September 30, 1994 in part due to a decrease in interest income. The Company's effective tax rate for 1995 was 38.5% as compared to 31.6% for 1994. This increase was due, in part, to operating losses from its operations in the United Kingdom for which there is no corresponding income tax deduction. LIQUIDITY AND CAPITAL RESOURCES Since its inception, the Company's principal sources of cash have been cash flow generated from operations and funds received from venture capital investments, the most recent of which was a $2.0 million financing completed in March 1991. At June 30, 1997, the Company had cash and cash equivalents of approximately $240,000, compared to cash and cash equivalents of approximately $600,000 at September 30, 1996 and approximately $1.8 million as of September 30, 1995. The decrease in cash resulted primarily from increased capital expenditures made to expand the Company's facilities and operations. The expansion was partially financed by cash provided by operating activities, and a $5.0 million credit facility. The Company's net cash provided by operating activities was approximately $367,000 for the nine months ended June 30, 1997. Cash used in operations during the nine months ended June 30, 1997 consisted of net income of approximately $671,000 plus non-cash charges of approximately $851,000 partially offset by a net increase of approximately $1.2 million in operating assets and liabilities. The most significant increase in operating assets related to trade accounts receivable, which increased to approximately $2.2 million at June 30, 1997 from approximately $1.6 million at September 30, 1996, due primarily to sales growth. Cash used by investing activities increased to approximately $2.6 million for the nine months ended June 30, 1997 from approximately $560,000 for the nine months ended June 30, 1996, primarily as a result of the Company's purchase and construction of additional facilities. Cash provided by financing activities for the first nine months of fiscal 1997 was approximately $1.9 million due to an increase in the Company's long term debt and offset by the redemption of Redeemable Preferred Shares in accordance with their terms. The Company's net cash provided by operating activities was approximately $301,000 for the year ended September 30, 1996, resulting from approximately $400,000 of net income and reduced by a net increase in operating assets and liabilities which was partially offset by non-cash charges. Trade accounts receivable remained relatively constant at approximately $1.6 million at September 30, 1996 as compared to September 30, 1995. 17 19 Cash used by investing activities increased to approximately $3.2 million for fiscal 1996 from approximately $1.3 million for fiscal 1995, primarily as a result of the Company's purchase and construction of additional facilities. Cash provided by financing activities for fiscal 1996 was approximately $1.7 million due to an increase in the Company's long term debt incurred for the facilities expansion and offset by the redemption of Redeemable Preferred Shares in accordance with their terms. Total expenditures by the Company for property and equipment were approximately $458,000, $1.3 million $3.2 million and $2.6 million in fiscal 1994, 1995, 1996 and for the nine months ended June 30, 1997, respectively. Expenditures made in connection with the expansion of the Company's operating facilities and purchases of laboratory equipment account for the largest portions of these expenditures. Total capital expenditures in fiscal 1997 are expected to be approximately $4.0 million, and the Company anticipates increased levels of capital expenditures in fiscal 1998 and fiscal 1999. The increased capital investments relate to the completion of the renovation and construction of the additional facilities and the purchase of additional laboratory equipment corresponding to anticipated increases in research services to be provided by the Company. The Company also expects to make other investments to expand its operations, through internal growth and strategic acquisitions, alliances and joint ventures. However, the Company currently has no firm commitments for capital expenditures other than in connection with the expansion of the Company's facilities. The Company believes that cash generated from its operations, amounts available under its existing bank lines of credit and credit facility and the net proceeds from this offering will be sufficient to fund the Company's working capital and capital expenditure requirements for the foreseeable future. The Company has a bank line of credit agreement which expires March 1, 1998 and allows borrowings of the lesser of 50.0% of inventories plus 80.0% of qualified accounts receivable or $2.2 million. Interest is charged at the prime rate plus .25% (8.50% at June 30, 1997). At September 30, 1996, the collateral base for this line of credit resulted in borrowing availability of approximately $2.0 million all of which was unused at September 30, 1996. At June 30, 1997, $300,000 was outstanding on this line. The line is collateralized by inventories and accounts receivable. The Company has a second line of credit agreement with the same bank for capital expenditures which expires March 1, 1998 and allows borrowings of the lesser 80% of capital expenditures or $1,000,000. Interest is charged at the prime rate plus .25% (8.50% at June 30, 1997). At June 30, 1997, this line was unused. The line is collateralized by fixed assets, inventories and accounts receivable. The Company has entered into negotiations with the bank to increase the amounts available under these lines of credit and extend the expiration dates upon completion of the sale of the Shares offered hereby, although there can be no assurance that such negotiations will be successful. During 1996, the Company entered into a credit facility for up to $5.0 million for the purchase and renovation of an adjacent building. At maturity of this facility on January 31, 1998, the loan may be converted to a five year term loan based upon a 20 year amortization funding on a conventional commercial mortgage basis or with fixed principal payments plus interest. Interest is charged at the prime rate plus .25% (8.50% at June 30, 1997). This credit facility is collateralized by substantially all of the Company's property and equipment. The agreement contains certain covenants which, among other things, require the Company to maintain minimum levels of tangible net worth and debt service coverage. At August 31, 1997, approximately $4.6 million was outstanding on this line of credit. INFLATION To date, the Company believes that the effects of inflation have not had a material adverse effect on its business, operations or financial condition. NEW ACCOUNTING PRONOUNCEMENTS In July, 1997, the Financial Accounting Standards Board (the "FASB") issued Statement No. 131 ("SFAS 131"), "Disclosures about Segments of an Enterprise and Related Information." Under SFAS 131, the Company will report financial and descriptive information about its operating segments. SFAS 131 is effective for fiscal years beginning after December 15, 1997. The Company plans to adopt SFAS 131 on October 1, 1998. The Company has not yet evaluated the impact of adoption of SFAS 131. 18 20 In June 1997, the FASB issued Statement of Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting Comprehensive Income." SFAS 130 establishes standards for reporting and display of comprehensive income in the financial statements. SFAS 130 is effective for fiscal years beginning after December 15, 1997. The Company plans to adopt SFAS 130 on October 1, 1998. The Company has not yet evaluated the impact of SFAS 130. In February 1997, the FASB issued Statement of Financial Accounting Standards No. 128, "Earnings per Share," which replaces the presentation of primary earnings per share ("EPS") with basic EPS and replaces fully diluted EPS with diluted EPS. It also requires dual presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the components of the basic EPS computation to the components of the diluted EPS computation. SFAS No. 128 is effective for both interim and annual periods ending after December 15, 1997. Earlier adoption is not permitted. Upon adoption, all prior-period EPS data presented will be restated. The Company does not anticipate the adoption of SFAS No. 128 to have a significant effect on EPS. In October 1995, the FASB issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock-based Compensation." Companies are required to adopt the provisions of this Statement for fiscal years beginning after December 15, 1995. The Company has not yet adopted the new rules and, upon adoption next year, presently intends to continue to measure compensation cost using Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." 19 21 BUSINESS COMPANY OVERVIEW The Company is a leading contract research organization providing research and development resources to the worldwide pharmaceutical, medical device and biotechnology industries. The Company offers an efficient, variable-cost alternative to its clients' internal product development, compliance and quality control programs. Founded in 1974, the Company initially focused primarily on providing new products and procedures which facilitated research progress at client sites. Recently, as a result of increasing pressures to bring products to market on a cost-effective and accelerated basis, many clients have requested the Company to carry out proprietary projects at the Company's facilities. As a result, the Company now derives its revenues from both the sale of its analytical instruments and other products as well as research services provided to customers. The Company provides a broad array of both value-added products and services focused on chemical analysis, allowing its clients to perform their R&D functions either "in-house" or at the Company. The Company believes that among CRO's that provide statistical, clinical, and medical services, the Company is the only one that designs and sells analytical instrumentation. Within the analytical instruments business, the Company believes that it is one of very few firms to maintain a separate business unit devoted to contract analytical services under the regulatory framework of GLP's and GMP's. The Company's products and services combine basic research with diagnostic and therapeutic experience. One consequence of the restructuring of the healthcare industry is the greater reliance on outsourcing research services for both clinical trials and formulation development. The Company is capable of supporting the analytical needs of researchers and clinicians, from small molecule drugs and hormones through large biomolecules such as proteins. The Company's scientists have the skills necessary in instrumentation, chemical reagents and computer software to make the products and services it provides increasingly valuable to the worldwide pharmaceutical, biotechnological and medical device industries. Over the past five years, the Company has provided its products and/or services to all of the top 25 pharmaceutical companies in the world, as ranked by 1996 research and development spending. As a result of its (i) client focus, (ii) reputation for high-quality services and products, (iii) capital investment in state-of-the art instrumentation and facilities, (iv) skilled and experienced professional staff, and (v) expertise in performing critical development and support services, the Company believes that it is a value-added partner in solving its clients' complex product development problems. The Company designs, manufactures and markets a broad range of products and related scientific procedures that detect and quantify the presence of chemicals in certain substances. On the products side, the Company competes in the $11 billion analytical instrument industry. The Company's focus, however, is not on marketing hardware and software, but rather on solutions to challenging analytical problems where the Company can utilize its talented personnel to provide a total solution not generally available from hardware-focused competitors. The Company's products utilize state-of-the-art scientific technology, including liquid chromatography, electrochemistry and in vivo sampling instrumentation. The Company's analytical instruments are sold primarily to pharmaceutical firms and research organizations. Principal clients include scientists engaged in drug metabolism studies, as well as scientists engaged in basic neuroscience research. The Company provides a wide variety of services to pharmaceutical companies, medical device manufacturers, medical research centers, academic institutions and others. These analytical services support screening and pharmacological testing, toxicology/safety testing, formulation development, laboratory testing, regulatory and compliance consulting and quality control testing. The Company began providing services primarily in response to requests from customers who had used or were using the Company's products. To reduce overhead and speed drug approval requests through the FDA, pharmaceutical companies are contracting increasing amounts of their analytical work to outside firms like the Company. The Pharmaceutical Research and Manufacturing Association estimates that in 1997, pharmaceutical and biotechnology companies will spend approximately $18.9 billion worldwide on research and development, of which approximately 18%, or $3.4 billion, will be outsourced to independent contract service providers. The Company believes that the trend of outsourcing will continue as a result of drug development pressures, the 20 22 emphasis on cost containment, patent expirations, consolidation in the pharmaceutical industry, virtual drug company and biotechnology industry growth, the need for technical expertise, the need for data management expertise and the globalization of the pharmaceutical marketplace. CHANGING NATURE OF PHARMACEUTICAL INDUSTRY The Company provides products and services on a world wide basis to pharmaceutical, medical device and biotechnology companies, academic institutions and the United States government to facilitate the research and development of drugs and medical devices. The Company's products are marketed generally to both public and private research organizations engaged in the early stages of drug development, while the Company's services are marketed generally to pharmaceutical and other biotechnical companies engaged in later stages of drug testing. The Company competes against several large equipment manufacturers with respect to its products, while the research services industry is highly fragmented consisting of several hundred service providers operating in various segments of the market and a few larger companies focusing primarily on managing clinical trials. While the markets for the Company's products and services have distinct customers (often simply separate divisions in a large pharmaceutical company) and requirements, the Company believes that both markets are facing increased pressure to outsource certain facets of their research and development activities. The Company believes that the factors identified below will contribute to a continuing increase in outsourcing activities by its customers. Drug Development Pressure The pharmaceutical industry is under pressure to rapidly develop new drugs to treat chronic illnesses and life threatening conditions such as AIDS and Alzheimer's disease as consumers, doctors, health care providers and pharmaceutical company shareholders continue to demand quicker and more efficient drug development. Responding to this pressure, pharmaceutical companies are attempting to accelerate the drug development process, including reliance to an increasing extent on external providers of research and development services to perform testing and analysis in all phases of the process. Emphasis on Cost Containment Pharmaceutical companies are facing increasing pressure to develop more efficient operating strategies as a result of margin pressure from market forces, including (i) a shift toward managed care, (ii) patent expirations, (iii) generic substitution, (iv) increased purchasing power of large buyer groups and (v) governmental initiatives designed to reduce drug prices. The Company believes that the pharmaceutical and medical device industries are responding to these pressures by downsizing internal research and development programs, favoring outsourcing as a variable-cost alternative. Further, the need for additional capacity to increase the speed of new product development, to maximize the period of marketing exclusivity and to increase economic returns, has driven the need for outsourced services. Patent Expirations Patents on all major pharmaceuticals continue to age and expire. According to the Pharmaceutical Research and Marketing Association, since 1984 prescriptions for generic drugs have risen from 20% to 43% of all prescriptions written. Moving generic drugs onto the market faster can result in an estimated 2 to 5 year reduction in effective patent protection for brand name drugs. Patent expirations are forcing drug companies to develop new products or modify existing products to maintain market share against generic product competition. The Company believes that the pressure to develop new products and modify (reformulate) existing products, combined with internal capacity constraints, is leading companies to outsource these activities. Consolidation in the Pharmaceutical Industry The pharmaceutical industry is increasingly consolidating as drug development companies continue to pursue new avenues of growth and more efficient ways of conducting business. As companies seek to combine 21 23 varied personnel, resources and activities, the Company believes that they will increasingly focus on ways to reduce costs and streamline operations, leading to the greater use of companies providing contract research services. Biotechnology Industry and "Virtual" Drug Company Growth The biotechnology industry has grown rapidly over the last 10 years and has introduced a significant number of new compounds for development. As a result, many biotechnology companies do not have the necessary in-house resources to conduct required development and testing. Furthermore, the number of pharmaceutical and medical device companies whose business strategy is to bring a product far enough along to attract a strategic partner that will manufacture and market a drug has increased. Many of these "virtual" drug development companies, having little or no internal development or support resources, must outsource a substantial portion of drug development and testing. Need for Technical Expertise The increasing complexity of new drugs requires high quality, innovative, solution-driven contract work through all phases of the development process from preclinical toxicology and pharmacokinetics through reformulation pharmacokinetic studies and post-market clinical drug monitoring. The Company believes that this need for specialized technical expertise will increasingly lead to outsourcing of research activities. Need for Data Management Expertise Regulatory agencies are increasing the volume of data required for regulatory filings, as well as requesting increased access to these data. Furthermore, the FDA is encouraging the use of computer-assisted filings in an effort to expedite the approval process; consequently, drug companies are increasingly outsourcing to firms with automated data management capabilities. Clients also are demanding access to data as it is acquired in the laboratory; and the Company has the ability to provide clients with remote access to Company computer systems while at the same time protecting client data from unauthorized access. Globalization of the Marketplace Foreign pharmaceutical companies, particularly in Japan and Europe, are increasingly seeking to obtain approval to market their products in the United States. Due to a lack of familiarity with the complex United States regulatory system and the difficulty in bringing their operating facilities into FDA-required GMP compliance, foreign firms are relying on independent development companies with experience in the United States to provide integrated services through all phases of product development and to assist in preparing regulatory submissions. The Company believes that domestic firms with established regulatory expertise and a broad range of integrated development services will benefit from this trend. GROWTH STRATEGY The Company's objective is to be the leading provider of high-quality analytical chemistry and support services to the worldwide pharmaceutical, medical device and biotechnology industries. The Company intends to leverage its personnel, facilities, technological expertise and information systems to facilitate growth and differentiate itself from its competitors. The Company has adopted a business strategy intended to accelerate growth and profitability, which consists of the following elements: Increase Technical Staff to Expand Sales The Company believes its investment in infrastructure and technical expertise has positioned it to significantly expand the level of services it provides to current and future clients. The Company is currently turning away opportunities to provide services because of technical personnel and capacity constraints. The Company intends to hire additional scientific personnel, allowing it to take advantage of the recent expansion of the Company's facilities and substantially increased laboratory space. The additional personnel will allow the Company to further provide services to current and future clients. 22 24 Implement Comprehensive Marketing and Sales Program Due to the recent growth of the CRO industry and the highly fragmented nature of the competition, the Company believes it has been difficult for many CRO's to achieve a high profile corporate identity within the marketplace. The Company's marketing strategy is to continue to build upon its reputation as a provider of high quality products and services. The Company has developed a marketing plan designed to substantially increase awareness of the products offered and services provided by the Company. The plan includes: (i) increasing the number of sales and marketing personnel, (ii) expanding the level of advertising and promotion, (iii) expanding strategic development relationships with key clients, (iv) expanding global market presence through distributors and locally focused promotion, and (v) surveying existing and potential clients to further assess needs and buying practices. The Company also intends to expand its technical services staff given that in the normal course of business of responding to client inquiries regarding the Company's products and services they have identified additional business opportunities in the services sector. Broaden Range of Services Provided The Company intends to expand its development capabilities by adding services that are complimentary to its product development and support services. In addition to offering a broad range of integrated, value-added services that span the product life cycle from new compound characterizations to market product compliance and quality control testing, the Company plans to: (i) provide integrated formulations development services, (ii) refine current in vitro sampling methodologies, and (iii) broaden the range of services provided in connection with clinical trials. Increasing the array of services offered to clients is intended to enhance the Company's reputation for providing a turnkey approach to accurately and quickly meet product development challenges. Expand Geographically The Company intends to supplement its internal growth through the opening of offices in strategic locations. The Company believes that these offices will be valuable in developing and maintaining important client relationships. The Company believes that establishing a presence in certain domestic and international markets will enable it to more effectively compete for services from worldwide pharmaceutical, medical device and biotechnology customers that require a rapid turnaround. The Company intends to add facilities on the West Coast, as well as in targeted international markets. Adding facilities outside the United States will allow the Company to provide analytical services nearer to clinical sites and major pharmaceutical research centers located in international markets, without certain regulatory restrictions applicable to delivery and testing of substances in the United States. Geographic expansion may be accomplished by internal growth, acquisitions or joint ventures. Identify and Effect Key Acquisitions The Company believes that significant acquisition opportunities exist in the CRO industry due to its highly fragmented nature. The Company intends to focus on acquisitions of businesses that would expand its geographic presence, add to its clinical expertise in sectors in which it has significant experience and broaden its range of services. As part of its business strategy and in a continuing effort to enhance its capabilities to serve the global needs of its clients, the Company is looking at strategic acquisitions on an ongoing basis. In addition to considering the business of the candidate, the Company evaluates the ease with which an acquisition candidate may be integrated into the Company's organizational structure. OPERATING STRATEGIES The Company's operating strategies are derived from a strong base of expertise in analytical chemistry, obtained from not only its role as a manufacturer of state of the art instrumentation but also as a provider of contract laboratory services. This dual role strongly differentiates the Company from its competitors. The Company believes that among CRO's that provide statistical, clinical, and medical services, the Company is the only one that designs and sells analytical instrumentation. Within the analytical instruments business, the 23 25 Company believes it is one of very few firms to maintain a separate business unit devoted to contract analytical services under the regulatory framework of GLP's and GMP's. The Company's operating strategies consist of the following elements: Continue to Focus on Analytical Chemistry The Company will remain focused on selling products and services related to analytical chemistry. The Company believes that this area has not been emphasized by many of the larger CRO's and that they presently do not have the personnel or the scientific expertise to be successful in this field. The Company has developed and will continue to develop methodologies capable of measuring new drug substances. The Company believes that its capabilities to make highly technical measurements in blood plasma, tissue or dosage forms, for example, represents a significant competitive advantage. Leverage the Synergy between Products and Services The Company will continue to provide analytical chemistry solutions by selling innovative products and services. Each of these business units complements and enhances the other. For example, the Company has received certain contract service work due to the Company's expertise in selling and supporting liquid chromatography products. Conversely, the timely completion of a contracted study in the services unit has subsequently led to purchase orders from the same clients for the Company's products. Further Emphasize High-End Assays The Company will continue to focus on performing sophisticated analytical techniques, distinguishing the Company from entities performing commodity-like services. Clients with a need for specialized, sophisticated, instrumental techniques with extremely high sensitivity seek out highly qualified CRO's such as the Company in order to maximize their likelihood of success. Many of the newer compounds being developed are pharmacologically active at much lower concentrations than before and require more sophisticated analytical techniques. Due to the expertise of the Company's staff, and the sophisticated instrumentation which it employs in its services contracts, the Company will continue to take advantage of these high-end opportunities. Continue to Invest in State of the Art Instrumentation The Company has historically and will continue to invest in technologies and products that are needed to support its customers' analytical chemistry needs. The Company's stature in the contract services business and its ability to distinguish itself from its competitors will be enhanced by (i) providing more capacity through purchasing automated sample analysis systems (robotics), (ii) increasing the number of LC/MS and GC/MS systems, (iii) increasing the on-site storage space for stability samples, and (iv) adding other instrument-based techniques. Enhance Client Relationships The Company prides itself on its strong relationships with its clients. The Company believes that its continuous communication with clients both on the product support side and throughout the testing process has been critical to its success. The Company believes many clients view the Company's staff as a virtual extension of their own department. Emphasize the "Annuity Effect" The Company will continue its close working relationships with large innovator pharmaceutical companies by developing analytical methods for new drug candidates as early as possible in the drug development process. Upon acceptance of the new method by the client, the Company becomes the preferred provider of the testing services and can leverage its development expenses over the analyses of thousands of specimens generated from dozens of clinical trials and stability testing protocols. The Company thereby generates a continuing revenue stream extending over not only the drug development process but also over the 24 26 post-approval phase, where demand for testing services can actually increase as reformulations occur and as other clients use the Company's method for drug interaction studies. THE COMPANY'S ROLE IN THE DRUG DEVELOPMENT PROCESS Overview of Process The Company has 23 years of experience in developing methodology to support the analytical chemistry requirements of the drug discovery process. Under the United States regulatory system, the development process for new pharmaceutical products can be divided into three distinct phases. The preclinical phase involves the discovery, characterization, product formulation and animal testing necessary to prepare an Investigational New Drug ("IND") exemption for submission to the FDA. The IND must be accepted by the FDA before the drug can be tested in humans. The second, or clinical phase of development follows a successful IND submission and involves the activities necessary to demonstrate the safety, tolerability, efficacy and dosage of the substance in humans, as well as the ability to produce the substance in accordance with the FDA's GMP regulations. Data from these activities are compiled in a New Drug Application ("NDA"), or for biotechnology products, a Product License Application ("PLA"), for submission to the FDA requesting approval to market the drug. The third phase follows FDA approval of the NDA, or PLA, and involves the production and continued analytical and clinical monitoring of the drug. The post-approval phase also involves the development and regulatory approval of product modifications and line extensions, including improved dosage forms. The drug development process may be illustrated schematically as set forth below. Although the schematic is organized in a linear fashion, many of the stages of the process frequently overlap. FLOW CHART ------------- -------------- ------------------ -------------- | | | UNDERLYING | | DRUG | | IN VITRO | | GENETIC | | BIOCHEMISTRY | | DISCOVERY | | AND IN VIVO | | INFORMATION |--->| OF DISEASE |--->|(LEAD GENERATION) |--->| PRECLINICAL |----------- | | | | | | | RESEARCH | | ------------- -------------- ------------------ -------------- | - --------------------------------------------------------------------------------------------- | ------------- -------------- ------------------- ------------- | | |IND | | | REFINED | | |NDA | | PRELIMINARY | | PHASE I | | FORMULATION | | PHASE II | | |FORMULATIONS | | TRIALS | | AND | | AND III | - -->| DEVELOPMENT |--->|(FIRST IN MAN)|--->| MANUFACTURING |--->| TRIALS |----------- | | | | |(STABILITY TESTING)| | | | ------------- -------------- ------------------- ------------- | - --------------------------------------------------------------------------------------------- | -------- ------------------- ------------------- ------------------ | | | | | | LINE | | GENERIC | | | FDA | | MARKETING | | EXTENSIONS | | COMPETITION | - -->|APPROVAL|--->| (QUALITY CONTROL) |--->| (NEW INDICATIONS) |--->| (BIO-EQUIVALENCE)| -------- ------------------- ------------------- ------------------ -------- | | | | Areas where the Company's products and services currently apply -------- -------- | | | | Areas where the Company's technology is being explored --------
25 27 Process Specifics and the Company's Role The Preclinical Phase. The development of a new pharmaceutical agent begins with the discovery or synthesis of an array of new molecules which may influence a specific target such as a membrane bound receptor or an enzyme involved in the disease under study. These libraries of molecules are screened for pharmacological activity using various in vitro and in vivo models, with the goal of selecting relatively few "leads" for further development. Once the pharmacologically active molecule is fully characterized, the agent is analyzed to confirm the integrity and quality of material produced. Development of the initial dosage forms to be used in clinical trials is completed, together with analytical chemistry protocols to determine their stability. Upon successful completion of preclinical safety and efficacy studies in animals, an IND submission is prepared and provided to the FDA for review prior to human clinical trials. Most of the Company's products are designed for use in the preclinical phase of drug development, and the Company also provides its bioanalytical services in this phase. A good example of the role of the Company's products in the preclinical phase is the utilization of Company technology in the development of drug substances impacting the central nervous system neurotransmitters, including serotonin, dopamine, norepinephrine, and acetylcholine. These drugs are used in the treatment of such conditions as depression, Parkinson's disease, schizophrenia and Alzheimer's disease. The Company's chromatography products have been used extensively, for example, to study the influence of reuptake inhibitors on serotonin uptake and release in CNS programs at universities and a major pharmaceutical company well before 1985. The Company believes that the synergy between the Company's instrumentation products and services has been a factor in the Company being selected by major pharmaceutical companies to determine new drug candidates in thousands of Phase I-III clinical specimens. The Clinical Phase. Following successful submission of an IND application, the sponsor is permitted to conduct Phase I human clinical trials in a limited number of healthy individuals to determine the drug's safety and tolerability. This work requires bioanalytical assays to determine the availability and metabolism of the active ingredient following administration. Expertise in method development and validation is essential for this phase, particularly with new chemical entities. Phase II clinical trials involve administering the drug to individuals who suffer from the target disease or condition to determine the drug's potential effectiveness and ideal dose. When further safety (toxicology), tolerability and an ideal dosing regimen have been established, Phase III clinical trials involving large numbers of patients are conducted to verify efficacy and safety. After the successful completion of Phase III clinical trials, the sponsor of the new drug submits an NDA, or PLA, to the FDA requesting that the product be approved for marketing. The Company's bioanalytical work is most intensive per individual in Phase I studies where relatively few individuals are dosed. In Phase II and III the number of individuals treated accelerates rapidly, but the number of blood samples drawn per patient declines. Phase II and III studies are carried out over several years with what has become a well established analytical protocol. To maintain consistency in the analytical data, it is unusual for a sponsor to change laboratories unless there are problems in the quality or timely delivery of results. This tendency provides the "annuity effect" described previously. One area of special interest to the Company is drug interaction studies. With increasing numbers of patients receiving multiple drug therapy, it is critical that the impact of each drug be assessed with respect to its influence on the effectiveness and toxicology of other drugs dosed simultaneously. This complicates and often extends clinical trials. Frequently, drugs from different manufacturers will be used together. A CRO such as the Company can provide services to several firms simultaneously when a potential synergy exists between their respective products. Such firms are often competitors in one therapeutic area and complementors in another area (e.g. the "cocktail" approach to HIV therapy). In such a case, a given assay technology might well be of interest to a number of clients, spreading the assay development cost. More importantly, drug interaction studies lead to new clients in a much more cost effective manner than advertising or an outside sales force. The Post-approval Phase. Following approval, the drug manufacturer must comply with quality assurance and quality control requirements throughout production and must continue chemical analytical and stability studies of the drug in commercial production to continue to validate production processes and confirm 26 28 product shelf life. The drug manufacturer's raw materials must be analyzed prior to use in production, and samples from each manufactured batch must be tested prior to release of the batch for distribution to the public. The Company also provides its bioanalytical services in all areas during the post-approval phase, concentrating on bioequivalence studies of new formulations, line extensions, new disease indications and drug interaction studies. COMPANY PRODUCTS AND SERVICES Overview The Company's products and services may be illustrated schematically as set forth below. [A FLOW CHART SCHEMATIC OF THE COMPANY'S SERVICES AND PRODUCTS, INDICATING THE TECHNOLOGY INVOLVED IN THE SERVICES AND PRODUCTS WILL BE INSERTED HERE.] The Company provides products and procedures for the $11 billion analytical instrument industry, and also provides a broad array of bioanalytical services in all phases of the drug development process. Over its 23 year history, the Company has developed expertise in a number of core scientific technologies which it has utilized in developing state-of-the-art procedures designed to determine amounts of chemical substances in complex materials. These technologies include: liquid chromatography, electrochemistry, solid phase extraction, mass spectrometry, enzymology and fluorescence. The Company also uses its expertise in analytical chemistry to provide a wide range of bioanalytical services to pharmaceutical companies, academic institutions and others involved in pharmaceutical research and development. Products The Company designs, manufactures and markets a broad range of products and related scientific procedures that detect and quantify the presence of chemicals in certain substances. The Company's products utilize state-of-the-art scientific technology including liquid chromatography, electrochemistry and in vivo sampling instrumentation. Presently, the Company's products and procedures include: - Bioanalytical separation instrumentation that utilizes liquid chromatography and Windows(R) software to detect low concentrations of substances in biological fluids and tissues. - A wide-range of chemical analyzers that utilize scientific technologies including electrochemistry, liquid chromatography and enzymology to analyze levels of chemicals such as acetylcholine, choline, serotonin and dopamine in biological materials. These instruments assist scientists in the study of, among other things, Alzheimer's disease, cocaine addiction and the effects of chemical warfare agents and strokes. - Diagnostic kits and procedures, designed to utilize the Company's instrumentation, that, among other things, enable clinical laboratories and pharmaceutical researchers to determine the presence of 27 29 multiple drugs in blood plasma and to measure neurotransmitters and their metabolites in plasma and urine. These kits and procedures assist researchers in developing new drugs for diseases such as AIDS and cardiovascular disease. - A line of miniaturized in vivo sampling devices, marketed to veterinary and animal research centers, pharmaceutical companies and medical research centers, which assist in the study of a number of medical conditions, including stroke, depression, Parkinson's disease, diabetes and osteoporosis. The chart below sets forth the Company's product categories, the technology supporting each category and the applications of each category.
- -------------------------------------------------------------------------------------------------------- PRODUCT/PROCEDURE ENABLING TECHNOLOGY APPLICATION(S) - -------------------------------------------------------------------------------------------------------- Bioanalytical Separation - Liquid chromatography Determining low concentrations Instrumentation - High pressure digitally of substances in biological controlled fluids and tissues metering pumps - Electrochemical and optical detectors - Customized Windows(R) software - Customized Internet applications - -------------------------------------------------------------------------------------------------------- Electrochemical Analyzers and - Electrochemistry Development of biosensors for Accessories - Real time control and data substances, such as glucose, acquisition software lactate, glutamate; development - Customized Windows(R) software of batteries for electronics - Customized Internet such as pacemakers; study of applications corrosion of implants - -------------------------------------------------------------------------------------------------------- Acetylcholine/Choline Analyzer - Liquid chromatography Studies of Alzheimer's disease; - Enzymology chemical warfare agents; and - Electrochemistry infant formula - -------------------------------------------------------------------------------------------------------- Serotonin and Dopamine Analyzer - Liquid chromatography Developing serotonin reuptake - Electrochemistry inhibitors; studies of the mechanism of cocaine addiction - -------------------------------------------------------------------------------------------------------- Amino Acid Analyzer - Derivatization chemistry Studies of aspartame, glutamate, - Liquid chromatography and GABA in the brain; research - Electrochemistry and/or to minimize the impact of stroke - Fluorescence and other ischemic events in the brain - -------------------------------------------------------------------------------------------------------- In vivo sampling devices - Hydrophilic membrane fibers Following pharmacokinetics in ("artificial blood vessels") - Digitally controlled pumping vivo; monitoring glucose; and auxiliary instrumentation systems, miniature fraction neurotransmitters, peptides, and collectors, and valves amino acids; studies of stroke, depression, Parkinson's Disease, diabetes and calcium loss related to osteoporosis and weightlessness; reducing the use of animals in research - -------------------------------------------------------------------------------------------------------- Kits for clinical measurement of - Robotics Evaluating cardiovascular neurotransmitters and - Liquid chromatography disease, inborn errors of homocysteine in human blood - Electrochemistry metabolism, and cancers of and urine - Customized Windows(R) software neurological origin - -------------------------------------------------------------------------------------------------------- Simultaneous determination of - Robotics Cocktail therapy for AIDS; drug multiple drugs in blood plasma - Solid phase extraction interaction studies during - Liquid chromatography clinical trials - Mass spectrometry - -------------------------------------------------------------------------------------------------------- Vital signs monitoring - Electrocardiology (ECG) ECG, respiration, blood - Temperature transducers pressure, and temperature - Real time software monitoring in veterinary clinics and toxicology departments in pharmaceutical companies - --------------------------------------------------------------------------------------------------------
28 30 Services The Company provides a wide variety of services to pharmaceutical companies, medical device manufacturers, medical and research centers, academic institutions, and others. The Company's services unit has grown rapidly over the last several years. The Company began providing services primarily in response to requests from customers who had used or were using the Company's products. As the Company's reputation has grown, the Company's customers increasingly have drawn on the Company's expertise in analytical chemistry to solve complex problems which arise in the course of drug research and development. The Company's range of services now include: method development and validation; product characterization; stability testing; bioanalytical testing; diagnostic testing and in vivo sampling. The Company is poised to utilize its expertise to provide a greater volume and broader array of services. These services involve the application of the Company's expertise in analytical chemistry to a broad range of challenging and complex issues, and include the services described below. - Method Development and Validation. The Company develops and validates methods used in a broad range of laboratory testing necessary to determine physical or chemical characteristics of compounds and finished dosage forms. Analytical methods are developed to demonstrate potency, purity, stability or physical attributes. These methods are validated to ensure that the data generated are accurate, precise, reproducible and reliable and are used throughout the drug development process and in product support testing. Of the Company's 155 employees as of September 30, 1997, more than 30 of the Company's scientists (including nine who hold Ph.D. degrees) are experienced with method development and validation. - Product Characterization. The Company has the expertise and instruments required to identify and characterize a broad range of chemical entities. Characterization analysis identifies the chemical composition, structure and physical properties of a compound, and characterization data forms a significant portion of a regulatory application. The Company uses numerous techniques to characterize the compound, including chromatography, spectroscopy, electrochemistry and other physical chemistry techniques. Once appropriate test methods are developed and validated, and appropriate reference standards (highly pure samples) are characterized and certified, the Company can assist clients by routinely testing compounds for clinical and commercial use. - Stability Testing. The Company provides stability testing and secure storage facilities necessary to establish and confirm product purity, potency and other shelf-life characteristics. Stability testing is required at all phases of product development, from dosage form development through commercial production, to confirm shelf life of each manufactured batch. The Company maintains a four-chamber, ICH validated controlled climate GMP facility. FDA regulations require that samples of clinical and commercial products placed in stability chambers be analyzed in a timely fashion after scheduled "pull points" occur, based on the date of manufacture. - Bioanalytical Testing. The Company offers bioanalytical testing services to support clinical trials, analyzing plasma samples to characterize the drug's concentration and determine the rate of absorption and elimination. Bioanalytical studies of new drugs often present challenging and complex issues, with products being metabolized into multiple active and inactive forms. The Company works with its clients to develop and validate analytical methods to permit detection and measurement of the various components to trace levels. In some cases clients expect the Company to take responsibility to develop methodology and in other cases methodology is transferred from the client and refined and validated by the Company personnel. The most common technology used in such studies is liquid chromatography coupled with various detectors, including mass spectrometry as well as optical and electrochemical devices. - Diagnostic Testing. The Company has manufactured bioanalytical chemistry products since its start in 1974. The Company produces fully automated, networkable state-of-the-art liquid chromatographs and electrochemical analyzers based on Windows(R)software. The Company has recently developed and now produces a line of diagnostic kits designed to fit its instrumentation. These kits help measure neurotransmitters and their metabolites and homocysteine, an experimental cardiovascular disease 29 31 indicator in plasma and urine. These measurement processes are often performed by Company personnel utilizing Company products. - In Vivo Sampling. The Company pioneered and has commercialized miniaturized in vivo sampling methodology, which involves the continuous monitoring of chemical changes in live animals. This technology is sold as both a service and a line of products. The Company is aggressively adding new components to this line, with the goal of selling complete, automated sampling systems. Target markets include veterinary and animal research centers, pharmaceutical companies and medical research centers. The Company has received two significant Phase II SBIR grants that involve subcontracts with Purdue University and the University of Kansas for the purpose of exploiting this emerging technology. - Formulation Development Services. In the future, the Company plans to provide integrated formulation development services, enabling the Company to take a client's compound and develop a safe and stable product with desired characteristics. The Company believes its strong academic connections to Purdue and other universities, formulation expertise and extensive analytical capabilities position the Company to provide a significant contribution to this area. CLIENTS Over the past five years, the Company has provided services and products to all of the top 25 pharmaceutical companies in the world as ranked by 1996 research and development spending. In addition, the Company products are purchased by the vast majority of medical schools in North America, Europe and Asia. In 1996, the Company provided products and services to approximately 300 institutions, including some of the largest United States, European and Japanese drug companies. Approximately 40% of the Company's revenues are generated from customers located outside the United States. The Company believes that a concentration of business among certain large clients is not uncommon in the CRO industry. The Company has experienced such concentration in the past and may do so again in the future. During 1996, four operating groups (Quality Control, Analytical Research and Development, Clinical Pharmacokinetics, and Drug Metabolism) of Pfizer, Inc., a major United States pharmaceutical company, in the aggregate accounted for approximately 18% of the Company's total revenues. These sales were derived from both the products and the services units of the Company. During the first nine months of 1997, Pfizer, Inc. accounted for approximately 21% of the Company's total revenues. Most of these sales fell under approximately 80 contracts the Company has or had with Pfizer, Inc., the largest of which totaled approximately $398,000. Although the Company strives to reduce its reliance on a limited number of major clients, there can be no assurance that the Company's business will not be dependent upon certain major clients, the loss of which could have a material adverse effect on the Company. In addition, due to the project-oriented nature of the Company's business, there can be no assurance that significant clients in any one period will continue to be significant clients in other periods. See "Risk Factors -- Dependence on Certain Industries and Clients." SALES AND MARKETING Marketing and sales initiatives have been created to address both market needs and economic reality. Services have grown primarily through direct, internal recommendations among major pharmaceutical manufacturers. Frequently, these customers have had prior relationships with the Company's staff and positive experiences with the Company's products and services. The Company recognizes that its growth and continued customer satisfaction are dependent upon its ability to continually improve its sales and marketing functions. In North America, products are sold directly to the end user. The Company has approximately 20 personnel selling a range of products and an equal number providing technical and development support. All staff members are technically trained and all function in both capacities. The Company has also established a highly professional collection of catalogs, training and technical support literature, workshops, and academic publications. The Company's peer-reviewed journal, Current Separations, describes independent research in 30 32 technologies of interest to the Company's customers, and is distributed to 18,500 readers worldwide, many of whom are current or potential customers. Product sales, marketing and technical support is led from the Company's main office in West Lafayette, Indiana. The Company maintains an office in New Jersey with a small sales and technical staff, enabling the Company to demonstrate its products and present technical workshops near the largest concentration of key customers. The Company also maintains sales and technical support capabilities in Massachusetts, North Carolina, Texas, Pennsylvania and Kansas. The Company's marketing plan provides for new sales representation in California and the Midwest, stronger promotion of all product lines, enhanced workshops, training, and demonstration capabilities in the Company's new facilities. The Company's marketing and sales strategy is to be more aggressive, focus on customer needs and further strengthen communications with its markets. The Company will build on its long history of innovation and technical excellence. BAS Technicol, Ltd., a wholly-owned subsidiary of the Company, manages most sales in Europe, and the Company maintains sales and technical support capabilities in Belgium. The Company has a network of more than 20 established distributors covering Japan, the Pacific Basin, South America, the Middle East, India, South Africa and Eastern Europe. Revenue generated from the Company's Japanese distributor, BAS Japan, accounted for approximately 19% of the Company's total revenue for fiscal 1996. Although the Company believes that it could identify a suitable replacement in the event that BAS Japan discontinues as the Company's distributor, such an event could have a material adverse effect on the Company's business, operations and financial condition. See Note 9 of Notes to Consolidated Financial Statements. All of these distributor relationships are managed from the Company's headquarters. International growth is planned through acquisitions, stronger local promotion and significantly broadening the Company's distributor network. CONTRACTUAL ARRANGEMENTS The Company's service contracts typically establish an estimated fee for identified services. While the Company is performing a contract, clients often adjust the scope of services to be provided by the Company in light of interim project results, at which time the amount of fees is adjusted accordingly. Generally, the Company's fee-for-service contracts are terminable by the client upon written notice of 30 days or less. The loss of a large contract or the loss of multiple contracts could adversely affect the Company's future revenue and profitability. Contracts may be terminated for a variety of reasons, including the client's decision to forego a particular study, the failure of product prototypes to satisfy safety requirements and unexpected or undesired results of product testing. See "Risk Factors -- Nature of Contracts" and "-- Dependence on Certain Industries and Clients." BACKLOG Backlog for the Company's products consist of booked purchase orders for products which have not been shipped. The Company rarely has a backlog for its products of more than one month of sales. Many products are shipped within 24 hours of order receipt. Due to the nature of the Company's services, the Company does not believe that backlog is a meaningful indicator of the future performance of its services unit. COMPETITION With respect to its products, the Company competes with several large equipment manufacturers, including Hewlett Packard, Waters Corporation and Perkin Elmer Corporation. Competitive factors include quality, reliability and price. The Company believes it competes favorably in its targeted markets because of its ability to combine quality products with technical assistance and services to meet customer needs. With respect to its services, the Company competes primarily with in-house research, development, quality control and other support service departments of pharmaceutical and biotechnology companies, as well as university research laboratories and teaching hospitals. In addition, there are numerous full-service CRO's 31 33 that compete in this industry. The largest CRO competitors offering similar research services include Covance, Inc., Pharmaceutical Product Development, Inc., Applied Analytical Industries, Inc., Phoenix International Life Sciences Inc. and MDS Health Group Ltd. CROs generally compete on the basis of previous experience, medical and scientific expertise in specific therapeutic areas, the quality of contract research, the ability to organize and manage large-scale trials on a global basis, medical database management capabilities, the ability to provide statistical and regulatory services, the ability to recruit investigators, the ability to integrate information technology with systems to improve the efficiency of contract research, an international presence with strategically located facilities, financial viability and price. Many of the Company's competitors are much larger and have significantly greater financial resources than the Company. See "Risk Factors -- Competition." GOVERNMENT REGULATION The services performed by the Company are subject to various regulatory requirements designed to ensure the quality and integrity of pharmaceutical and diagnostic products, primarily under the Federal Food, Drug and Cosmetic Act and associated GLP and GMP regulations which are administered by the FDA in accordance with current industry standards. These regulations apply to all phases of manufacturing, testing and record keeping, including personnel, facilities, equipment, control of materials, processes and laboratories, packaging, labeling and distribution. Noncompliance with GLPs and GMPs by the Company in a project could result in disqualification of data collected by the Company in the project. Material violation of GLP or GMP requirements could result in additional regulatory sanctions, and in severe cases could result in a discontinuance of selected Company operations, which would have a material adverse effect on the Company's business, financial condition and results of operations. To help assure compliance with applicable regulations, the Company has established quality assurance controls at its facilities that monitor ongoing compliance by auditing test data and regularly inspecting facilities, procedures and other GMP compliance parameters. In addition, FDA regulations and guidelines serve as a basis for the Company's standard operating procedures, where applicable. Certain of the Company's development and testing activities are subject to the Controlled Substances Act, administered by the Drug Enforcement Agency ("DEA"), which regulates strictly all narcotic and habit-forming substances. The Company maintains restricted-access facilities and heightened control procedures for projects involving such substances due to the level of security and other controls required by the DEA. In addition to FDA regulations, the Company is subject to other federal and state regulations concerning such matters as occupational safety and health and protection of the environment. The Company's activities involve the controlled use of hazardous materials and chemicals. The Company is subject to foreign, federal, state and local laws and regulations governing the use, storage, handling and disposal of such materials and certain waste products. The risk of accidental contamination or injury from these materials cannot be completely eliminated. In the event of such an accident, the Company could be held liable for any damages that result which could have a material adverse effect on the Company's business and results of operations. See "Risk Factors -- Dependence on and Effect of Government Regulation." PRODUCT LIABILITY AND INSURANCE The Company maintains product liability and professional errors and omissions liability insurance, providing approximately $6.0 million in coverage on a claims-made basis. In addition, in certain circumstances the Company seeks to manage its liability risk through contractual provisions with clients requiring the Company to be indemnified by the client or covered by clients' product liability insurance policies. In addition, in certain types of engagements, the Company seeks to limit contractual liability to its clients to the amount of fees received by the Company. The contractual arrangements are subject to negotiation with clients and the terms and scope of such indemnification, liability limitation and insurance coverage vary from client to client and from project to project. Although most of the Company's clients are large, well-capitalized companies, the financial performance of these indemnities is not secured. Therefore,the Company bears the risk that the indemnifying party may not have the financial ability to fulfill its indemnification obligations or that liability 32 34 would exceed the amount of applicable insurance. In addition, the Company could be held liable for errors and omissions in connection with the services it performs. There can be no assurance that the Company's insurance coverage will be adequate or that insurance coverage will continue to be available on terms acceptable to the Company, or that the Company can obtain indemnification arrangements or otherwise be able to limit its liability risk. See "Risk Factors -- Liability Risks Related to Products and the Provision of Services." EMPLOYEES At June 30, 1997, the Company had 155 full-time employees, 110 of which hold degrees, including 29 Ph.D.s. The Company believes that its relations with its employees are good. None of the Company's employees are represented by a union. The Company's performance depends on its ability to attract and retain qualified professional, scientific and technical staff. The level of competition among employers for skilled personnel is high. The Company believes that its employee benefit plans enhance employee morale, professional commitment and work productivity and provide an incentive for employees to remain with the Company. While the Company has not experienced any significant problems in attracting or retaining qualified staff, there can be no assurance that the Company will be able to avoid these problems in the future. All employees enter into confidentiality agreements intended to protect the Company's proprietary information. See "Risk Factors -- Need to Attract, Develop, Manage and Retain Professional Staff." FACILITIES The Company's principal executive offices are located at 2701 Kent Avenue, West Lafayette, IN 47906 constituting approximately 100,000 square feet of operational and administrative space. Purdue University, located in West Lafayette, Indiana, is exceptionally strong in pharmacy, chemistry, veterinary medicine, computer science and engineering. Its program in Analytical Chemistry is ranked among the best in the nation. The Purdue campus provides access to educational opportunities, high quality consultants, graduates and information resources. The technically trained staff that the Company requires prefers a community with the amenities of a first rate university. The Company's record for obtaining Federal and other grants has enhanced collaborative efforts with Purdue. The Company maintains offices which provide sales and technical support services in New Jersey, Pennsylvania and the United Kingdom, and employs sales and technical support service representatives in North Carolina, Texas and Belgium. The Company believes that its facilities are adequate for the Company's operations and that suitable additional space will be available when needed. INFORMATION SYSTEMS Although the Company's focus is on providing value-added products and services, information systems are an important component of the Company's technological leadership. The Company believes that superior information systems are essential to expanding its operations and to providing innovative services to clients. The Company's customized Windows(R)-based software is integral to many of its products. The FDA has become increasingly sophisticated with respect to information systems and the integrity of all forms of data incorporated into regulatory submissions. Correspondingly, the Company strives to be at the forefront of nonclinical testing laboratories in validation of hardware and software systems. The Company's continuing commitment to technological innovations and meeting changing client and regulatory requirements will drive continuous improvement of its information systems technology, maintaining a competitive advantage. LEGAL PROCEEDINGS The Company from time to time may be involved in various claims and legal proceedings arising in the ordinary course of business. The Company does not believe that any pending claims or proceedings, individually or in the aggregate, would have a material adverse effect on the Company's financial condition or results of operations. 33 35 MANAGEMENT EXECUTIVE OFFICERS AND DIRECTORS The executive officers and directors of the Company and their ages as of June 30, 1997 are as follows:
NAME AGE POSITION ---- --- -------- Peter T. Kissinger, Ph.D.(1)(2)........ 52 Chairman of the Board; President; Chief Executive Officer Ronald E. Shoup, Ph.D.(2).............. 45 President, Research Services Unit; Vice President, Research and Development; Director Craig S. Bruntlett, Ph.D............... 48 Vice President, Electrochemical Products Donnie A. Evans........................ 51 Vice President, Engineering Stephen Geary, Ph.D.................... 55 Vice President, United States Sales and Marketing Candice B. Kissinger................... 45 Vice President, International Marketing; Secretary and Director Lina L. Reeves-Kerner.................. 46 Vice President, Human Resources Michael P. Silvon, Ph.D................ 50 Vice President, Business Development Denise M. Wallworth, Ph.D.............. 44 Managing Director, BAS Technicol, Ltd. Douglas P. Wieten...................... 35 Chief Financial Officer, Controller and Treasurer William E. Baitinger(2)(3)............. 64 Director Michael K. Campbell(3)................. 46 Director Thomas A. Hiatt(1)..................... 49 Director John A. Kraeutler(1)(2)................ 49 Director William C. Mulligan(1)(3).............. 43 Director W. Leigh Thompson(2)................... 59 Director
- ------------------------- (1) Member of the Compensation and Incentive Stock Option Committee. (2) Member of the Executive Committee. (3) Member of the Audit Committee. PETER T. KISSINGER, PH.D. founded the Company in 1974 and has served as its Chairman, President and Chief Executive Officer since 1974. He is also a part-time Professor of Chemistry at Purdue University where he has been teaching since 1975. Dr. Kissinger has a Bachelor of Science degree in Analytical Chemistry from Union College and a Doctorate in Analytical Chemistry from the University of North Carolina. RONALD E. SHOUP, PH.D. has been Vice President, Research and Development since 1983 and President of the Company's research services unit, BAS Analytics, since 1990. Dr. Shoup has been instrumental in developing many of the Company's chromatographic applications. Dr. Shoup has a Bachelor of Science degree in Chemistry and Mathematics, and a Ph.D. in Analytical Chemistry from Purdue University. CRAIG S. BRUNTLETT, PH.D. has been Vice President, Electrochemical Products since 1992 and is responsible for sales, marketing and development of the Company's electrochemical products. From 1980 to 1990, Dr. Bruntlett was Director of New Product Development for the Company. Dr. Bruntlett has a Bachelor of Arts degree in Chemistry and Mathematics from St. Cloud State University in Minnesota and a Ph.D. in Chemistry from Purdue University. DONNIE A. EVANS was the Company's first full-time employee beginning as an electronics engineer in 1978. Since January of 1988, he has been Vice President, Engineering Services. STEPHEN GEARY, PH.D. has been Vice President, United States Sales and Marketing since January 1992. Dr. Geary is responsible for the sales efforts of the Company's clinical products. Dr. Geary has a Bachelor of Science degree in Biology and Chemistry from Tufts University, a Masters of Science degree in Biology from the University of New Hampshire and a Ph.D. in Biochemistry from Syracuse University. CANDICE B. KISSINGER has been Vice President, International Sales and Marketing since July 1981. Mrs. Kissinger developed the Company's international distribution network and is responsible for managing the Company's advertising activities. Mrs. Kissinger has a Bachelor of Science degree in Microbiology from 34 36 Ohio Wesleyan University and a Masters of Science degree in Microbiology from the University of Massachusetts. Mrs. Kissinger is the wife of Dr. Peter T. Kissinger. LINA L. REEVES-KERNER has been Vice President, Human Resources since 1995 and is responsible for the administrative support functions of the Company, including shareholder relations, human resources and community relations. From 1980 to 1990 Ms. Reeves-Kerner served as an Administrative Assistant at the Company. Ms. Reeves-Kerner has a Bachelor of Science degree in Business Administration from Indiana Wesleyan University. MICHAEL P. SILVON, PH.D. has been Vice President, Business Development since March 1997. From August 1996 until January 1997, Dr. Silvon was Manager, Technical Services for Great Lakes Chemical responsible for commercial technical support. From December 1994 until August 1996, Dr. Silvon was a self-employed consultant advising various companies on technical business management. From October 1993 until December 1994, Dr. Silvon was Vice President Sales and Marketing at Hi-Port, Inc., a custom formulations and packaging firm in Houston, Texas. Prior to that period, Dr. Silvon was a Regional Business Manager-Americas for the Fine Chemicals Business of Imperial Chemical Industries, PLC/Zeneca, responsible for outsourcing the needs of many major pharmaceutical companies with key raw materials. Dr. Silvon has his Bachelor in Science degree in Chemistry from Loyola University of Chicago, a Ph.D. in Chemistry from the University of Vermont and a Masters in Business Administration from Sacred Heart University. DENISE M. WALLWORTH has been Managing Director, BAS Technicol, Ltd. since March 1995 and is responsible for the Company's operations in the United Kingdom. Prior to that time she was Managing Director of Technicol Ltd., which was acquired by the Company in March 1995. Dr. Wallworth has a Bachelor of Science degree in Chemistry and a Doctorate in Organic Chemistry from the University of Manchester Institute of Science Technology. DOUGLAS P. WIETEN has been Chief Financial Officer since September 1997, corporate Controller since February 1992 and Treasurer since March 1997 and is a certified public accountant. Prior to that time, Mr. Wieten worked at Ernst & Whinney (now Ernst & Young LLP), where he had been employed since 1984. Mr. Wieten has a Bachelor of Science degree in Accounting from Butler University. WILLIAM E. BAITINGER has served as a director of the Company since 1979. Mr. Baitinger has been Director of Technology Transfer at Purdue University since 1988, responsible for all aspects of the program. Mr. Baitinger has a Bachelor of Science degree in Chemistry and Physics from Marietta College and a Doctorate in Chemistry from Purdue University. MICHAEL K. CAMPBELL has served as a director of the Company since 1991. Mr. Campbell has been the President and Chief Executive Officer of Powerway, Inc., a software company, since January 1993. From January 1992 until January 1993, Mr. Campbell was Chief Financial Officer of Hurco Companies, Inc. and was president of Hurco Manufacturing, its largest division. Mr. Campbell has a Bachelor of Science degree in accounting from the University of Southern Indiana. THOMAS A. HIATT has served as a director of the Company since 1991. Mr. Hiatt has been general partner of Middlewest Ventures, a venture capital firm, since 1986. Mr. Hiatt has a Bachelor of Arts degree in Political Science from Wabash College and a Master of Science degree in Management from the Massachusetts Institute of Technology. Mr. Hiatt is also a director of Fifth Third Bank of Central Indiana, Isolab, Inc., PackageNet, Inc. and Powerway, Inc. JOHN A. KRAEUTLER has served as a director of the Company since January 1997. Mr. Kraeutler has been President and Chief Operating Officer of Meridian Diagnostics, Inc. since August 1992 and is also a director. Prior to that time, Mr. Kraeutler was Executive Vice President and Chief Operating Officer of Meridian Diagnostics, Inc. Mr. Kraeutler has a Bachelor of Science degree in Biology from Fairleigh Dickinson University and a Masters of Science degree in Biology and a Masters in Business Administration from Seton Hall University. WILLIAM C. MULLIGAN has served as a director of the Company since 1991. Mr. Mulligan has been the managing director of Primus Venture Partners, a venture capital firm, since January 1992. Mr. Mulligan has a 35 37 Bachelor of Arts degree in Economics from Denison University and a Masters in Business Administration from the University of Chicago. Mr. Mulligan is also a director of Universal Electronics. W. LEIGH THOMPSON has served as a director of the Company since January 1997. Since 1995, Dr. Thompson has been the chief executive officer of Profound Quality Resources, Inc., a world-wide scientific consulting firm. Prior to 1995, Dr. Thompson held various positions at Lilly Resource Laboratories. Dr. Thompson has a Bachelor of Science degree in Biology from the College of Charleston, a Masters of Science and a Doctorate in Pharmacology from the Medical University of South Carolina and a Medical Doctor degree from The Johns Hopkins University. Dr. Thompson is also a director of Chrysalis International Corporation, Corvas International, Inc., GeneMedicine, Inc., La Jolla Pharmaceutical Company, Medarex, Inc., Ophidian Pharmaceuticals, Inc. and Orphan Medical, Inc. All directors are elected at the annual meeting of shareholders for a term of one year and hold office until the election and qualification of their successors at the next annual meeting of shareholders or until their earlier resignation or removal. Officers of the Company serve at the discretion of the Board of Directors. DIRECTOR COMMITTEES The Board of Directors has established an Audit Committee, a Compensation and Incentive Stock Option Committee (the "Compensation Committee") and an Executive Committee. The Audit Committee is responsible for recommending to the Board of Directors the engagement of the independent auditors of the Company and reviewing with the independent auditors the scope and results of the audits, the internal accounting controls of the Company, and audit practices. Messrs. Baitinger, Campbell and Mulligan serve on the Audit Committee. The Compensation Committee is responsible for reviewing and approving all compensation arrangements for the officers of the Company and for administering the Company's Option Plans. See "Management -- Option Plans." Messrs. Kissinger, Hiatt, Kraeutler and Mulligan serve on the Compensation and Incentive Stock Option Committee. The Executive Committee may exercise all of the authority of the Board of Directors, subject to certain limitations with respect to payment of dividends, filling of vacancies on the Board, amendment of the Articles of Incorporation or Bylaws, and issuance of shares. Messrs. Kissinger, Shoup, Baitinger, Kraeutler and Thompson serve on the Executive Committee. DIRECTOR COMPENSATION Directors who are not employees of the Company, other than Messrs. Hiatt and Mulligan, receive $500 for each Board meeting attended, plus out-of-pocket expenses incurred in connection with attendance at such meetings. Dr. Thompson receives an additional $6,000 annually as compensation for the services he renders as a consultant to the Company. See "Management -- Scientific Advisory Board." Directors who are employees of the Company do not receive any additional compensation for their services as directors. SCIENTIFIC ADVISORY BOARD In 1985, the Company established a Scientific Advisory Board to assist the Company in its research and development activities. The Scientific Advisory Board is comprised of distinguished scientists from outside the Company who have significant accomplishments in areas of science and technology that are important to the Company's future. The Scientific Advisory Board interacts with the Company's scientific and management staff. The following individuals are the current members of the Scientific Advisory Board: DANIEL W. ARMSTRONG, PH.D. is the Curators' Distinguished Professor of Chemistry at the University of Missouri-Rolla. He is the Editor for Chirality; Section Editor for Amino Acids; on the Advisory Board for Analytical Chemistry; and is on the Editorial Board of several other journals. He is the founder and first director of the Center for Environmental Science and Technology. He is on the Board of Directors of Advanced Separation Technologies, has six patents and approximately 250 publications. He received his Ph.D. in Chemistry from Texas A&M University in 1977. R. GRAHAM COOKS, PH.D., is Henry Bohn Hass Distinguished Professor of Chemistry at Purdue University. He received his Bachelor of Science degree at the University of Natal, South Africa, in 1959; his 36 38 Masters of Science and his Doctorate from the above in 1963 and 1966, respectively, and his Doctorate from Cambridge University in Great Britain in 1976. Prof. Cooks currently serves on the editorial boards of ten scientific journals. He has been honored with Purdue Cancer Research Award (1983), ACS Analytical Divisions 1984 Chemical Instrumentation Award, Thomson Medal for International Service to Mass Spectrometry (1985), Herbert McCoy Award (1990), NSF Special Creativity Award (1990 & 1995), ACS award for Mass Spectrometry (1991), and ACS Award for Analytical Chemistry (1997). He has published more than 500 scientific papers since 1967. WILLIAM R. HEINEMAN, PH.D., is Distinguished Research Professor in the Department of Chemistry at the University of Cincinnati where he has served on the faculty since 1972. He received his Doctorate in Chemistry from the University of North Carolina in 1968. Dr. Heineman has served on the editorial/advisory boards of Analytical Chemistry, The Analyst, Selective Electrode Reviews, Encyclopedia of Analytical Science, Fresenius Journal of Analytical Chemistry, Quimica Analitica, Biosensors and Bioelectronics, Analytica Chimica Acta, Applied Biochemistry and Biotechnology, and Analytical Letters. He has received numerous awards including the Alexander von Humboldt Senior Research Award for U.S. Scientists, the Charles N. Reilley Award in Electroanalytical Chemistry, and the Division of Analytical Chemistry Award for Excellence in Teaching from the University of Cincinnati. He is the Chair of the Division of Analytical Chemistry of the American Chemical Society and a cofounder and President of the Society for Electroanalytical Chemistry. JEAN-MICHEL KAUFFMAN, PH.D., is Professor of Analytical Chemistry at the Pharmaceutical Institute, University of Brussels (ULB). He received his undergraduate degree in Pharmacy and his Doctorate in Pharmaceutical Sciences from ULB in 1977 and 1983, respectively. Dr. Kauffman is Vice President of the Belgian Society of Pharmaceutical Sciences and Treasurer of the International Bioelectrochemical Society. He is Editor in Chief of the journal Talanta and serves on five other editorial boards. Dr. Kauffinan's research focuses on pharmaceutical analysis, biosensors, and electrochemical measurement techniques. He has published 19 review chapters and 105 scientific journal articles. SUSAN M. LUNTE, PH.D., is Associate Professor of Pharmaceutical Chemistry and Courtesy Associate Professor of Chemistry at the University of Kansas. She received her Doctorate in Analytical Chemistry in 1984 from Purdue University. She was a research scientist at Procter & Gamble, Cincinnati, OH from 1984 until 1987 when she went to the University of Kansas. Dr. Lunte has been associated with the Center for Bioanalytical Research (CBAR) at the University of Kansas since 1987 and served as Associate Director and Director of that center from 1994 to early 1997. Dr. Lunte serves on the editorial advisory boards of Analytical Proceedings and Pharmaceutical Research and in 1997 was the recipient of the Agnes Fay Morgan Research Award for Women in Chemistry from Iota Sigma Pi, an NSF CAREER Award, and the University of Kansas Graduate Student Mentoring Award. She is currently chair-elect of the Analytical and Pharmaceutical Quality section of the American Association of Pharmaceutical Scientists and will serve as chair next year. MARK E. MEYERHOFF, PH.D. is Professor of Chemistry and Associate Chair for Graduate Affairs in the Department of Chemistry at the University of Michigan. He has active research programs in the areas of electrochemical sensor design, novel immunoassay systems, and new stationary phases for liquid chromatography. He received his Doctorate from the State University of New York at Buffalo in 1979. Since joining the faculty at Michigan, he and his collaborators have authored more than 170 original research papers. Professor Meyerhoff serves on the editorial/advisory boards of Biosensors & Bioelectronics; Electroanalysis; Analytica Chimica Acta, and Applied Biochemistry and Biotechnology. He also serves on Scientific Advisory Boards for Medtronics Blood Management, Instrumentation Laboratory Sensor Systems, Magnequench International, GDS Technologies, and Selective Technologies. W. LEIGH THOMPSON, M.S., PH.D., M.D., is retired from Eli Lilly and Company where he served as Director of Clinical Investigation, Executive Vice President of Lilly Research Laboratories and Chief Scientific Officer. Prior to joining Eli Lilly in 1982, Dr. Thompson served as a Professor of Medicine at Case Western University from 1974 until 1982, where he founded programs in clinical pharmacology and critical care medicine. He directed live telecasts for continuing education, developed the Northeast Ohio Poison Control Center, Cleveland Drug Analysis Laboratory, and University Hospitals Drug Information Center. As an Assistant Professor of Medicine and of Pharmaceutical and Experimental Therapeutics at John Hopkins, 37 39 Dr. Thompson started the advanced nurse practitioner program and initiated computer-assisted instruction in pharmacokinetics. He is an honorary Life Member and Past President of the Society of Critical Care Medicine and is co-editor of the Textbook of Critical Care and Critical Care: State of the Art. Each of the Scientific Advisory Board members is employed by an employer other than the Company and may have commitments to, or consulting or advisory contracts with, other entities that may conflict or compete with his or her obligations with the Company. Generally, members of the Scientific Advisory Board are not expected to devote a substantial portion of their time to Company matters. The members of the Scientific Advisory Board do not receive any compensation in connection with attending meetings of the Scientific Advisory Board. They do, however, from time to time, receive compensation in connection with consulting services they render to the Company. EXECUTIVE COMPENSATION SUMMARY COMPENSATION TABLE The following table sets forth the compensation provided by the Company to, or for the account of, the Chief Executive Officer of the Company for the years ended September 30, 1994, 1995 and 1996. No other executive officer of the Company had annual compensation exceeding $100,000.
ANNUAL COMPENSATION ------------------------------- ALL OTHER NAME AND PRINCIPAL POSITION(S) FISCAL YEAR SALARY BONUS COMPENSATION(1) ------------------------------ ----------- ------ ----- --------------- Peter T. Kissinger, Ph.D......................... 1996 $85,000 $ 4,250 $26,788 Chairman of the Board; President 1995 $85,000 $21,250 $26,134 and Chief Executive Officer 1994 $85,000 $17,000 $25,697
- ------------------------- (1) Includes $21,365 of premiums paid on a life insurance policy on the lives of Dr. Kissinger and Mrs. Kissinger, the beneficiary of which is a trust established for their benefit, and contributions to the Company's 401(k) plan on Dr. Kissinger's behalf. INCENTIVE PLAN The Company has an incentive plan for its executive officers, the purpose of which is to strengthen the financial condition of the Company by providing an incentive bonus to its executive officers based upon the Company's pre-tax net income. If the Company's pre-tax net income, calculated before the payment of any bonuses, exceeds $500,000, each executive officer receives a bonus equal to 5% of his or her annual salary. If the Company's pre-tax net income, calculated before the payment of any bonuses, exceeds $750,000, $1 million or $1.25 million, each executive officer will receive a bonus equal to 15%, 20% or 25%, respectively, of his or her annual salary. In fiscal 1996, each executive officer received a bonus equal to 5% of his or her annual salary. OPTION PLANS A total of 95,000 Common Shares have been reserved for issuance under the Company's 1997 Employee Option Plan adopted , 1997, of which options to purchase an aggregate of Common Shares have been granted at an exercise price equal to the public offering price set forth on the cover page of this Prospectus. In addition, at the date of this Prospectus options to purchase a total of 250,097 Common Shares were outstanding under the 1990 Employee Option Plan at a weighted average exercise price of $1.27 per share, and 27,086 Common Shares were outstanding under a Director Option Plan, at an exercise price of $0.66 per share. No further options may be granted under the 1990 Employee Option Plan or the Director Option Plan. The 1990 and 1997 Employee Option Plans (the "Employee Plans") are administered by the Compensation Committee. Members of the Compensation Committee are not eligible to participate in the Employee Plans while serving on the Compensation Committee. Participants in the Employee Plans are key 38 40 employees of the Company and its subsidiaries as may be selected from time to time by the Compensation Committee. Subject to the terms of the Employee Plans, the Compensation Committee is authorized to determine the number of Common Shares subject to each option granted thereunder, the time and conditions of exercise of such option and all other terms and conditions of such option. Options granted under the Employee Plans are incentive stock options, as defined by Section 422A of the Internal Revenue Code of 1986, as amended (the "Code"). The per share exercise price of an option will be not less than 100% of the fair market value of the Common Shares on the date of the grant, except that the per share exercise price of options granted to holders of 10.0% or more of the total combined voting power of all outstanding classes of shares of the Company ("10% Shareholders") will be not less than 110.0% of such fair market value. In addition, for each participant, the maximum aggregate fair market value on the date of grant of all Common Shares subject to options first exercisable in any one year may not exceed $100,000. Options will expire on a date determined by the Compensation or Option Committee, as the case may be, provided that the options will expire not more than ten years from the date of grant (five years in the case of options issued to 10% Shareholders). If an option holder retires with the consent of the Company or becomes permanently and totally disabled, options granted under the Employee Plans will expire 90 days and 120 days, respectively, after the termination of employment. If an option holder's service with the Company is terminated as a result of death, the options will expire one year after such event. Options are not transferable other than by will or the laws of descent and distribution. Options vest in four equal installments on the second, third, fourth and fifth anniversary of the date of grant. If the Company is a party to any merger or consolidation, the Company has the right to terminate any outstanding option upon 30 days written notice to the option holder; however, if the merger or consolidation is not consummated within 180 days from the date of such notice, all options terminated shall be deemed to have been continuously in effect. If the Company is dissolved or liquidated, the Company shall give each option holder 30 days written notice and all unexercised options shall be deemed to be terminated upon such dissolution or liquidation. The following table sets forth certain information concerning exercisable and unexercisable options held by the Chief Executive Officer at September 30, 1997. AGGREGATED OPTION EXERCISES IN LAST YEAR AND FISCAL YEAR-END OPTION VALUES
NUMBER OF VALUE OF UNEXERCISED SECURITIES UNDERLYING IN-THE-MONEY UNEXERCISED OPTIONS AT OPTIONS AT SEPTEMBER 30, 1997 SEPTEMBER 30, 1997(1) --------------------------- --------------------------- EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE ----------- ------------- ----------- ------------- Peter T. Kissinger, Ph.D....................... 40,630 13,543 $334,385 $ 111,459
- ------------------------- (1) Calculated on the basis of on assumed initial public offering price of $10.00 per share, the mid-point of the range set forth on the cover page of this Prospectus, less $1.77, the per share exercise price. The Company has reserved 5,000 Common Shares for issuance to non-employee members of its Board of Directors in the future, on terms to be determined at the time of the grant. The exercise price of an option will be at least the fair market value of the Common Shares on the date of the grant. 401(K) SAVINGS PLAN The Company has a defined contribution retirement plan (the "401(k) Plan"), qualified under Sections 401(a) and 401(k) of the Code. All employees of the Company are eligible to enroll in the 401(k) Plan on the first April 1 or October 1 after completing one year of employment with the Company. The 401(k) Plan provides that the Company will contribute 2% of each eligible employee's compensation to the 401(k) Plan. In addition, each participant may contribute from 1% to 10% or none of their annual compensation. The Company may also make discretionary contributions based on a certain percentage of a 39 41 participant's contributions under the 401(k) Plan, as determined by the Board of Directors. The Board of Directors approved a matching contribution of 35% beginning October 1, 1996. The Company made contributions under the 401(k) Plan totaling approximately $153,630 for the year ended September 30, 1996. LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS As permitted by the Indiana Business Corporation Law (the "BCL"), the Second Restated Articles of Incorporation of the Company (the "Articles") require the Company to indemnify its officers and directors from liabilities to the extent allowed by the BCL. The BCL provides that a corporation may indemnify its officers and directors, if the officer or director acted in good faith and in a manner he reasonably believed, in the case of conduct in his official capacity, was in the best interests of the Company and, in all other cases, was not opposed to the best interests of the Company, and, with respect to any criminal proceeding, the officer or director had reasonable cause to believe his conduct was lawful or no reasonable cause to believe his conduct was unlawful. The BCL further provides that the Company may advance to its officers and directors expenses incurred in connection with proceedings against them for which they may be indemnified, if the Company receives a written affirmation from such officer or director that in his good faith belief he met the standard of conduct described above and that he will repay all advanced expenses if it is ultimately determined that he did not meet that standard of conduct. Pursuant to the BCL, the Company may obtain directors' and officers' insurance. At present, the Company is not aware of any pending or threatened litigation or proceeding involving an officer, director, employee or agent of the Company in which indemnification would be required or permitted. The Company maintains directors' and officers' liability insurance with respect to certain risks to which the Company and its directors and officers are exposed. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION Peter T. Kissinger, Thomas Hiatt, John Kraeutler and William Mulligan served on the Compensation Committee during fiscal 1996. Dr. Kissinger, the President and Chief Executive Officer of the Company, currently is a member of the Compensation Committee; however, he does not participate in decisions regarding his compensation. None of the Company's executive officers serves as a director of, or in any compensation related capacity for, companies with which members of the Compensation Committee are affiliated. 40 42 CERTAIN TRANSACTIONS In 1991 Primus Capital Fund II, LP ("Primus") and Middlewest Ventures II, LP ("Middlewest") purchased Redeemable Preferred Shares and Convertible Preferred Shares of the Company. The Redeemable Preferred Shares carried an 8% cumulative dividend, and were redeemed in accordance with their terms for an amount equal to their purchase price in equal installments on December 31, 1995, June 30, 1996 and December 31, 1996. See Note 6 of Notes to Consolidated Financial Statements. The Convertible Preferred Shares were purchased for an aggregate of $1,231,000 and will be converted into an aggregate of 752,399 Common Shares immediately prior to the issuance of the Shares offered hereby, of which 470,250 shares and 282,149 shares are owned by Primus and Middlewest, respectively. The Venture Funds continue to have certain rights to cause the Company to register the Common Shares owned by the Venture Funds under the Securities Act for sale to the public. See "Description of Capital Stock -- Registration Rights." Additionally, the Company has agreed to use its best efforts to cause one representative from each Venture Fund to be elected to the Company's Board of Directors as long as the respective Venture Fund owns more than 5% of the Company's outstanding Common Shares. All other covenants between the Company and the Venture Funds will be terminated in connection with the conversion of the Convertible Preferred Shares to Common Shares. 41 43 PRINCIPAL SHAREHOLDERS The following table sets forth certain information regarding beneficial ownership of the Common Shares as of August 31, 1997 by (i) each person who is known by the Company to own beneficially more than 5% of the outstanding Common Shares, (ii) each director of the Company, (iii) the Chief Executive Officer, and (iv) all directors and executive officers of the Company as a group.
SHARES BENEFICIALLY SHARES BENEFICIALLY OWNED PRIOR TO OWNED AFTER OFFERING(1)(2) OFFERING(1)(2) -------------------- -------------------- NAME NUMBER PERCENT NUMBER PERCENT ---- ------ ------- ------ ------- Primus Capital Fund II, L.P. ........................... 470,250 15.7% 470,250 10.5% Middlewest Ventures II, L.P. ........................... 282,149 9.4% 282,149 6.3% Peter T. Kissinger(3)................................... 1,261,099 42.0% 1,261,099 28.0% Ronald E. Shoup(4)...................................... 89,453 3.0% 89,453 1.9% Candice B. Kissinger(5)................................. 1,261,099 42.0% 1,261,099 28.0% William E. Baitinger(6)................................. 137,734 4.6% 137,734 3.1% Michael K. Campbell(7).................................. 27,086 * 27,086 * Thomas A. Hiatt(8)...................................... 282,149 9.4% 282,149 6.3% John A. Kraeutler....................................... -- -- -- -- William C. Mulligan(9).................................. 470,250 15.7% 470,250 10.5% W. Leigh Thompson....................................... -- -- -- -- All executive officers and directors as a group......... 2,513,138 83.8% 2,513,138 55.8%
- ------------------------- * Less than 1% of outstanding Common Shares. (1) Unless otherwise noted, all addresses are in care of Company at 2701 Kent Avenue, West Lafayette, Indiana 47906. (2) Except as indicated in the footnotes to this table and pursuant to applicable community property laws, the Company believes that the persons named in the table have sole voting and investment power with respect to all Common Shares. (3) Includes (i) 247,795 Common Shares beneficially owned by Candice B. Kissinger, the wife of Dr. Kissinger, including 13,543 Common Shares issuable upon the exercise of options granted to Mrs. Kissinger under the Employee Option Plan which are exercisable within 60 days of September 26, 1997; (ii) 595,904 Common Shares owned jointly by Dr. and Mrs. Kissinger; and (iii) 40,630 Common Shares issuable upon the exercise of outstanding options granted to Dr. Kissinger under the Employee Option Plan which are exercisable within 60 days of September 26, 1997. (4) Includes (i) 68,686 Common Shares owned jointly by Dr. Shoup and his wife and (ii) 20,315 Common Shares beneficially owned by Dr. Shoup issuable upon the exercise of options under the Employee Option Plan exercisable within 60 days of September 26, 1997. (5) Includes 417,400 Common Shares beneficially owned by Peter T. Kissinger, including 40,630 Common Shares issuable upon the exercise of options granted to Dr. Kissinger under the Employee Option Plan exercisable within 60 days of September 26, 1997; (ii) 595,904 Common Shares owned jointly by Dr. and Mrs. Kissinger; and (iii) 13,543 Common Shares beneficially owned by Mrs. Kissinger issuable upon the exercise of options under the Employee Option Plan exercisable within 60 days of September 26, 1997. (6) Includes 53,089 Common Shares owned jointly by Dr. Baitinger and his wife. (7) Includes 27,086 Common Shares issuable upon the exercise of outstanding options granted to Mr. Campbell under the Director Option Plan which are exercisable within 60 days of September 26, 1997. (8) Mr. Hiatt is a general partner of Middlewest Management Company, L.P., which is the general partner of Middlewest Ventures II, L.P., and accordingly may be attributed beneficial ownership of the Common Shares owned by Middlewest Ventures II, L.P. The other general partner of Middlewest Management Company, L.P. is Marcey Shockey. Mr. Hiatt disclaims beneficial ownership of the Common Shares 42 44 beyond his ownership interest in Middlewest Management Company, L.P. Mr. Hiatt serves as a Director of the Company as a nominee of Middlewest Ventures II, L.P. The address of Middlewest Ventures II, L.P. is 201 N. Illinois, Suite 300, Indianapolis, Indiana 46204. (9) Mr. Mulligan is a general partner of Primus Venture Partners Limited Partnership, which, together with Primus Advisors, Inc., is the general partner of Primus Management II. Primus Management II is the general partner of Primus Capital Fund II, L.P. Accordingly, Mr. Mulligan may be attributed beneficial ownership of the Common Shares owned by Primus Capital Fund II, L.P. The other general partners of Primus Venture Partners Limited Partnership are James T. Bartlett, Jonathan E. Dick, Kevin J. McGinly and Loyal W. Wilson. Mr. Mulligan disclaims beneficial ownership of the Common Shares beyond his ownership interest in Primus Venture Partners Limited Partnership. Mr. Mulligan serves as a Director of the Company as a nominee of Primus Capital Fund II, L.P. The address of Primus Capital Fund II, L.P. is 1375 E. Ninth Street, Suite 2700, Cleveland, Ohio 44114. DESCRIPTION OF CAPITAL STOCK Upon the closing of this offering, the authorized capital stock of the Company will consist of 19 million Common Shares, and one million preferred shares (the "Preferred Shares") none of which will be outstanding. As of August 31, 1997, there were 2,247,601 Common Shares issued and outstanding held of record by 63 shareholders and the Company had outstanding options to purchase a total of 277,184 Common Shares. The following summary of certain provisions of the Common Shares and Preferred Shares does not purport to be complete and is subject to, and qualified in its entirety by, the provisions of the Articles of Incorporation, which are included as an exhibit to the Registration Statement on Form S-1 (including all schedules, exhibits and amendments thereto, the "Registration Statement"), and by the provisions of applicable law. COMMON SHARES Upon the completion of this offering, the Company's Articles of Incorporation will authorize the issuance of up to 19 million Common Shares. Holders of Common Shares are entitled to one vote for each Common Share held on all matters submitted to a vote of shareholders and do not have cumulative voting rights. Accordingly, holders of a majority of the Common Shares entitled to vote in any election of directors may elect all of the directors standing for election. Holders of Common Shares are entitled to receive ratably such dividends, if any, as may be declared by the Company's Board of Directors out of funds legally available therefor and subject to any preferential dividend rights of any then outstanding Preferred Shares. Upon the liquidation, dissolution or winding up of the Company, the holders of Common Shares are entitled to receive ratably the net assets of the Company available after the payment of all debts and other liabilities and subject to any preferential dividend rights of any then outstanding Preferred Shares. Holders of Common Shares have no preemptive, subscription, redemption or conversion rights. The outstanding Common Shares are, and the Shares offered by the Company in this offering will be, when issued and paid for, fully paid and nonassessable. PREFERRED SHARES The Board of Directors is authorized, subject to any limitations prescribed by Indiana law, to provide for the issuance of Preferred Shares in one or more series, to establish from time to time the number of shares to be included in each such series, to fix the powers, designations, preferences and rights of the shares of each wholly unissued series and any qualifications, limitations or restrictions thereon and to increase or decrease the number of shares of any such series (but not below the number of shares of such series then outstanding) without any further vote or action by the shareholders. The Board of Directors may authorize the issuance of Preferred Shares with voting or conversion rights that could adversely affect the voting power or other rights of the holders of Common Shares. The issuance of Preferred Shares could have the effect of decreasing the market price of the Shares. The issuance of Preferred Shares may have the effect of delaying, deferring or 43 45 preventing a change in control of the Company. The Company has no current plan to issue any Preferred Shares. REGISTRATION RIGHTS Upon the completion of this offering, the Venture Funds will have certain rights with respect to the registration of under the Securities Act an aggregate of 752,399 Common Shares held by them. If requested by the Venture Funds, the Company must file a registration statement under the Securities Act covering all Common Shares requested to be included by the Venture Funds within 60 days. The Venture Funds may make an unlimited number of requests for registration; provided, however, that the Company is only required to bear the expense of one registration. The Company has the right to delay any registration for up to 90 days under certain circumstances. In addition, if the Company proposes to register any of its Common Shares under the Securities Act other than in connection with a Company employee benefit plan or a corporate reorganization, the Venture Funds may require the Company to include all or a portion of their shares in that registration, subject to certain priorities among them, although the managing underwriter of any such offering may limit the number of Common Shares to be offered by the Venture Funds. CERTAIN PROVISIONS OF INDIANA LAW As an Indiana corporation, the Company is governed by the provisions of the BCL. Voting Requirements for Certain Business Combinations. Chapter 43 of the BCL establishes a five-year period beginning with the acquisition of 10% of the voting power of the outstanding voting shares of a "resident domestic corporation" (which definition includes the Company) during which certain business transactions involving the acquiring shareholder are prohibited unless, prior to the acquisition of such interest, the board of directors approves the acquisition of such interest or the proposed business combination. After the five-year period expires, a business combination involving the acquiring shareholder may take place only upon approval by a majority of the disinterested shares, or if the other shareholder receive a formula price based on the higher of the highest price paid by the acquiring shareholder or at the time of the announcement of the proposed transaction, whichever is higher. The minimum price for shares other than common shares is to be determined under criteria similar to that for common shares, except the minimum price as defined cannot be less than the highest preferential amount to which the shares are entitled in the event of any liquidation, dissolution or winding up of the corporation. Changes of Control. Under Chapter 42 of the BCL, with certain exceptions, a person proposing to acquire or acquiring voting shares of an "issuing public corporation" (which definition includes only corporations having at least 100 shareholders and in which more than 10% of its shareholders are Indiana residents, 10% of its shares are owned by Indiana residents, or which have 10,000 or more shareholders who are Indiana residents) sufficient to entitle that person to exercise voting power within any of the ranges of one-fifth to one-third of all voting power, more than one-third but less than one-half of all voting power, or a majority or more of all voting power (a "control share acquisition") may give a notice of such fact to the corporation containing certain specified data. The acquiring person may request that the directors call a special meeting of shareholders for the purpose of considering the voting rights to be accorded the shares so acquired ("control shares"), and the control shares have voting rights only to the extent granted by a resolution approved by the shareholders. The resolution must be approved by a majority of the votes entitled to be cast by each voting group entitled to vote separately on the proposal, excluding shares held by the acquiring person and shares held by management. Control shares as to which the required notice has not been filed and any control shares not accorded full voting rights by the shareholders may be redeemed at fair market value by the corporation if it is authorized to do so by its articles of incorporation or bylaws before a control share acquisition has occurred. The Company has not adopted such a provision in its Articles or Bylaws. Shareholders are entitled to dissenters rights with respect to the control share acquisition in the event that the control shares are accorded full voting rights and the acquiring person has acquired control shares with a majority of all voting power. 44 46 Other Provisions of the BCL. The BCL specifically authorizes directors, in considering the best interest of a corporation, to consider both the long- and short-term interests of the corporation, as well as the effects of any action on shareholders, employees, suppliers and customers of the corporation, and communities in which offices or other facilities of the corporation are located and any other factors the directors consider pertinent. Under the BCL, directors are not required to approve a proposed business combination or other corporate action if they determine in good faith that the action is not in the best interest of the corporation. In addition, the BCL states that directors are not required to redeem any rights under or render inapplicable a shareholder rights plan or to take or decline to take any other action solely because of the effect such action or inaction might have on a proposed change of control of the corporation or the amounts to be paid to shareholders upon such a change of control. The Delaware Supreme Court has held that defensive measures in response to a potential takeover must be "reasonable in relation to the threat posed." The BCL explicitly provides that the different or higher degree of scrutiny imposed in Delaware and certain other jurisdictions upon director actions taken in response to potential changes in control will not apply. The BCL requires directors to discharge their duties, based on the facts then known to them, in good faith, with the care an ordinary, prudent person in a like position would exercise under similar circumstances and in a manner the director reasonably believes to be in the best interest of the corporation. A director is not liable for any action taken as a director or for failure to take any action unless the director has breached or failed to perform the duties of the director's office in compliance with the foregoing standard and the breach or failure to perform constitutes willful misconduct or recklessness. TRANSFER AGENT AND REGISTRAR The Transfer Agent and Registrar for the Shares is . Its telephone number is ( ) - . SHARES ELIGIBLE FOR FUTURE SALE Upon the closing of this offering, the Company will have outstanding an aggregate of 4,500,000 Common Shares. Of these Common Shares, all the Shares sold in this offering be freely tradeable without restrictions or further registration under the Securities Act of 1933, as amended (the "Securities Act"), and approximately 600,000 Common Shares owned by existing shareholders will be eligible for sale pursuant to Rule 144(k) under the Securities Act. All of the Company's officers and directors and certain of the Company's shareholders have agreed with the Underwriters that, for a period of 180 days after the date of this Prospectus, subject to certain exceptions, they will not directly or indirectly offer, sell, contract to sell, pledge, grant any option to purchase, establish an open "put equivalent position" within the meaning of Rule 16a-1(h) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise dispose of or grant any rights with respect to any Common Shares (or any securities convertible into, exchangeable for or exercisable for Common Shares), without the prior written consent of the Underwriters (the "Lock-Up Agreements"). In its sole discretion and at any time without notice, the Underwriters may release all or any portion of the Common Shares subject to the Lock-Up Agreements. Following the expiration of the 180-day lock-up period, or earlier with the written consent of the Underwriters, 2,334,592 Common Shares will be eligible for sale by existing shareholders of the Company subject to the volume and other limitations of Rule 144, as discussed below. In general, under Rule 144 any holder of restricted securities, as defined under Rule 144, including an affiliate of the Company, as to which at least one year has elapsed since the later of the date of acquisition of the Common Shares from the Company or an affiliate, would be entitled beginning 90 days after the date of this Prospectus, to sell within any three-month period a number of Common Shares that does not exceed the greater of 1% of the then outstanding Common Shares (approximately 45,000 shares upon the completion of this offering) or the average weekly trading volume of the Common Shares on the Nasdaq National Market during the four calendar weeks preceding the date on which notice of the sale is filed with the Commission. Sales under Rule 144 are subject to certain requirements relating to manner of sale, notice and availability of current public information about the Company. However, a person (or persons whose Common Shares are 45 47 aggregated) who is not deemed to have been an affiliate of the Company at any time during the 90 days immediately preceding the sale and who beneficially owned the Common Shares for at least two years since the later of the date the Common Shares were acquired from the Company or an affiliate of the Company may sell those shares under Rule 144(k) without regard to the limitations described above. The foregoing is a summary of Rule 144 and is not intended to be a complete description of it. As of June 30, 1997, there were 277,184 Common Shares subject to outstanding options issued pursuant to the Company's Option Plans, of which approximately 234,297 Common Shares were vested as of that date. The Company intends to file a registration statement under the Securities Act to register Common Shares reserved for issuance under the Option Plans, thereby permitting the sale of those Common Shares by non-affiliates in the public market without restriction under the Securities Act. That registration statement will become effective immediately upon filing. Subject to certain limitations on the aggregate offering price of a transaction and other conditions, Rule 701 may be relied upon with respect to the resale of securities originally purchased from the Company by its employees, directors, officers, consultants or advisers prior to the closing of this offering pursuant to written compensatory benefit plans or written contracts relating to the compensation of such persons. In addition, the Commission has indicated that Rule 701 will apply to options granted by the Company before this offering, along with the Common Shares acquired upon exercise of such options. Securities issued in reliance on Rule 701 are deemed to be Restricted Shares and, subject to the contractual limitations described above, beginning 90 days after the date of this Prospectus, may be sold by persons other than affiliates subject only to the manner of sale provisions of Rule 144 and by affiliates under Rule 144 without compliance with its one-year minimum holding period requirements. See "Risk Factors -- Shares Eligible for Future Sale; Registration Rights." 46 48 UNDERWRITING Subject to the terms and conditions contained in the Underwriting Agreement, each of the underwriters named below (the "Underwriters") has severally agreed to purchase, and the Company has agreed to sell to such Underwriter, the respective number of Shares set forth opposite the name of such Underwriter:
NUMBER OF NAME SHARES ---- --------- Roney & Co., L.L.C. ........................................ The Ohio Company............................................ ------------ Total.................................................. ============
The Underwriting Agreement provides that the obligations of the several Underwriters to pay for and accept delivery of the Shares offered hereby are subject to approval of certain legal matters by their counsel and to certain other conditions. The Underwriters are obligated to take and pay for all Shares offered hereby (other than those covered by the over-allotment option described below) if any such shares are purchased. The Underwriters, for whom Roney & Co., L.L.C. and The Ohio Company are acting as representatives (the "Representatives"), propose to offer part of the Shares directly to the public at the public offering price set forth in the cover page of this Prospectus and part of the shares to certain dealers at a price which represents a concession not in excess of $ per share under the public offering price. The Underwriters may allow, and such dealers may reallow, a concession not in excess of $ per share to certain other dealers. After the offering, the offering price and other selling terms may be changed. The Representatives have advised the Company that the Underwriters do not intend to confirm sales to any accounts over which they exercise discretionary authority. The Company has granted to the Underwriters an option, exercisable for 30 days from the date of this Prospectus, to purchase up to an aggregate of 225,000 additional Shares, respectively, at the public offering price set forth on the cover page of this Prospectus minus the underwriting discounts and commissions. The Underwriters may exercise such option solely for the purpose of covering over-allotments, if any, in connection with the sale of the shares offered hereby. To the extent such option is exercised, each Underwriter will be obligated, subject to certain conditions, to purchase approximately the same percentage of such additional shares as the number of share set forth opposite such Underwriter's name in the preceding table bears to the total number of share in such table. The Company and all of its directors and executives officers, who beneficially hold an aggregate of 2,334,592 Shares, have agreed that, for a period of 180 days following the date of this Prospectus, they will not, without the prior written consent of the Representatives, offer, sell, contract to sell, or otherwise dispose of any Shares of the Company; provided, however, that the Company may issue and sell up to 377,184 Common Shares pursuant to the Option Plans in effect on the date of this Prospectus or to non-employee Directors. Prior to the offering, there has not been any public market for the Common Shares of the Company. Consequently, the initial public offering price for the Shares included in the offering will be determined by negotiations between the Company and the Representatives. Among the factors to be considered in determining such price are the history of and prospects for the Company's business and the industry in which it competes, an assessment of the Company's management and the present state of the Company's development, the past and present revenues and earnings of the Company, the prospects for the growth of Company's revenues and earnings, the current state of the economy in the United States and the current level of economic activity in the industry in which the Company competes and in related or comparable industries, 47 49 and currently prevailing conditions in the securities markets, including current market valuations of publicly traded companies that are comparable to the Company. The Company has agreed to indemnify the Underwriters against certain liabilities, including certain liabilities under the Securities Act or to contribute to payments that the Underwriters may be required to make in respect thereof. The Underwriters have reserved for sale, at the initial public offering price, up to of the Shares offered hereby for employees of the Company and certain other individuals who have expressed an interest in purchasing such Shares in the offering. The number of shares available for sale to the general public will be reduced to the extent such persons purchase such reserved shares. Any reserved shares not so purchased will be offered by the Underwriters to the general public on the same basis as the other shares offered hereby. 48 50 LEGAL MATTERS The validity of the Shares offered hereby will be passed upon for the Company by Ice Miller Donadio & Ryan, Indianapolis, Indiana. Certain legal matters in connection with this offering will be passed upon for the Underwriters by Honigman Miller Schwartz & Cohn. EXPERTS The consolidated financial statements of Bioanalytical Systems, Inc. at September 30, 1996 and 1995, and for each of the three years in the period ended September 30, 1996, appearing in this Prospectus and Registration Statement, have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. ADDITIONAL INFORMATION The Company has filed with the Securities and Exchange Commission, Washington, D.C. 20549 (the "Commission"), a Registration Statement on Form S-1 under the Securities Act with respect to the Shares offered hereby. This Prospectus does not contain all of the information set forth in the Registration Statement and the exhibits and schedules thereto. Statements contained in this Prospectus as to the contents of any contract or any other document referred to are not necessarily complete, and, in each instance, if such contract or document is filed as an exhibit, reference is made to the copy of such contract or document filed as an exhibit to the Registration Statement. Each statement is qualified in all respects by such reference to such exhibit. The Registration Statement, including exhibits and schedules thereto, is publicly available through the Commission's World Wide Web site (http:/www.sec.gov) or may be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices located at Seven World Trade Center, 13th Floor, New York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material may be obtained at prescribed rates by writing the Commission, Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549. 49 51 GLOSSARY AIDS: A fatal disease that destroys the host's immune system resulting from infection with human immunodeficiency virus (HIV). ASSAY: Quantitative measurement of a substance. BIOANALYTICAL TESTING: Measurement of a drug substance, its metabolites, and/or naturally occurring compounds in samples that are produced by or are part of living systems. These samples could include a new drug substance in human plasma or a neurotransmitter in rat brain tissue. Often the method is custom built for a particular problem and requires specialized staff and instrumentation for the procedure's development and validation for use. CHROMATOGRAPHY: An analytical technique in which a mixture of chemicals is separated into its discrete components, according to their differing interactions between moving and stationary chemical phases. The stationary phase is usually a powder contained in a tube and the moving phase is a gas or a liquid. Several different detectors have been created to quantify each component in the mixture after separation. CLINICAL STUDIES: Human studies designed to distinguish a drug's effect from other influences. Such studies conducted in the U.S. must be under an approved IND under the guidance of an institutional review board and in accord with FDA rules on human studies and informed consent of participants. CNS: Central Nervous System is that portion of the nervous system having to do with the brain and spinal cord. COCKTAIL THERAPY: A combination of drugs generally operating with different therapeutic mechanisms designed to attack disease hard and early. See drug interaction studies. COMPLIANCE: The extent to which a product developer conforms to regulatory direction or a patient agrees to and follows a prescribed treatment. CRO: Contract Research Organizations, which help drug companies design and administer clinical trials. DISSOLUTION: Release of a given amount of a drug into solution from a solid dosage form. Dissolution is measured in vitro, under conditions which generally simulate those which occur in vivo. DRUG: A chemical used in the diagnosis, treatment or prevention of disease. DRUG INTERACTION STUDIES: Patients treated with more than one drug may experience unexpected therapeutic and/or toxic effects. Bioanalytical testing helps understand and resolve these effects. EFFECTIVENESS, EFFICACY: The desired measure of a drug's influence on a disease condition designated as such by the FDA on the basis of "substantial evidence." ELECTROCARDIOGRAPHY: A measurement technique that detects and records the electrical activity of the heart. The EKG detects and records the electrical potential of the heart during the heartbeat. ELECTROCHEMISTRY: The study of chemical reactions in which one or more electrons are added or removed from an atom or molecule. Electrochemistry is used in two ways for practical purposes. Electricity can alter chemicals (as in corrosion and analysis) and chemicals can generate electricity (as in batteries and fuel cells). ENZYMOLOGY: The study of enzymes, which are complex proteins that catalyze specific biochemical reactions in the body. FDA: The Food and Drug Administration, an agency of the Department of Health and Human Services which is responsible for ensuring compliance with the federal Food, Drug and Cosmetic Act, as amended. FLUORESCENCE: Light emitted by a chemical after energy is added to it. The kind and amount of light is unique to the kind and amount of each chemical. It can be used as an indirect method of detecting and measuring the concentration of a chemical. 50 52 GC/MS: Gas Chromatography/Mass Spectrometry. An analytical technique in which the chemical mix is separated by heating, converting to a gas, passing the gas over a stationary phase and detecting, identifying, and quantifying the separated components by Mass Spectrometry. GENERIC DRUGS: Drug formulations of identical composition with respect to the active ingredient. Drugs may be generically equivalent but not therapeutically equivalent. GLP: Good Laboratory Practices. Regulations that set requirements for facilities management, maintenance and calibration of equipment, analytical protocol, quality assurance, data reporting, storage, retrieval and retention and other controls. GMP: Current Good Manufacturing Practices. Regulations that set requirements for sanitation, inspection of raw materials and finished products and other quality controls. HIV: A type of retrovirus (human immunodeficiency virus) that is responsible for the fatal illness, acquired immunodeficiency syndrome (AIDS). ICH GUIDELINES: International Conference on Harmonization attempting to normalize drug regulations among several countries. IND: Investigational New Drug Application. An application that a drug sponsor must submit to the FDA before beginning tests of a new drug on humans. The IND contains a plan for the study and is supposed to give a complete picture of the drug, including its structural formula, animal test results and manufacturing information. INDICATION: A sign or circumstance which points to or shows the cause, pathology, treatment or issue of an attack of disease; that which serves as a guide or warning. IN VITRO: Literally, "in glass"; a biologic or biochemical process occurring outside a living organism. IN VIVO: Literally, "in life"; a biologic or biochemical process occurring within a living organism. KIT: A carefully designed and validated method and collection of tools and reagents used to determine the presence of an illness or disorder. LCEC: Liquid Chromatography/Electrochemistry. A technique in which liquid chromatography is used to separate the components of a mixture. The chemicals are detected and quantified in an electrochemical cell. LC/MS: Liquid Chromatography/Mass Spectrometry. A technique in which liquid chromatography is used to separate the components of a mixture. The separated chemicals are detected, identified and quantified by Mass Spectrometry. LIQUID CHROMATOGRAPHY: A chromatographic method in which the stationary phase is packed in a tubular column and the moving phase is a liquid driven through the column by a force such as hydraulic pressure or gravity. Components may be separated on the basis of size, polarity, charge and/or shape. MASS SPECTROMETRY: A gas phase analytical technique used to identify a chemical by molecular weight and breakdown products unique to that chemical. NDA: New Drug Application. An application requesting FDA approval to market a new drug for human use in interstate commerce. The application must contain, among other things, data from specific technical viewpoints for FDA review -- including chemistry, pharmacology, medical, biopharmaceutics, statistics and, for anti-infectives, microbiology. NEUROTRANSMITTER: A chemical, such as acetylcholine, which is released from the axon of one neuron and binds to a specific site in the dendrite of an adjacent neuron, thus triggering a nerve impulse. PHARMACOKINETICS: The science which describes, quantitatively, the uptake of drugs by the body, their biotransformation, their distribution, metabolism, and elimination from the body. PHARMACOLOGY: The science that deals with the effect of drugs on living organisms. 51 53 PHYSIOLOGY: The study of how living organisms function. PLA: Product License Application. An application that a drug sponsor must submit to the FDA before beginning tests of a new biologic drug on humans. Equivalent to an IND for biologically derived drugs (genetically altered organisms etc.). POTENCY: The power of a medicinal agent to product the desired effects. PRECLINICAL STUDIES: Studies that test a drug on animals and other nonhuman test systems. They must comply with FDA's Good Laboratory Practices Regulations. PRODUCT CHARACTERIZATIONS: Thorough analysis of a product, which may contain a mixture of chemicals, decomposition products and other components, in a pharmaceutical formulation. ROBOTIC SAMPLE PREPARATION AND DISSOLUTION TESTING: Rapid, cost effective, fully automated sample preparation and dissolution tests which are typically quantified by liquid chromatography. SAFETY: No drug is completely safe or without the potential for side effects. Before a drug may be approved for marketing, the law requires the submission of results of tests adequate to show the drug is safe under the conditions of use in the proposed labeling. Thus, "safety" is determined case by case and reflects the drug's risk v. benefit relationship. SBIR GRANTS: Federal Small Business Innovation Research and Small Business Technology Transfer Grants. These support research in topics of interest to NASA, NIH, etc. Awards, term and degree of industry involvement vary. SOLID PHASE EXTRACTION: An analytical separation technique in which a mixture of chemicals is stirred with a solid, usually a powder. The solid is chosen for its ability to bind specifically to one or more of the chemicals in the mixture. After mixing, the solid with the bound chemicals attached is separated from the extracted sample and washed. The chemicals are subsequently removed with a solvent and analyzed. SPECTROSCOPY/SPECTROMETRY: An analytical technique used to identify a chemical by observing how it interacts with visible, infrared, or ultraviolet light, magnetism, radio waves or other parts of the electromagnetic energy spectrum. Each part of each chemical absorbs and/or emits this energy differently. A spectroscope/spectrometer measures the kind and amount of energy and in some cases the chemical breakdown products. Each chemical has a unique energy fingerprint that enables identification. STABILITY: The quality of maintaining a constant character in the presence of forces which threaten to disturb it; resistance to change. In drugs, maintaining therapeutic efficacy and chemical composition with changing time, temperature, humidity, etc. THERAPEUTICS: The science and techniques of restoring patients to health. VALIDITY: The degree to which output reflects what it purports to reflect. The degree to which output is a function of known input and it alone. "VIRTUAL" DRUG COMPANY: A venture management technique. A "virtual" company creates, acquires or licenses a new pharmaceutical or device. Most development, registration, manufacture and commercialization are then carried out through contracted parties or strategic partners. A small staff and negligible assets are key characteristics. 52 54 BIOANALYTICAL SYSTEMS, INC. INDEX TO FINANCIAL STATEMENTS
PAGE ---- Report of Independent Auditors.............................. F-2 Consolidated Balance Sheets as of September 30, 1995 and 1996, and as of June 30, 1997 (unaudited)................. F-3 Consolidated Statements of Income for the years ended September 30, 1994, 1995 and 1996, and for the nine-month periods ended June 30, 1996 and 1997 (unaudited).......... F-4 Consolidated Statements of Preferred Shares and Shareholders' Equity for the years ended September 30, 1994, 1995 and 1996, and for the nine-month period ended June 30, 1997 (unaudited)................................. F-5 Consolidated Statements of Cash Flows for the years ended September 30, 1994, 1995 and 1996, and for the nine-month periods ended June 30, 1996 and 1997 (unaudited).......... F-6 Notes to Consolidated Financial Statements.................. F-7
F-1 55 REPORT OF INDEPENDENT AUDITORS Board of Directors and Shareholders Bioanalytical Systems, Inc. We have audited the accompanying consolidated balance sheets of Bioanalytical Systems, Inc. as of September 30, 1996 and 1995, and the related consolidated statements of income, preferred shares and shareholders' equity and cash flows for each of the three years in the period ended September 30, 1996. 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 consolidated financial position of Bioanalytical Systems, Inc. at September 30, 1996 and 1995, and the consolidated results of its operations and its cash flows for each of the three years in the period ended September 30, 1996 in conformity with generally accepted accounting principles. Indianapolis, Indiana November 8, 1996, except for Note 10, as to which the date is The foregoing report is in the form that will be signed upon the effective date of the share split described in Note 10 to the financial statements. /s/ ERNST & YOUNG LLP Indianapolis, Indiana September 25, 1997 F-2 56 BIOANALYTICAL SYSTEMS, INC. CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30 -------------------------- JUNE 30 1995 1996 1997 ---- ---- ------- (UNAUDITED) ASSETS Current assets: Cash and cash equivalents................................ $ 1,799,515 $ 595,339 $ 240,597 Accounts receivable (Note 4): Trade.................................................. 1,541,625 1,545,843 2,165,627 Other.................................................. 109,933 105,966 384,258 Inventories (Notes 3 and 4).............................. 1,783,233 1,931,850 2,088,216 Deferred income taxes (Note 5)........................... 165,791 164,753 164,753 Prepaid expenses......................................... 28,778 38,710 48,061 ----------- ----------- ----------- Total current assets....................................... 5,428,875 4,382,461 5,091,512 Goodwill, less accumulated amortization of $18,002 in 1996 and $27,228 in 1997 (Note 2)............................. 240,032 222,030 213,256 Other assets............................................... 51,859 290,496 485,616 Property and equipment (Note 4): Land and improvements.................................... 166,621 166,621 171,014 Buildings and improvements............................... 2,152,640 4,282,317 6,486,243 Machinery and equipment.................................. 2,823,646 3,742,979 4,089,107 Office furniture and fixtures............................ 515,460 620,319 663,444 ----------- ----------- ----------- 5,658,367 8,812,236 11,409,808 Less accumulated depreciation and amortization........... (1,951,561) (2,333,356) (2,777,255) ----------- ----------- ----------- 3,706,806 6,478,880 8,632,553 ----------- ----------- ----------- Total assets............................................... $ 9,427,572 $11,373,867 $14,422,937 =========== =========== =========== LIABILITIES, PREFERRED SHARES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable......................................... $ 805,883 $ 730,110 $ 621,518 Income taxes payable..................................... 115,574 33,562 6,862 Accrued expenses......................................... 281,335 239,826 481,560 Customer advances........................................ 26,000 19,871 19,871 Current portion of long-term debt........................ 119,605 300,115 300,115 Line of credit........................................... -- -- 300,000 ----------- ----------- ----------- Total current liabilities.................................. 1,348,397 1,323,484 1,729,926 Long-term debt, less current portion (Note 4).............. 416,234 2,512,027 4,382,538 Deferred income taxes (Note 5)............................. 953,745 1,053,144 1,451,143 Preferred shares (Note 6): Authorized shares -- 1,000,000 Issued and outstanding shares: Redeemable -- 66,667 in 1995 and 22,223 in 1996........ 868,997 298,302 -- Convertible -- 166,667................................. 1,231,242 1,231,242 1,231,242 Shareholders' equity (Note 6): Common Shares, no par value: Authorized shares -- 19,000,000 Issued and outstanding shares -- 2,182,148 in 1995; 2,186,663 in 1996 and 2,247,601 in 1997............. 483,375 484,375 497,875 Additional paid-in capital............................... 149,233 151,233 178,233 Retained earnings........................................ 3,974,040 4,321,103 4,965,350 Currency translation adjustment.......................... 2,309 (1,043) (13,370) ----------- ----------- ----------- 4,608,957 4,955,668 5,628,088 ----------- ----------- ----------- Total liabilities, preferred shares and shareholders' equity................................................... $ 9,427,572 $11,373,867 $14,422,937 =========== =========== ===========
See accompanying notes. F-3 57 BIOANALYTICAL SYSTEMS, INC. CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED SEPTEMBER 30 NINE MONTHS ENDED JUNE 30, --------------------------------------- --------------------------- 1994 1995 1996 1996 1997 ---- ---- ---- ---- ---- (UNAUDITED) (UNAUDITED) Product revenue................ $ 8,902,658 $ 9,627,393 $ 9,113,297 $6,724,710 $ 7,347,211 Services revenue............... 1,800,547 2,724,469 3,680,838 2,669,972 3,690,569 ----------- ----------- ----------- ---------- ----------- Total Revenue............. 10,703,205 12,351,862 12,794,135 9,394,682 11,037,780 Cost of product revenue........ 3,417,741 3,447,566 3,226,736 2,335,327 2,268,248 Cost of services revenue....... 1,039,727 1,834,349 2,141,715 1,608,897 2,157,008 ----------- ----------- ----------- ---------- ----------- Total Cost of Revenue..... 4,457,468 5,281,915 5,368,451 3,944,224 4,425,256 ----------- ----------- ----------- ---------- ----------- Gross profit................... 6,245,737 7,069,947 7,425,684 5,450,458 6,612,524 Operating expenses: Selling...................... 3,530,663 3,940,096 3,937,224 2,987,206 3,094,049 Research and development..... 1,122,400 1,123,641 1,423,901 1,088,486 1,109,493 General and administrative... 983,834 1,222,136 1,363,921 1,046,930 1,210,219 ----------- ----------- ----------- ---------- ----------- 5,636,897 6,285,873 6,725,046 5,122,622 5,413,761 ----------- ----------- ----------- ---------- ----------- Operating income............... 608,840 784,074 700,638 327,836 1,198,763 Interest income................ 60,514 67,492 38,843 35,709 3,587 Interest expense............... (43,099) (78,882) (81,396) (50,838) (68,668) Other income (expense)......... 135,873 86,645 28,180 9,007 7,387 Gain (loss) on sale of property and equipment................ 39,094 35,532 (3,218) -- -- ----------- ----------- ----------- ---------- ----------- Income before income taxes..... 801,222 894,861 683,047 321,714 1,141,069 Income taxes (Note 5).......... 253,298 344,254 282,648 132,000 470,000 ----------- ----------- ----------- ---------- ----------- Net income..................... $ 547,924 $ 550,607 $ 400,399 $ 189,714 $ 671,069 =========== =========== =========== ========== =========== Net income available to common shareholders................. 494,588 497,271 347,063 136,378 644,021 Net income per common share.... $ 0.16 $ 0.16 $ 0.11 $ 0.04 $ 0.21 Weighted average Common Shares outstanding.................. 3,048,398 3,065,567 3,089,308 3,088,865 3,074,491
See accompanying notes. F-4 58 BIOANALYTICAL SYSTEMS, INC. CONSOLIDATED STATEMENTS OF PREFERRED SHARES AND SHAREHOLDERS' EQUITY
REDEEMABLE CONVERTIBLE ADDITIONAL CURRENCY PREFERRED PREFERRED COMMON PAIN-IN RETAINED TRANSLATION SHARES SHARES SHARES CAPITAL EARNINGS ADJUSTMENT ---------- ----------- ------ ---------- -------- ----------- Balance at September 30, 1993....... $ 762,325 $1,231,242 $459,608 $105,963 $2,982,181 $ -- Net income.......................... -- -- -- -- 547,924 -- Accrual of cumulative dividends on preferred shares.................. 53,336 -- -- -- (53,336) -- Retirement of 8,446 common shares... -- -- (1,871) (15,903) -- -- Issuance of 47,401 common shares for the exercise of stock options..... -- -- 10,500 21,000 -- -- --------- ---------- -------- -------- ---------- -------- Balance at September 30, 1994....... 815,661 1,231,242 468,237 111,060 3,476,769 -- Net income.......................... -- -- -- -- 550,607 -- Accrual of cumulative dividends on preferred shares.................. 53,336 -- -- -- (53,336) -- Retirement of 21,949 common shares............................ -- -- (4,862) (41,327) -- -- Issuance of 67,716 common shares for the exercise of stock options..... -- -- 15,000 34,500 -- -- Issuance of 22,572 common shares for the acquisition of business (Note 2)................................ -- -- 5,000 45,000 -- -- Currency translation adjustment..... -- -- -- -- -- 2,309 --------- ---------- -------- -------- ---------- -------- Balance at September 30, 1995....... 868,997 1,231,242 483,375 149,233 3,974,040 2,309 Net income.......................... -- -- -- -- 400,399 -- Accrual of cumulative dividends on preferred shares.................. 53,336 -- -- -- (53,336) -- Issuance of 4,514 common shares for the exercise of stock options..... -- -- 1,000 2,000 -- -- Redemption of Preferred Shares...... (624,031) -- -- -- -- -- Currency translation adjustment..... -- -- -- -- -- (3,352) --------- ---------- -------- -------- ---------- -------- Balance at September 30, 1996....... 298,302 1,231,242 484,375 151,233 4,321,103 (1,043) Net income.......................... -- -- -- -- 671,295 -- Accrual of cumulative dividends on preferred shares.................. 27,048 -- -- -- (27,048) -- Issuance of 60,944 common shares for the exercise of stock options..... -- -- 13,500 27,000 -- -- Redemption of Preferred Shares...... (325,350) -- -- -- -- -- Currency translation adjustment..... -- -- -- -- -- (12,327) --------- ---------- -------- -------- ---------- -------- Balance at June 30, 1997 (unaudited)....................... $ -- $1,231,242 $497,875 $178,233 $4,965,350 $(13,370) ========= ========== ======== ======== ========== ========
See accompanying notes. F-5 59 BIOANALYTICAL SYSTEMS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED SEPTEMBER 30 NINE MONTHS ENDED JUNE 30 -------------------------------------- ------------------------- 1994 1995 1996 1996 1997 ---- ---- ---- ---- ---- (UNAUDITED) (UNAUDITED) OPERATING ACTIVITIES Net income....................... $ 547,924 $ 550,607 $ 400,399 $ 189,714 $ 671,295 Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization.............. 204,421 397,619 399,797 348,591 452,899 Loss (gain) on sale of property and equipment.... (39,094) (35,532) 3,218 -- -- Deferred income taxes....... 13,647 107,324 100,437 (247,016) 397,999 Changes in operating assets and liabilities: Accounts receivable.... 466,126 (118,978) (251) (217,367) (898,076) Inventories............ (283,750) 25,365 (148,617) (172,972) (156,366) Prepaid expenses and other assets......... 42,906 (19,367) (248,569) 123,074 (204,697) Accounts payable....... (59,907) (46,054) (75,773) 426,725 (108,592) Income taxes payable... (187,120) 106,760 (82,012) 10,000 (26,700) Accrued expenses....... (35,105) (312,079) (41,509) (582,269) 241,734 Customer advances...... (50,822) (36,000) (6,129) -- -- ---------- ----------- ----------- ----------- ----------- Net cash provided (used) by operating activities........... 619,226 619,665 300,991 (121,520) 369,496 INVESTING ACTIVITIES Capital expenditures............. (458,542) (1,299,910) (3,178,499) (563,024) (2,597,572) Proceeds from sale of property and equipment.................. 51,141 61,370 21,412 -- -- Payments for purchase of net assets from Technicol Limited, net of cash acquired........... -- (92,731) -- -- -- ---------- ----------- ----------- ----------- ----------- Net cash used by investing activities..................... (407,401) (1,331,271) (3,157,087) (563,024) (2,597,572) FINANCING ACTIVITIES Borrowings of long-term debt..... -- 422,250 2,401,035 -- 1,870,511 Payments of long-term debt....... (45,822) (128,255) (124,732) (88,748) -- Borrowings on line of credit..... -- -- -- -- 300,000 Net proceeds from the exercise of stock options.................. 13,726 3,311 3,000 3,000 40,500 Redemption of preferred shares... -- -- (624,031) (594,253) (325,350) Other............................ -- 2,309 (3,352) (1,933) (12,327) ---------- ----------- ----------- ----------- ----------- Net cash provided (used) by financing activities........... (32,096) 299,615 1,651,920 (681,934) 1,873,334 ---------- ----------- ----------- ----------- ----------- Net increase (decrease) in cash and cash equivalents........... 179,729 (411,991) (1,204,176) (1,366,478) (354,742) Cash and cash equivalents at beginning of period............ 2,031,777 2,211,506 1,799,515 1,799,515 595,339 ---------- ----------- ----------- ----------- ----------- Cash and cash equivalents at end of period...................... $2,211,506 $ 1,799,515 $ 595,339 $ 433,037 $ 240,597 ========== =========== =========== =========== ===========
See accompanying notes. F-6 60 BIOANALYTICAL SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED WITH RESPECT TO INFORMATION AS OF JUNE 30, 1997 AND FOR THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997) 1. SIGNIFICANT ACCOUNTING POLICIES NATURE OF BUSINESS Bioanalytical Systems, Inc. and its subsidiaries (the "Company") manufacture scientific instruments for use in the determination of trace amounts of organic compounds in biological, environmental and industrial materials. The Company sells its equipment and software for use in industrial, governmental and academic laboratories. The Company also engages in laboratory services, consulting and research related to analytical chemistry and chemical instrumentation. The Company's customers are located in the United States and throughout the world. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant inter-company accounts and transactions have been eliminated. CASH EQUIVALENTS The Company considers all short-term, highly liquid investments to be cash equivalents. FINANCIAL INSTRUMENTS Management has estimated that the fair value of financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and debt approximates the carrying values. INVENTORIES Inventories are stated at the lower of cost or market. Cost is determined using the last-in, first-out (LIFO) method. GOODWILL Goodwill represents the excess of cost of acquisitions over the fair value of net assets acquired and is amortized by the straight-line method over a twenty year period. PROPERTY AND EQUIPMENT Property and equipment is recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of 10 through 40 years. Expenditures for maintenance and repairs are charged to expense as incurred. The Financial Accounting Standards Board (FASB) issued Statement of Accounting Standards No. 121, "Accounting for Impairment of Long-Lived Assets and for Assets to be Disposed of," which the Company adopted effective October 1, 1995. SFAS No. 121 requires that long-lived assets and certain identifiable intangibles held and used by the Company be reviewed for possible impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Adoption of the Statement and its application during 1996 did not have an impact on the Company's financial position or results of operations. F-7 61 BIOANALYTICAL SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED 1. SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED REVENUE RECOGNITION Revenue from the sale of the Company's products and the related costs are recognized upon shipment of the products to customers. The Company's pharmaceutical service contracts generally have terms ranging from several months to several years. A portion of the contract fee is generally payable upon receipt of the initial samples with the balance payable in installments over the life of the contract. The Company's contracts are broken down into discrete units of deliverable services for which a fixed fee for each unit is established and revenue and related direct costs are recognized as specific contract terms are fulfilled under the percentage of completion method utilizing units of delivery. INCOME TAXES The Company computes its income tax provision in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109). SFAS 109 requires recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities. These deferred taxes are measured by applying the provisions of tax laws in effect at the balance sheet date. ADVERTISING EXPENSE The Company expenses advertising costs as incurred. Advertising expense was $201,570, $238,612, and $267,184 for 1994, 1995, and 1996, respectively. NET INCOME PER COMMON SHARE Net income per common share is computed on the basis of the weighted average number of common and common equivalent shares outstanding during each year. Common equivalent shares include options to purchase Common Shares and convertible preferred shares. In this computation, net income is reduced by dividends accrued on the redeemable preferred shares. Supplemental net income per share is computed by dividing supplemental net income (which includes net income plus interest expense, net of the related income tax benefit) by the weighted average number of shares that would have been outstanding after giving effect to the number of shares that were required to be sold in this public offering to repay borrowings under the Company's line of credit and long-term debt facilities at October 1, 1995. Supplemental net income per share were $0.12 and $0.22, respectively, for 1996 and for the nine-month period ended June 30, 1997. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. RECENTLY ISSUED ACCOUNTING STANDARDS In July 1997, the Financial Accounting Standards Board (FASB) issued Statement No. 131 (SFAS 131), "Disclosures about Segments of an Enterprise and Related Information". Under SFAS 131, the Company will report financial and descriptive information about its operating segments. SFAS 131 is effective for fiscal years beginning after December 15, 1997. The Company plans to adopt SFAS 131 on October 1, 1998. The Company has not yet evaluated the impact of adoption of SFAS 131. F-8 62 BIOANALYTICAL SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED 1. SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED In June 1997, the FASB issued Statement of Financial Accounting Standards No. 130 (SFAS 130), "Reporting Comprehensive Income." SFAS 130 establishes standards for reporting and display of comprehensive income in the financial statements. SFAS 130 is effective for fiscal years beginning after December 15, 1997. The Company plans to adopt SFAS 130 on October 1, 1998. The Company has not yet evaluated the impact of SFAS 130. In February 1997, the FASB issued Statement of Financial Accounting Standards No. 128 (SFAS 128), "Earnings per Share", which replaces the presentation of primary earnings per share (EPS) with basic EPS and replaces fully diluted EPS with diluted EPS. It also requires dual presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the components of the basic EPS computation to the components of the diluted EPS computation. SFAS 128 is effective for both interim and annual periods ending after December 15, 1997. Earlier adoption is not permitted. Upon adoption, all prior-period EPS data presented will be restated. The Company does not anticipate the adoption of SFAS 128 to have a significant effect on EPS. In October 1995, the FASB issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock-based Compensation." Companies are required to adopt the provisions of this Statement for fiscal years beginning after December 15, 1995. The Company has not yet adopted the new rules and, upon adoption for the year ending September 30, 1997, presently intends to continue to measure compensation cost using Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." UNAUDITED INTERIM FINANCIAL STATEMENTS The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Article 10 of Regulation S-X of the Securities Exchange Act of 1934. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of the Company, all adjustments (consisting of only normal recurring accruals) considered necessary to present fairly the consolidated financial position as of June 30, 1997 and the consolidated statements of income, preferred shares and shareholders' equity and cash flows for the nine-month periods ended June 30, 1996 and 1997 have been included. 2. ACQUISITION Effective April 3, 1995 the Company acquired all of the capital stock of Technicol, Limited for cash approximating $97,000 and 22,572 common shares. The acquired business was involved in the distribution of chromatography equipment and supplies to pharmaceutical firms in the United Kingdom. The acquisition was accounted for using the purchase method of accounting and the results of operations have been included in the consolidated financial statements since the date of acquisition. The purchase price was allocated to the net assets acquired, including $240,032 to goodwill, based upon the fair market value at the date of acquisition. On an unaudited pro forma basis, revenue, net income and net income per share for the year ended September 30, 1994 were $11,229,000, $589,000 and $0.17, respectively, and for the year ended September 30, 1995, were $12,892,000, $510,000 and $0.15, respectively. This pro forma data presents the consolidated results of operations as if the acquisition had occurred on October 1, 1993, after giving effect to certain adjustments, including amortization of goodwill, increased interest expense and related income tax effects. The pro forma results have been prepared for comparative purposes only and do not purport to indicate the F-9 63 BIOANALYTICAL SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED 2. ACQUISITION -- CONTINUED results of operations which would actually have occurred had the acquisition been in effect on the date indicated, or which may occur in the future. Pro forma amounts for the years ended September 30, 1994 and 1995 include the acquired entity's financial data for the years ended April 30, 1994 and 1995 as it was not practicable to determine the September 30, 1994 and 1995 year end results. 3. INVENTORIES Inventories at September 30 consisted of:
1995 1996 ---- ---- Raw materials............................................... $ 759,124 $ 803,396 Work in progress............................................ 196,995 292,076 Finished goods.............................................. 838,360 868,153 ---------- ---------- 1,794,479 1,963,625 LIFO reserve................................................ (11,246) (31,775) ---------- ---------- Total LIFO cost............................................. $1,783,233 $1,931,850 ========== ==========
4. DEBT ARRANGEMENTS The Company has a bank line of credit agreement which expires April 29, 1997 and allows borrowings of the lesser of 50% of inventories plus 80% of qualified accounts receivable or $2,200,000. Interest is charged at the prime rate plus .25% (8.50% at September 30, 1996). At September 30, 1996, the collateral base for this line of credit resulted in borrowing availability of approximately $2,000,000, all of which was unused at September 30, 1996. At June 30, 1997, $300,000 was outstanding on this line. The line is collateralized by inventories and accounts receivable. The expiration date of the line of credit has been extended to March 1, 1998. During 1996 the Company entered into a credit facility for up to $5,000,000 for the purchase and renovation of an adjacent building (the "Construction loan"). At maturity (January 31, 1998), the loan may be converted to a five year term loan based upon a 20 year amortization funding on a conventional commercial mortgage basis or with fixed principal payments plus interest. Interest is charged at the prime rate plus .25% (8.50% at September 30, 1996). This credit facility is collateralized by property and equipment. The agreement contains certain covenants, which among other things require the Company to maintain minimum levels of tangible net worth and debt service coverage. F-10 64 BIOANALYTICAL SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED 4. DEBT ARRANGEMENTS -- CONTINUED Long-term debt at September 30 consisted of the following:
1995 1996 ---- ---- Construction loan, monthly payments of interest only at 8.50% variable per annum.................................. $ -- $1,972,003 Equipment loan, monthly payments of $8,803 including interest at 8.50% per annum............................... -- 423,900 Mortgage note collateralized by certain real estate, monthly payments of $4,827 including interest at 9% per annum..... 187,222 144,412 Capital lease obligations (Note 7).......................... 348,617 271,827 --------- ---------- 535,839 2,812,142 Less current portion........................................ (119,605) (300,115) --------- ---------- $ 416,234 $2,512,027 ========= ==========
The maturities of long-term debt for the five succeeding years are as follows:
YEARS ENDED SEPTEMBER 30 ------------------------ 1997............................................... $300,115 1998............................................... 198,308 1999............................................... 222,660 2000............................................... 138,840 2001............................................... 143,217
Cash interest payments of $37,852, $69,602, and $99,057 were made in 1994, 1995, and 1996, respectively. Cash interest payments for 1996 include interest of $28,868 on the Construction loan which was capitalized. These amounts include interest required to be paid on a portion of the undistributed earnings of a subsidiary which qualifies as a domestic international sales corporation (see Note 5). The Company has a bank line of credit agreement for capital expenditures which expires March 1, 1998 and allows borrowings of the lesser of 80% of capital expenditures or $1,000,000. Interest is charged at the prime rate plus .25% (8.50% at June 30, 1997). At June 30, 1997, this line was unused. The line is collateralized by property and equipment, inventories and accounts receivable. F-11 65 BIOANALYTICAL SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED 5. INCOME TAXES Significant components of the Company's deferred tax liabilities and assets as of September 30 are as follows:
1995 1996 ---- ---- Deferred tax liabilities: Tax over book depreciation................................ $ 564,488 $ 712,032 Deferred DISC income...................................... 456,338 398,280 ---------- ---------- Total deferred liabilities.................................. 1,020,826 1,110,312 Deferred tax assets: Tax credit carryforwards.................................. 141,709 91,493 Net operating loss carryforwards.......................... 24,194 14,876 Inventory pricing......................................... 68,941 72,669 Accrued vacation.......................................... 50,778 57,916 Other-net................................................. 47,250 34,184 ---------- ---------- Total deferred tax assets................................... 332,872 271,138 ---------- ---------- Valuation allowance for deferred tax assets................. (100,000) (49,217) ---------- ---------- Net deferred tax assets..................................... 232,872 221,921 ---------- ---------- Net deferred tax liabilities................................ $ 787,954 $ 888,391 ========== ==========
Significant components of the provision for income taxes are as follows:
1994 1995 1996 ---- ---- ---- Current: Federal............................................. $175,000 $170,721 $123,625 State............................................... 64,651 66,209 58,586 -------- -------- -------- Total current......................................... 239,651 236,930 182,211 Deferred: Federal............................................. 14,506 100,181 81,928 State............................................... (859) 7,143 18,509 -------- -------- -------- Total deferred........................................ 13,647 107,324 100,437 -------- -------- -------- $253,298 $344,254 $282,648 ======== ======== ========
The effective income tax rate varied from the statutory federal income tax rate as follows:
1994 1995 1996 ---- ---- ---- Statutory federal income tax rate........................... 34.0% 34.0% 34.0% Increases (decreases): Amortization of goodwill and other nondeductible expenses............................................... 0.9 1.0 2.1 Benefit of foreign sales corporation, net................. (2.6) (3.2) (4.0) State income taxes, net of federal tax benefit............ 5.3 5.4 7.5 Other..................................................... (6.0) 1.3 1.8 ---- ---- ---- 31.6% 38.5% 41.4% ==== ==== ====
Net operating loss carryforwards were generated by a subsidiary of the Company prior to its acquisition by the Company and the carryforwards are restricted to use by that subsidiary. These carryforwards expire through the year 2004. The tax credit carryforwards amounted to $91,493 at September 30, 1996 and expire F-12 66 BIOANALYTICAL SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED 5. INCOME TAXES -- CONTINUED through the year 2010. As management cannot determine that it is more likely than not that these carryforwards can be fully utilized in the future, a valuation allowance of $49,217 has been recorded. In fiscal 1996, the Company's foreign operations generated a loss before income taxes of $200,145. Payments made in 1994, 1995, and 1996 for federal and state income taxes amounted to $422,300, $163,950, and $160,000, respectively. 6. PREFERRED SHARES AND SHAREHOLDERS' EQUITY PREFERRED SHARES On February 27, 1991 the Board of Directors approved the issuance of up to 1,000,000 shares of Preferred Shares. The Board of Directors designated 105,000 shares as Redeemable Preferred Shares ($10.00 stated value) and designated 250,000 shares as Convertible Preferred Shares ($8.00 stated value). The Redeemable Preferred Shares have preference over all other outstanding classes of capital shares of the Company with respect to payment of dividends. Holders of Redeemable Preferred Shares are entitled to receive, when and as declared by the Board of Directors, cumulative preferential cash dividends at the rate of $.80 per share per annum payable quarterly in arrears, however, they do not participate with respect to other dividends declared by the Company. Although such dividends have not been declared, the Company has recorded the dividends as a charge to Retained Earnings and an increase to Redeemable Preferred Shares. The Redeemable Preferred Shares were redeemed by the Company in three equal installments on December 31, 1995, June 30, 1996 and December 1, 1996 at $10.00 per share plus accrued unpaid dividends. The holders of the Convertible Preferred Shares have the right at any time to convert those shares, in whole or in part and without additional consideration, into fully paid Common Shares. The conversion rate is one Common Shares for each Convertible Preferred Share at September 30, 1996 (4.514 Common Shares for each Convertible Preferred Share after the share split described in Note 10). Holders of Convertible Preferred Shares are entitled to one vote per share on any matter submitted to a vote of the holders of Common Shares. No cash dividends may be declared and paid with respect to the Common Shares unless equivalent dividends are also declared and paid with respect to the Convertible Preferred Shares. These shares are redeemable, at the option of the holders, in three equal installments on December 31, 1995, June 30, 1996 and December 31, 1996, at a redemption price of $8.00 per share plus any accrued unpaid dividends. No redemption requests were made by the holders. Alternatively, the holders of the Convertible Preferred Shares may require the Company to purchase all or any portion of the Convertible Preferred Shares and any Common Shares obtained through the conversion of the Convertible Preferred Shares at any time after March 15, 1996 at a price equal to the greater of the amount such shares are entitled to receive upon liquidation of the Company or fair market value. The fair market value could exceed the $8 optional redemption price. As of September 30, 1996, no redemption requests had been made by the holders. The Company must maintain certain restrictive covenants in accordance with the preferred stock agreement, including net worth and indebtedness requirements, restrictions on the declaration of dividends, redemption of Common Shares, issuance of Preferred and Common Shares and capital expenditure levels. STOCK OPTION PLANS During 1990, the Company established an Employee Incentive Stock Option Plan whereby options to purchase shares of the Company's Common Shares at fair market value can be granted to employees of the F-13 67 BIOANALYTICAL SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED 6. PREFERRED SHARES AND SHAREHOLDERS' EQUITY -- CONTINUED Company. Options granted become exercisable in four equal installments beginning two years after the date of the grant. The plan terminates in the year 2000. During fiscal 1989, the Company established an Outside Director Stock Option Plan whereby options to purchase shares of the Company's Common Shares at fair market value can be granted to outside directors. Options granted become exercisable in four equal installments beginning two years after the date of grant. The plan terminates in 1999. The Company intends to adopt a new stock option plan in connection with its initial public offering and accordingly does not plan to grant any more options pursuant to the plans discussed above. The following presents information regarding options granted through September 30, 1996.
AVAILABLE OPTIONS OPTION PRICE FOR GRANT OUTSTANDING EXERCISABLE PER SHARE --------- ----------- ----------- ------------ The Employee Incentive Stock Option Plan........................... 735,847 252,355 169,967 $.66 to $2.31 The Outside Director Stock Option Plan.................................. 27,086 81,259 81,259 .66
No options were granted in fiscal 1995 or 1996. Options exercised during 1994, 1995 and 1996 had a weighted average exercise price of $.66, $.73 and $.66, respectively. A special non-qualified option was granted for 4,514 shares of Common Shares at $1.27 per share to a consultant to the Company in August 1991. This option remains outstanding at September 30, 1996. 7. CAPITAL LEASE The Company has a capital lease arrangement to finance the acquisition of equipment. Future minimum lease payments, based upon scheduled payments under the lease arrangement, as of September 30, 1996 are as follows: 1997........................................................ $102,504 1998........................................................ 102,504 1999........................................................ 102,504 -------- Total minimum lease payments................................ 307,512 Amounts representing interest............................... (35,685) -------- Present value of minimum lease payments..................... $271,827 ========
The total amount of property and equipment capitalized under capital lease obligations as of both September 30, 1995 and 1996 was $486,043. Accumulated amortization at September 30, 1995 and 1996 was $72,587 and $121,191, respectively. The amortization is included in depreciation expense. 8. RETIREMENT PLAN Effective July 1, 1984, the Company established an Internal Revenue Code Section 401(k) Retirement Plan covering all employees over twenty-one years of age with at least one year of service. Under the terms of the Plan, the Company contributes 2% of each participant's total wages to the Plan. The Plan also includes provisions for various contributions which may be instituted at the discretion of the Board of Directors. The contribution made by the participant may not exceed 10% of the participant's annual wages. Contribution expense was $79,067, $110,489, and $138,142 in 1994, 1995 and 1996, respectively. F-14 68 BIOANALYTICAL SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED 9. SEGMENT INFORMATION The Company operates in two principal segments -- analytical services and analytical products. The Company's analytical services unit provides analytical chemistry support on a contract basis directly to pharmaceutical companies. The Company's analytical products unit provides liquid chromatography, electrochemical, and physiological monitoring products to pharmaceutical companies, universities, government research centers and medical research institutions. INDUSTRY SEGMENT DATA:
YEAR ENDED SEPTEMBER 30, --------------------------- 1994 1995 1996 ---- ---- ---- (IN THOUSANDS) REVENUE Products.................................................... $ 8,903 $ 9,627 $ 9,113 Services.................................................... 1,801 2,725 3,681 ------- ------- ------- Total Revenue............................................... $10,704 $12,352 $12,794 ======= ======= ======= OPERATING INCOME (LOSS) Products.................................................... $ 311 $ 409 $ (254) Services.................................................... 400 490 1,113 ------- ------- ------- Total Operating Income (Loss)............................... 711 899 859 Corporate income (expenses)................................. 90 (4) (176) ------- ------- ------- Income before income taxes.................................. $ 801 $ 895 $ 683 ======= ======= ======= IDENTIFIABLE ASSETS Products.................................................... $ 6,791 $ 6,993 $ 6,242 Services.................................................... 1,372 2,435 5,132 ------- ------- ------- Total Assets................................................ $ 8,163 $ 9,428 $11,374 ======= ======= ======= DEPRECIATION AND AMORTIZATION Products.................................................... $ 140 $ 266 $ 224 Services.................................................... 64 132 176 ------- ------- ------- $ 204 $ 398 $ 400 ======= ======= ======= CAPITAL EXPENDITURES Products.................................................... $ 293 $ 468 $ 450 Services.................................................... 166 832 2,728 ------- ------- ------- $ 459 $ 1,300 $ 3,178 ======= ======= =======
EXPORT SALES: Export sales to unaffiliated customers by destination of sales are summarized as follows (in thousands):
YEAR ENDED SEPTEMBER 30, ------------------------ 1994 1995 1996 ---- ---- ---- Europe...................................................... $ 988 $ 933 $1,144 Pacific Rim................................................. 2,064 2,898 2,903 Other....................................................... 952 836 556 ------ ------ ------ $4,004 $4,667 $4,603 ====== ====== ======
F-15 69 BIOANALYTICAL SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED 9. SEGMENT INFORMATION -- CONTINUED MAJOR CUSTOMERS: During 1996, a major United States-based pharmaceutical company accounted for approximately 18.3% of the Company's total revenues. The Company sells its products through international distributors, one of which represents 20%, 18%, and 19% of 1994, 1995 and 1996 product sales, respectively. Accounts receivable from this foreign distributor are $200,861 and $196,416 at September 30, 1995 and 1996, respectively. 10. SUBSEQUENT EVENT (UNAUDITED) On September 24, 1997, the Company's Board of Directors approved a 4.514 for 1 share split of common shares to be effective upon completion of the Company's initial public offering. All common share and per share amounts and information concerning stock option plans have been adjusted retroactively to give effect to this stock split. F-16 70 ====================================================== NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES OFFERED BY THIS PROSPECTUS OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. ------------------------ TABLE OF CONTENTS
PAGE ---- Prospectus Summary.................... 3 Risk Factors.......................... 5 Use of Proceeds....................... 10 Dividend Policy....................... 10 Dilution.............................. 11 Capitalization........................ 12 Selected Consolidated Financial Data................................ 13 Management's Discussion and Analysis of Financial Condition and Results of Operations....................... 14 Business.............................. 20 Management............................ 34 Certain Transactions.................. 41 Principal Shareholders................ 42 Description of Capital Stock.......... 43 Shares Eligible for Future Sale....... 45 Underwriting.......................... 47 Legal Matters......................... 49 Experts............................... 49 Additional Information................ 49 Glossary.............................. 50 Index to Financial Statements......... F-1
------------------------ UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN COMMON SHARES, WHETHER OR NOT PARTICIPATING IN THE DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENTS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITER WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. ====================================================== ====================================================== 1,500,000 COMMON SHARES BIOANALYTICAL SYSTEMS LOGO BIOANALYTICAL SYSTEMS, INC. ----------------------------- PROSPECTUS ----------------------------- RONEY & CO. THE OHIO COMPANY , 1997 ====================================================== 71 PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following is a statement of the estimated expenses to be paid by the Registrant in connection with the issuance and distribution of the securities being registered:
EXPENSES AMOUNT* -------- ------- Securities and Exchange Commission registration fee......... $ 5,750 National Association of Securities Dealers, Inc. fee........ 2,398 NASDAQ fee.................................................. Printing and engraving expenses............................. Legal fees and expenses..................................... Accounting fees and expenses................................ Blue Sky fees and expenses (including fees of counsel)...... Transfer agent and registrar fees and expenses.............. Miscellaneous............................................... ------- Total.................................................. $ =======
- ------------------------- * All of the expenses, except the Securities and Exchange Commission registration fee, the National Association of Securities Dealers, Inc. fee and the Nasdaq fee, are estimated. ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The Indiana Business Corporation Law ("BCL"), the provisions of which govern the Registrant, empowers an Indiana corporation to indemnify present and former directors, officers, employees, or agents or any person who may have served at the request of the corporation as a director, officer, employee, or agent of another corporation ("Eligible Persons") against liability incurred in any proceeding, civil or criminal, in which the Eligible Person is made a party by reason of being or having been in any such capacity, or arising out of his status as such, if the individual acted in good faith and reasonable believed that (a) the individual was acting in the best interests of the corporation, or (b) if the challenged action was taken other than in the individual's official capacity as an officer, director, employee or agent, the individual's conduct was at least not opposed to the corporation's best interests, or (c) if in a criminal proceeding, either the individual had reasonable cause to believe his conduct was lawful or no reasonable cause to believe his conduct was unlawful. The BCL further empowers a corporation to pay or reimburse the reasonable expenses incurred by an Eligible Person in connection with the defense of any such claim, including counsel fees; and, unless limited by its articles of incorporation, the corporation is required to indemnify an Eligible Person against reasonable expenses if he is wholly successful in any such proceeding, on the merits or otherwise. Under certain circumstances, a corporation may pay or reimburse an Eligible Person for reasonable expenses prior to final disposition of the matter. Unless a corporation's articles of incorporation otherwise provide, an Eligible Person may apply for indemnification to a court which may order indemnification upon a determination that the Eligible Person is entitled to mandatory indemnification for reasonable expenses or that the Eligible Person is fairly and reasonably entitled to indemnification in view of all the relevant circumstances without regard to whether his actions satisfied the appropriate standard of conduct. Before a corporation may indemnify any Eligible Person against liability or reasonable expenses under the BCL, a quorum consisting of directors who are not parties to the proceeding must (1) determine that indemnification is permissible in the specific circumstances because the Eligible Person met the requisite standard of conduct, (2) authorize the corporation to indemnify the Eligible Person and (3) if appropriate, evaluate the reasonableness of expenses for which indemnification is sought. If it is not possible to obtain a quorum of uninvolved directors, the foregoing action may be taken by a committee of two or more directors II-1 72 who are not parties to the proceeding, special legal counsel selected by the Board or such a committee, or by the shareholders of the corporation. In addition to the foregoing, the BCL states that the indemnification it provides shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any provision of the articles of incorporation or bylaws, resolution of the board of directors or shareholders, or any other authorization adopted after notice by a majority vote of all the voting shares then issued and outstanding. The BCL also empowers an Indiana corporation to purchase and maintain insurance on behalf of any Eligible Person against any liability asserted against or incurred by him in any capacity as such, or arising out of his status as such, whether or not the corporation would have had the power to indemnify him against such liability. Reference is made to Article V of the Amended and Restated Articles of Incorporation of the Registrant concerning indemnification of directors, officers, employees and agents. The Registrant may obtain directors' and officers' liability insurance, the effect of which will be to indemnify the directors and officers of the corporation and its subsidiaries against certain losses caused by errors, misleading statements, wrongful acts, omissions, neglect or breach of duty by them or any matter claimed against them in their capacities as directors and officers. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES. The Registrant has issued the following securities during the three year period ended September 24, 1997: 1. An aggregate of 142,560 Common Shares were issued to five key employees at various times upon the exercise of options granted pursuant to the Registrant's 1990 Employee Stock Option Plan for consideration equal to the fair market value of the shares purchased on the date of the option grant. The issuance of these Common Shares was exempt from registration under the Securities Act by reason of Rule 701 of the Commission and Section 4(2) thereof. 2. An aggregate of 22,572 Common Shares were issued on April 3, 1995, to a single individual in connection with and as partial consideration for the acquisition by the Registrant of all of the outstanding shares of Technicol Ltd. The issuance of these Common Shares was exempt from registration under the Securities Act by reason of Section 4(2) thereof. The share data set forth above has been adjusted for the 4.514 for 1 share split described in the Prospectus. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) Exhibits: The list of exhibits is incorporated herein by reference to the Index to Exhibits. (b) Financial Statement Schedules: No schedules have been provided because the required information is not applicable. ITEM 17. UNDERTAKINGS. The undersigned Registrant hereby undertakes to provide to the Underwriters at the closing specified in the Underwriting Agreement certificates in such denominations and registered in such names as required by the Underwriters to permit prompt delivery to each purchaser. Insofar as indemnification by the Registrant for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification for such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the II-2 73 successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The undersigned Registrant hereby undertakes that: (1) For purposes of determining any liabilities under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in the form of prospectus to be filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-3 74 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF WEST LAFAYETTE, STATE OF INDIANA, ON THE 26TH DAY OF SEPTEMBER, 1997. BIOANALYTICAL SYSTEMS, INC. By: /s/ PETER T. KISSINGER ------------------------------------ Peter T. Kissinger, President and Chief Executive Officer POWER OF ATTORNEY Each person whose signature appears below irrevocably constitutes and appoints Peter T. Kissinger and Ronald E. Shoup, and each or either of them (with full power to act alone), his or her true and lawful attorneys-in-fact and agents with full power of substitution and re-substitution, for him or her and in his name, place and stead, in any and all capacities, to sign any and all amendments to this registration statement therewith filed with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact, agents or their substitute or substitutes may lawfully do or cause to be done by virtue hereof. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED:
SIGNATURE CAPACITY DATE --------- -------- ---- /s/ PETER T. KISSINGER President and Chief Executive September 26, 1997 - ------------------------------------------ Officer (Principal Executive Peter T. Kissinger Officer) and Director /s/ CANDICE B. KISSINGER Director September 26, 1997 - ------------------------------------------ Candice B. Kissinger /s/ RONALD E. SHOUP Director September 26, 1997 - ------------------------------------------ Ronald E. Shoup /s/ WILLIAM BAITINGER Director September 26, 1997 - ------------------------------------------ William Baitinger /s/ THOMAS A. HIATT Director September 26, 1997 - ------------------------------------------ Thomas Hiatt /s/ JOHN KRAEUTLER Director September 26, 1997 - ------------------------------------------ John Kraeutler Director , 1997 - ------------------------------------------ W. Leigh Thompson
II-4 75
SIGNATURE CAPACITY DATE --------- -------- ---- Director , 1997 - ------------------------------------------ William Mulligan /s/ MICHAEL CAMPBELL Director September 26, 1997 - ------------------------------------------ Mike Campbell /s/ DOUGLAS P. WIETEN (Principal Financial Officer and September 26, 1997 - ------------------------------------------ Accounting Officer) Douglas Wieten
II-5 76 BIOANALYTICAL SYSTEMS, INC. REGISTRATION STATEMENT ON FORM S-1 INDEX TO EXHIBITS
NUMBER ASSIGNED IN REGULATION S-K EXHIBIT ITEM 601 NUMBER DESCRIPTION OF EXHIBIT - ------------------ ------- ---------------------- (1) 1.1 Form of Underwriting Agreement (2) No Exhibit (3) 3.1 Form of Second Restated Articles of Incorporation of Bioanalytical Systems, Inc. 3.2 Form of Second Restated Bylaws of Bioanalytical Systems, Inc. (4) 4.1 Form of Specimen Certificate for Common Shares* 4.2 See Exhibits 3.1 and 3.2 4.3 Form of Letter Agreement dated September , 1997, by and among Bioanalytical Systems, Inc., Primus Capital Fund II, L.P. and Middlewest Ventures II, L.P. (5) 5.1 Opinion of Ice Miller Donadio & Ryan (6) No Exhibit (7) No Exhibit (8) No Exhibit (9) No Exhibit (10) 10.1 Form of Employee Confidentially Agreement 10.2 Bioanalytical Systems, Inc. Outside Director Stock Option Plan 10.3 Form of Bioanalytical Systems, Inc. Outside Director Stock Option Agreement 10.4 Bioanalytical Systems, Inc. 1990 Employee Incentive Stock Option Plan 10.5 Form of Bioanalytical Systems, Inc. 1990 Employee Incentive Stock Option Agreement 10.6 Letter/Loan Agreement by and between Bioanalytical Systems, Inc. and Bank One, Lafayette, N.A. dated May 31, 1997 for up to $5,000,000 Construction Loan 10.7 Note for $4,720,000 executed by Bioanalytical Systems, Inc., in favor of Bank One, Lafayette, N.A., dated July 19, 1996 10.8 Loan Agreement by and between Bioanalytical Systems, Inc. and Bank One, Lafayette, N.A., dated July 22, 1992 for up to $700,000 10.9 Credit Agreement by and between Bioanalytical Systems, Inc. and Bank One, Lafayette, N.A., dated July 24, 1992 relating to loan of up to $300,000 10.10 Promissory Note for $300,000 executed by Bioanalytical Systems, Inc. in favor of Bank One, Lafayette, N.A. dated July 24, 1992. 10.11 Letter Loan Agreement by and between Bioanalytical Systems, Inc. and Bank One, Indiana, N.A., dated April 15, 1997. 10.12 Promissory Note for $2,200,000 executed by Bioanalytical Systems, Inc. in favor of Bank One, Indiana, N.A. dated May 9, 1997
II-6 77
NUMBER ASSIGNED IN REGULATION S-K EXHIBIT ITEM 601 NUMBER DESCRIPTION OF EXHIBIT - ------------------ ------- ---------------------- 10.13 Promissory Note for $1,000,000 executed by Bioanalytical Systems, Inc. in favor of Bank One, Indiana, N.A. dated May 9, 1997 10.14 Indemnifying Mortgage by and between Bioanalytical Systems, Inc. and Bank One, Lafayette, N.A. dated January 23, 1987. 10.15 Real Estate Mortgage by and between Bioanalytical Systems, Inc. and Bank One, Lafayette, N.A., dated July 19, 1996 10.16 Security Agreement by and between Bioanalytical System, Inc. and Bank One, Lafayette, N.A., dated April 22, 1991 10.17 Security Agreement by and between Bioanalytical Systems, Inc. and Bank One, Lafayette, N.A., dated August 22, 1996. 10.18 Master Lease Agreement by and between Bioanalytical Systems, Inc. and Banc One Leasing Corporation, dated November 9, 1994 10.19 Financing Lease by and between Bioanalytical Systems, Inc. and Banc One Leasing Corporation, dated November 9, 1994 10.20 Purchase Agreement Commercial-Industrial Real Estate by and between Great Lakes Chemical Corporation and Bioanalytical Systems, Inc. (11) 11.1 Statement Regarding Computation of Per Share Earnings (12) No Exhibit (14) No Exhibit (15) No Exhibit (16) No Exhibit (21) 21.1 List of Subsidiaries (23) 23.1 Consent of Ice Miller Donadio & Ryan (included in Exhibit 5.1) 23.2 Consent of Ernst & Young LLP, independent auditors (24) 24.1 See Signature Page (25) No Exhibit (26) No Exhibit (27) 27.1 Financial Data Schedule (28) No Exhibit (99) No Exhibit
- ------------------------- * To be filed by amendment. II-7 EX-1.1 2 FORM OF UNDERWRITING AGMT. 1 EXHIBIT 1.1 BIOANALYTICAL SYSTEMS, INC. 1,500,000 SHARES* COMMON STOCK UNDERWRITING AGREEMENT ________, 1997 Roney & Co., L.L.C. The Ohio Company As representatives of the several Underwriters named in Schedule I hereto, c/o Roney & Co., L.L.C., One Griswold Detroit, Michigan 48226 Ladies and Gentlemen: Bioanalytical Systems, Inc., an Indiana corporation (the "Company"), proposes, subject to the terms and conditions stated herein, to issue and sell to the Underwriters named in Schedule I hereto (the "Underwriters") an aggregate of 1,500,000 shares (the "Firm Shares") of the Company's Common Stock, no par value (the "Common Stock") and up to an aggregate of 225,000 shares (the "Optional Shares") of Common Stock (the Firm Shares and the Optional Shares that the Underwriters elect to purchase pursuant to Section 2 hereof being collectively referred to as the "Shares"). 1. (a) The Company represents and warrants to, and agrees with, each of the Underwriters that: (i) A registration statement on Form S-1 (File No. 333-_________) as amended by any pre-effective amendment thereto in respect of the Shares (the "Initial Registration Statement") has been filed with the Securities and Exchange Commission (the "Commission"); the Initial Registration Statement and any post-effective amendment thereto, each in the form heretofore delivered to you, and, excluding exhibits thereto, as the same may have been amended from time to time, to each of the other Underwriters, have been declared effective by the Commission in such form; other than a registration statement, if any, increasing the size of the offering (a "Rule 462(b) Registration Statement"), filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the "Act"), which became effective upon filing, no other document with respect to the - ----------------- *Plus an option to acquire from the Company up to 225,000 additional shares to cover overallotments. 2 Initial Registration Statement has heretofore been filed with the Commission; and no stop order suspending the effectiveness of the Initial Registration Statement, any post-effective amendment thereto or the Rule 462(b) Registration Statement, if any, has been issued and no proceeding for that purpose has been initiated or threatened by the Commission (any preliminary prospectus included in the Initial Registration Statement or filed with the Commission pursuant to Rule 424(a) of the rules and regulations of the Commission under the Act, as amended, is hereinafter called a "Preliminary Prospectus;" the various parts of the Initial Registration Statement and the Rule 462(b) Registration Statement, if any, including all exhibits thereto and including the information contained in the form of the final prospectus filed with the Commission pursuant to Rule 424(b) under the Act in accordance with Section 5(a) hereof and deemed by virtue of Rule 430A under the Act to be part of the Initial Registration Statement at the time it was declared effective or such part of the Rule 462(b) Registration Statement, if any, that became or hereafter becomes effective, each as amended at the time such part of the registration statement became effective, is hereinafter collectively called the "Registration Statement;" and such final prospectus, in the form first filed pursuant to Rule 424(b) under the Act, is hereinafter called the "Prospectus"); (ii) No order preventing or suspending the use of any Preliminary Prospectus has been issued by the Commission, and each Preliminary Prospectus, at the time of filing thereof, conformed in all material respects to the requirements of the Act and the rules and regulations of the Commission thereunder, and did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by an Underwriter through the Representatives expressly for use therein; and (iii) The Registration Statement conforms, and the Prospectus and any further amendments or supplements to the Registration Statement or the Prospectus will conform, in all material respects to the requirements of the Act and the rules and regulations of the Commission thereunder and do not and will not, as of the applicable effective date of the Registration Statement and any amendment thereto, and as of the applicable filing date of the Prospectus and any amendment or supplement thereto, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by an Underwriter through the Representatives expressly for use therein; 2 3 (b) The Company represents and warrants to, and agrees with, each of the Underwriters that: (i) Since the respective dates as of which information is given in the Registration Statement and the Prospectus, there has not been any material adverse change in or affecting the general affairs, business, management, financial position, stockholders' equity, results of operations or prospects of the Company, otherwise than as set forth or contemplated in the Prospectus; (ii) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Indiana, with power and authority (corporate and other) to own its properties and conduct its business as described in the Prospectus, and has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties, or conducts any business so as to require such qualification; (iii) The Company has an authorized capitalization as set forth in the Prospectus, and all of the issued shares of capital stock of the Company have been duly and validly authorized and issued and are fully paid and nonassessable; (iv) The Shares have been duly and validly authorized and, when issued and delivered against payment therefor as provided herein, will be duly and validly issued and fully paid and nonassessable and will conform in all material respects to the description of the Common Stock contained in the Prospectus; (v) The issue and sale of the Shares by the Company and the compliance by the Company with all of the provisions of this Agreement and the consummation of the transactions herein contemplated will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company is a party or by which the Company is bound or to which any of the property or assets of the Company is subject, nor will such action result in any violation of the provisions of the Articles of Incorporation (or other charter document) or By-laws of the Company or any statute, ordinance, rule or regulation, or any order, decree, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its properties; and no consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for the issue and sale of the Shares or the consummation by the Company of the transactions contemplated by this Agreement, except the registration under the Act and such consents, approvals, authorizations, registrations, notifications or qualifications as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Shares by the Underwriters; 3 4 (vi) The Company is not in violation of its Articles of Incorporation or By-laws or in default in the performance or observance of any material obligation, agreement, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which it is a party or by which it or any of its properties may be bound; (vii) The statements set forth in the Prospectus under the caption "Description of Capital Stock," insofar as it purports to constitute a summary of the terms of the capital stock of the Company, and under the captions "Business -- Product Liability and Insurance," "-- Legal Proceedings," "Certain Transactions" and "Management" insofar as they purport to describe the provisions of the laws and documents referred to therein, are accurate, complete in all material respects and fair; (viii) Other than as set forth in the Prospectus, there are no legal or governmental proceedings pending to which the Company is a party or of which any property of the Company is the subject which, if determined adversely to the Company would individually or in the aggregate have a material adverse effect on the financial position, stockholders' equity or results of operations of the Company; and, to the best of the Company's knowledge, no such proceedings are threatened or contemplated by any governmental authorities or threatened by others; (ix) The Company is not and, after giving effect to the offering and sale of the Shares, will not be an "investment company" or an entity "controlled" by an "investment company," as such terms are defined in the Investment Company Act of 1940, as Amended (the "Investment Company Act"); (x) The Company does not do business with the government of Cuba or with any person or affiliate located in Cuba within the meaning of Section 517.075, Florida Statutes; (xi) Ernst & Young, L.L.P., who have certified certain financial statements of the Company, are independent public accountants as required by the Act and the rules and regulations of the Commission thereunder; (xii) This Agreement has been duly authorized, executed and delivered by the Company; (xiii) There are no contracts or documents which are required to be described in the Registration Statement or the Prospectus or to be filed as exhibits thereto which have not been so described and filed as required; (xiv) No filing with, or authorization, approval, consent, license, order, registration, notification, qualification or decree of, any court or governmental authority or agency is necessary or required for the performance by the Company of its obligations hereunder, in connection with the offering, issuance or sale of the Common Stock 4 5 hereunder or the consummation of the transactions contemplated by this Agreement, except such as have been already obtained or as may be required under the Act or the rules and regulations thereunder or state securities laws; (xv) The Company possesses such permits, licenses, approvals, consents, and other authorizations (collectively "Governmental Licenses") issued by the appropriate federal, state, local or foreign regulatory agencies or bodies necessary to conduct the business now operated by it; the Company is in compliance with the terms and conditions of all such Governmental Licenses, except where the failure so to comply would not have a material adverse effect on the financial position, stockholders' equity or results of operations of the Company; all of the Governmental Licenses are valid and in full force and effect, except where the invalidity of such Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect would not have a material adverse effect on the financial position, stockholders' equity or results of operations of the Company; the Company has not received any notice of proceedings relating to the revocation or modification of any such Governmental Licenses which singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a material adverse effect on the financial position, stockholders' equity or results of operations of the Company; and (xvi) There are no persons with registration rights or other similar rights to have any securities registered pursuant to the Registration Statement or otherwise registered by the Company under the Act. 2. Subject to the terms and conditions herein set forth, (a) the Company agrees to issue and sell to each of the Underwriters, and each of the Underwriters agrees, severally and not jointly, to purchase from the Company, at a purchase price per share of $[ ] the number of Firm Shares set forth opposite the name of such Underwriter in Schedule I hereto and (b) in the event and to the extent that the Underwriters shall exercise the election to purchase Optional Shares as provided below, the Company agrees to issue and sell to each of the Underwriters, and each of the Underwriters agrees, severally and not jointly, to purchase from the Company, at the purchase price per share set forth in clause (a) of this Section 2, that portion of the number of Optional Shares as to which such election shall have been exercised (to be adjusted so as to eliminate fractional shares) determined by multiplying such number of Optional Shares by a fraction, the numerator of which is the maximum number of Optional Shares which such Underwriter is entitled to purchase as set forth opposite the name of such Underwriter in Schedule I hereto and the denominator of which is the maximum number of Optional Shares that all of the Underwriters are entitled to purchase hereunder. The Company hereby grants to the Underwriters the right to purchase at their election up to 225,000 Optional Shares, at the purchase price per share set forth in the paragraph above, for the sole purpose of covering overallotments in the sale of the Firm Shares. Any such election to purchase Optional Shares may be exercised only by written notice from the Representatives to the Company, given within a period of 30 business days after the date of this Agreement, 5 6 setting forth the aggregate number of Optional Shares to be purchased and the date on which such Optional Shares are to be delivered, as determined by the Representatives. As compensation to the Underwriters for their commitments hereunder, the Company at each Time of Delivery (as defined in Section 4 hereof) will pay to Roney & Co., L.L.C. ("Roney"), for the accounts of the several Underwriters, an amount equal to $____per share for the Shares to be delivered by the Company hereunder at such Time of Delivery. 3. Upon the authorization by you of the release of the Firm Shares, the several Underwriters propose to offer the Firm Shares for sale upon the terms and conditions set forth in the Prospectus. 4. (a) The Shares to be purchased by each Underwriter hereunder will be represented by one or more definitive certificates registered in the name of Roney which will be deposited by or on behalf of the Company with The Depository Trust Company ("DTC") or its designated custodian. The Company will deliver the Shares to Roney, for the account of each Underwriter, against payment by or on behalf of such Underwriter of the purchase price therefor by wire transfer to the account specified by the Company in Federal (same day) funds, by causing DTC to credit the Shares to the account of Roney at DTC. The Company will cause the certificates representing the Shares to be made available to Roney for checking at least 24 hours prior to the Time of Delivery at the office of DTC or its designated custodian (the "Designated Office"). The time and date of such delivery and payment shall be, with respect to the Firm Shares, 9:30 A.M., Detroit time, on ______________, 1997 or such other time and date as the Representatives and the Company may agree upon in writing, and, with respect to the Optional Shares, 9:30 A.M., Detroit time, on the date specified by Roney in the written notice given by the Representatives of the Underwriters' election to purchase such Optional Shares, or such other time and date as the Representatives and the Company may agree upon in writing. Such time and date for delivery of the Firm Shares is herein called the "First Time of Delivery," such time and date for delivery of the Optional Shares, if not the First Time of Delivery, is herein called the "Second Time of Delivery," and each such time and date for delivery is herein called a "Time of Delivery." (b) The documents to be delivered at each Time of Delivery by or on behalf of the parties hereto pursuant to Section 7 hereof, including the cross-receipt for the Shares and any additional documents requested by the Underwriters pursuant to Section 7(i) hereof, will be delivered at the offices of Honigman Miller Schwartz and Cohn, 2290 First National Building, Detroit, MI 48226-3583 (the "Closing Location"), the Shares will be delivered at the Designated Office, and the wire transfers will be made to the specified accounts, all at such Time of Delivery. A meeting will be held at the Closing Location at 2:00 P.M., Detroit time, on the Detroit Business Day next preceding such Time of Delivery, at which meeting the final drafts of the documents to be delivered pursuant to the preceding sentence will be available for review by the parties hereto. For the purposes of this Section 4, "Detroit Business Day' shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in Detroit are generally authorized or obligated by law or executive order to close. 6 7 5. The Company agrees with each of the Underwriters: (a) To prepare the Prospectus in a form approved by you and to file such Prospectus pursuant to Rule 424(b) under the Act not later than the Commission's close of business on the second business day following the execution and delivery of this Agreement, or, if applicable, such earlier time as may be required by Rule 430A(a)(3) under the Act; to make no further amendment or any supplement to the Registration Statement or Prospectus which shall be disapproved by you promptly after reasonable notice thereof; to advise you, promptly after it receives notice thereof, of the time when any amendment to the Registration Statement has been filed or becomes effective or any supplement to the Prospectus or any amended Prospectus has been filed and to furnish you with copies thereof; to advise you, promptly after it receives notice thereof, of the issuance by the Commission of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or prospectus, of the suspension of the qualification of the Shares for offering or sale in any jurisdiction, of the initiation or threatening of any proceeding for any of the foregoing purposes, or of any request by the Commission for the amending or supplementing of the Registration Statement or Prospectus or for additional information; and, in the event of the issuance of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or prospectus or suspending any such qualification, promptly to use every reasonable effort to obtain the withdrawal of such order; (b) Promptly from time to time to take such action as you may reasonably request to qualify the Shares for offering and sale under the securities laws of such jurisdictions as you may request and to comply with such laws so as to permit the continuance of sales and dealings therein in such jurisdictions for as long as may be necessary to complete the distribution of the Shares, provided that in connection therewith the Company shall not be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction; (c) As soon after the execution and delivery of this Agreement as possible and thereafter from time to time for such period as delivery of a Prospectus is required in connection with the offering or sale of the Shares, to furnish the Underwriters with copies of the Prospectus in Detroit in such quantities as you may from time to time reasonably request, and, if the delivery of a prospectus is required at any time prior to the expiration of nine months after the time of issue of the Prospectus in connection with the offering or sale of the Shares and if at such time any event shall have occurred as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such Prospectus is delivered, not misleading, or, if for any other reason it shall be necessary during such period to amend or supplement the Prospectus in order to comply with the Act, to notify you and upon your request to prepare and furnish without charge to each Underwriter and to any dealer in securities as many copies as you may from time to time reasonably request of an amended Prospectus or a supplement to the Prospectus which will correct such statement or omission or effect such compliance, and in case any Underwriter is required to deliver a prospectus in connection with sales of any of the Shares at any time nine months or more after the time of issue of the Prospectus, upon your request but at the expense 7 8 of such Underwriter, to prepare and deliver to such Underwriter as many copies as you may reasonably request of an amended or supplemented Prospectus complying with Section 10(a)(3) of the Act; (d) To make generally available to the Company's security holders as soon as practicable, but in any event not later than 18 months after the effective date of the Registration Statement (as defined in Rule 158(c) under the Act), an earnings statement of the Company complying with Section 11(a) of the Act and the rules and regulations thereunder (including, at the option of the Company, Rule 158); (e) During the period beginning from the date hereof and continuing to and including the date 180 days after the effective date of the Registration Statement, not to offer, sell, contract to sell or otherwise dispose of, other than for the issuance of shares upon the exercise of stock options, any securities of the Company that are substantially similar to the Shares without the consent of the Representatives; (f) To the extent necessary to comply with the National Association of Securities Dealers, Inc. bulletin board rules and regulations or the rules and regulations of any other exchange on which the Shares are listed, to furnish to holders of the Shares as soon as practicable after the end of each fiscal year an annual report (including a balance sheet and statements of income, stockholders, equity and cash flows of the Company certified by independent public accountants) and, as soon as practicable after the end of each of the first three quarters of each fiscal year (beginning with the fiscal quarter ending after the effective date of the Registration Statement), consolidated summary financial information of the Company for such quarter in reasonable detail; (g) During a period of three years from the effective date of the Registration Statement, to furnish to you copies of all reports or other communications (financial or other) furnished to stockholders of the Company, and to deliver to you (i) as soon as they are available, copies of any reports and financial statements furnished to or filed with the Commission or any national securities exchange on which any class of securities of the Company is listed; and (ii) such additional information concerning the business and financial condition of the Company as you may from time to time reasonably request (such financial statements to be on a consolidated basis to the extent the accounts of the Company and its subsidiaries (if any) are consolidated in reports furnished to their stockholders generally or to the Commission); (h) To use the net proceeds received by it from the sale of the Shares pursuant to this Agreement in the manner specified in the Prospectus under the caption "Use of Proceeds;" (i) If the Company elects to rely upon Rule 462(b), the Company shall file a Rule 462(b) Registration Statement with the Commission in compliance with Rule 462(b) by 5:00 P.M., Washington, D.C. time, on the date of this Agreement, and the Company shall at the time of filing either pay to the Commission the filing fee for the Rule 462(b) Registration Statement 8 9 or give irrevocable instructions for the payment of such fee pursuant to Rule 111(b) under the Act; (j) To file with the Commission such reports on Form SR as may be required by Rule 463 under the Act. 6. The Company covenants and agrees with the several Underwriters to pay or cause to be paid the following: (i) the fees, disbursements and expenses of their counsel and accountants in connection with the registration of the Shares under the Act and all other expenses in connection with the preparation, printing and filing of the Registration Statement, any Preliminary Prospectus and the Prospectus and amendments and supplements thereto and the mailing and delivering of copies thereof to the Underwriters and dealers; (ii) the cost of printing or producing any Agreement among Underwriters, this Agreement and Blue Sky Memoranda, closing documents (including any compilations thereof) and any other documents in connection with the offering, purchase, sale and delivery of the Shares; (iii) all expenses in connection with the qualification of the Shares for offering and sale under state securities laws, including the fees and disbursements of counsel for the Underwriters in connection with such qualification and in connection with the Blue Sky surveys (such Blue Sky costs not to exceed $10,000); (iv) all fees and expenses in connection with listing the Shares on the NASDAQ NMS; (v) the cost of preparing stock certificates; (vi) the cost and charges of any transfer agent or registrar; (vii) the cost and charges of DTC; (vii) the out-of-pocket expenses of the Underwriters, including without limitation, road show expenses and the Underwriter's legal fees and expenses (provided that the Company's obligation to pay such out-of-pocket expenses shall not exceed the amount of $40,000) and (viii) all other costs and expenses incident to the performance of its obligations hereunder which are not otherwise specifically provided for in this Section. The out-of-pocket expenses of the Underwriters, including the Underwriters' legal fees and expenses and the fees and disbursements in connection with qualification of the Shares for offering and sale under state securities laws shall be paid regardless of whether the offering contemplated hereby is consummated or not consummated for any reason, including market conditions, unless the offering is not consummated due to a willful breach of this Agreement by the Underwriters or because of the Underwriters' inability to perform their obligations under this Agreement. Upon consummation of the offering, the Underwriters' agree to credit such out-of-pocket expenses (up to a maximum of $40,000) against the fees paid pursuant to Section 2 hereof. 7. The obligations of the Underwriters hereunder, as to the Shares to be delivered at each Time of Delivery, shall be subject, in their discretion, to the condition that all representations and warranties and other statements of the Company herein are, at and as of such Time of Delivery, true and correct, the condition that the Company shall have performed all of its obligations hereunder theretofore to be performed, and the following additional conditions: (a) The Prospectus shall have been filed with the Commission pursuant to Rule 424(b) within the applicable time period prescribed for such filing by the rules and regulations under the Act and in accordance with Section 5(a) hereof; no stop order suspending the effectiveness of the Registration Statement or any part thereof shall have been issued and no proceeding for that 9 10 purpose shall have been initiated or threatened by the Commission; and all requests for additional information on the part of the Commission shall have been complied with to your reasonable satisfaction; if the Company has elected to rely upon Rule 462(b), the Rule 462(b) Registration Statement shall have become effective by 5:00 P.M., Washington, D.C. time, on the date of this Agreement; (b) Honigman Miller Schwartz and Cohn, counsel for the Underwriters, shall have furnished to you such opinion or opinions, dated as of such Time of Delivery, with respect to the validity of the Shares as well as such other related matters as you may reasonably request, and such counsel shall have received such papers and information as they may reasonably request to enable them to pass upon such matters; (c) Ice Miller Donadio & Ryan, counsel for the Company, shall have furnished to you their written opinion, dated such Time of Delivery, in form and substance satisfactory to you, to the effect that: (i) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Indiana, with power and authority (corporate and other) to own its properties and conduct its business as described in the Prospectus; (ii) The Company has an authorized capitalization as set forth in the Prospectus, and all of the issued shares of capital stock of the Company (including the Shares being delivered at such Time of Delivery) have been duly and validly authorized and issued and are fully paid and non-assessable; and the Shares conform in all material respects to the description of the Common Stock contained in the Prospectus; (iii) To the knowledge of such counsel and other than as set forth in the Prospectus there are no legal or governmental proceedings pending to which the Company is a party or of which any property of the Company is the subject which, if determined adversely to the Company, would individually or in the aggregate have a material adverse effect on the current or future consolidated financial position, stockholders' equity or results of operations of the Company; and, to the knowledge of such counsel, no such proceedings are threatened or contemplated by governmental authorities or threatened by others; (iv) This Agreement has been duly authorized, executed and delivered by the Company; (v) The issue and sale of the Shares being delivered at such Time of Delivery by the Company and the compliance by the Company with all of the provisions of this Agreement and the consummation of the transactions herein contemplated will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement 10 11 or instrument known to such counsel to which the Company is a party or by which the Company is bound or to which any of the property or assets of the Company is subject, nor will such action result in any violation of the provisions of the Articles of Incorporation (or other charter document) or By-laws of the Company or any statute or any order, rule or regulation known to such counsel of any court or governmental agency or body having jurisdiction over the Company or any of its properties; (vi) No consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for the issue and sale of the Shares or the consummation by the Company of the transactions contemplated by this Agreement, except the registration under the Act of the Shares and such consents, approvals, authorizations, registrations or qualifications as may be required under, state securities or Blue Sky laws in connection with the purchase and distribution of the Shares by the Underwriters; (vii) The Company is not, to the knowledge of such counsel, (i) in violation of its Articles of Incorporation (or other charter documents) or By-laws or (ii) in default in the performance or observance of any material obligation, agreement, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which it is a party or by which it or any of its properties may be bound; (viii) The statements set forth in the Prospectus under the caption, "Description of Capital Stock," insofar as they purport to constitute a summary of the terms of the capital stock of the Company, and under the captions _______________________________ insofar as they constitute or purport to describe matters of law or legal conclusions, provisions of laws and documents referred to therein, have been reviewed by such counsel, are accurate in all material respects and present fairly the information required to be shown therein; (ix) The Company is not an "investment company" or an entity "controlled" by an "investment company," as such terms are defined in the Investment Company Act; (x) The Registration Statement and the Prospectus and any further amendments and supplements thereto made by the Company prior to such Time of Delivery (other than the financial statements, related schedules and other financial data therein, as to which such counsel need express no opinion) comply as to form in all material respects with the requirements of the Act and the rules and regulations thereunder; although such counsel does not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statement or the Prospectus, except as otherwise indicated in its opinion, such counsel has no reason to believe that, as of its effective date, the Registration Statement or any further amendment thereto made by the Company prior to such Time of Delivery (other than the financial statements, related schedules and other financial data therein, as to which such counsel need express no opinion) contained an 11 12 untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that, as of its date, the Prospectus or any further amendment or supplement thereto made by the Company prior to such Time of Delivery (other than the financial statements, related schedules and other financial data therein, as to which such counsel need express no opinion) contained an untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading or that, as of such Time of Delivery, either the Registration Statement or the Prospectus or any further amendment or supplement thereto made by the Company prior to such Time of Delivery (other than the financial statements, related schedules and other financial data therein, as to which such counsel need express no opinion) contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and they do not know of any amendment to the Registration Statement required to be filed or of any contracts or other documents of a character required to be filed as an exhibit to the Registration Statement or required to be described in the Registration Statement or the Prospectus which are not filed or described as required; and (d) On the date of the Prospectus at a time prior to the execution of this Agreement, at 9:30 A.M., Detroit time, on the effective date of any post-effective amendment to the Registration Statement filed subsequent to the date of this Agreement and also at each Time of Delivery, Ernst & Young, L.L.P. shall have furnished to you a letter or letters, dated the respective dates of delivery thereof, in form and substance satisfactory to you, to the effect set forth in Annex I hereto (the executed copy of the letter delivered prior to the execution of this Agreement is attached as Annex I(a) hereto and a draft of the form of letter to be delivered on the effective date of any post-effective amendment to the Registration Statement and as of each Time of Delivery is attached as Annex I(b) hereto); (e) (i) The Company shall not have sustained since the date of the latest audited financial statements included in the Prospectus, any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Prospectus, and (ii) since the respective dates as of which information is given in the Prospectus there shall not have been any change in the capital stock or long-term debt of the Company or any change in or affecting the general affairs, business, management, financial position, stockholders' equity, or results of operations of the Company, otherwise than as set forth or contemplated in the Prospectus, the effect of which, in any such case described in clause (i) or (ii), is in the judgment of the Representative after discussion with the Company so material and adverse as to make it impracticable or inadvisable to proceed with the public offering or the delivery of the Shares being delivered at such Time of Delivery on the terms and in the manner contemplated in the Prospectus; (f) (x) On or after the date hereof (i) trading in securities generally on the NASDAQ NMS shall not have been suspended or materially limited, (ii) trading in the Shares on the 12 13 NASDAQ NMS shall not have been suspended, (iii) a general moratorium on commercial banking activities in Detroit shall not have been declared by Federal or Detroit authorities or (iv) there shall not have occurred any outbreak of hostilities or escalation thereof or other calamity or crisis having an adverse effect on the financial markets of the United States and (y) the occurrence or consequences of any one or more of such events shall have, in the reasonable judgment of the Underwriters, made it impracticable to market the Shares on the terms and in the manner contemplated by the Prospectus; (g) The Shares to be sold at such Time of Delivery shall have been duly listed, subject to notice of issuance, on the NASDAQ NMS; (h) The Company shall have complied with the provisions of Section 5(c) hereof with respect to the furnishing of Prospectuses; (i) The Company shall furnish or cause to be furnished to you at such Time of Delivery certificates of officers of the Company satisfactory to you as to the accuracy of the representations and warranties of the Company herein at and as of such Time of Delivery, as to the performance by the Company of all of its obligations hereunder to be performed at or prior to such Time of Delivery, as to the matters set forth in subsections (a) and (e) of this Section and as to such other matters as you may reasonably request; and (j) The Company and its executive officers and directors and certain shareholders as designated by the Underwriters shall have executed and delivered Lock-Up Agreements substantially in the form attached hereto as Annex II. 8. (a) The Company will indemnify and hold harmless each Underwriter against any losses, claims, damages or liabilities, joint or several, to which such Underwriter may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the Registration Statement, the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each Underwriter for any legal or other expenses reasonably incurred by such Underwriter in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any Preliminary Prospectus, the Registration Statement, the Prospectus, or any such amendment or supplement thereto in reliance upon and in conformity with written information furnished to the Company by any Underwriter through the Representatives expressly for use therein; and provided, further, that with respect to any untrue statement or omission or alleged untrue statement or omission made in any Preliminary Prospectus or Preliminary Offering Circular, the indemnity agreement contained in this subsection (a) shall not inure to the benefit of any Underwriter to the extent that any such loss, claim, 13 14 damage or liability of such Underwriter results from the fact that a copy of the Prospectus was not sent or given to any person at or prior to the written confirmation of the sale of such securities to such person. (b) Each Underwriter will indemnify and hold harmless the Company against any losses, claims, damages or liabilities to which the Company may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the Registration Statement, the Prospectus, or any amendment or supplement thereto, or arise out of or are based on the omission or alleged omission to state therein a material fact required be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement, alleged untrue statement or omission or alleged omission was made in any Preliminary Prospectus, the Registration Statement, the Prospectus, or any such amendment or supplement thereto in reliance upon and in conformity with written information furnished to the Company by such Underwriter through the Representatives expressly for use therein. (c) Promptly after receipt by an indemnified party under subsections (a) or (b) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against an indemnifying party under such subsection, notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under such subsection. In case any such action shall be brought against any indemnified party and it has notified the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and, after notice from the indemnifying party to such indemnified party of its election to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under such subsection for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (ii) does not include a statement as to, or an admission of, fault, culpability or a failure to act, by or on behalf of any indemnified party. (d) If the indemnification provided for in this Section 8 is unavailable or insufficient to hold harmless an indemnified party under subsections (a) or (b) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as 14 15 a result of such losses, claims, damages or liabilities (or actions in respect thereof) such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other from the offering of the Shares. If, however, the allocation provided for by the immediately preceding sentence is not permitted by applicable law or if the indemnified party failed to give the notice required under subsection (c) above, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company on the one hand and the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or abilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other shall be deemed to be in the same proportion the total net proceeds from the offering (before deducting expenses) received by the Company bear to the total underwriting commissions received by the Underwriters, in each case as set forth in the table on the cover page of the Prospectus. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or the Underwriters on the other and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contributions pursuant to this section (d) were determined by pro rata allocation (even if the Underwriters are treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this subsection (d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (d), no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Shares underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations in this subsection (d) to contribute are several in proportion to their respective underwriting obligations and not joint. (e) The obligations of the Company under this Section 8 shall be in addition to any liability which the Company may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Underwriter within the meaning of the Act; and the obligations of the Underwriters under this Section 8 shall be in addition to any liability which the respective Underwriters may otherwise have and shall extend, upon the same terms and conditions, to each officer and director of the Company and to each person, if any, who controls the Company within the meaning of the Act. 15 16 9. (a) If any Underwriter shall default in its obligation to purchase the Shares which it has agreed to purchase hereunder at a Time of Delivery, you may in your discretion arrange for you or another party or other parties to purchase such Shares on the terms contained herein. If within 36 hours after such default by any Underwriter you do not arrange for the purchase of such Shares, then the Company shall be entitled to a further period of 36 hours within which to procure another party or other parties satisfactory to you to purchase such Shares on such terms. In the event that, within the respective prescribed periods, you notify the Company that you have so arranged for the purchase of such Shares, or the Company notifies you that it has so arranged for the purchase of such Shares, you or the Company shall have the right to postpone such Time of Delivery for a period of not more than seven days, in order to effect whatever changes may thereby be made necessary in the Registration Statement or the Prospectus, or in any other documents or arrangements, and the Company agrees to file promptly any amendments to the Registration Statement or the Prospectus which in your opinion may thereby be made necessary. The term "Underwriter" as used in this Agreement shall include any person substituted under this Section with like effect as if such person had originally been a party to this Agreement with respect to such Shares. (b) If, after giving effect to any arrangements for the purchase of the Shares of a defaulting Underwriter or Underwriters by you and the Company as provided in subsection (a) above, the aggregate number of such Shares which remains unpurchased does not exceed one-tenth of the aggregate number of all the Shares to be purchased at such Time of Delivery, then the Company shall have the right to require each non-defaulting Underwriter to purchase the number of shares which such Underwriter agreed to purchase hereunder at such Time of Delivery and, in addition, to require each non-defaulting Underwriter to purchase its pro rata share (based on the number of Shares which such Underwriter agreed to purchase hereunder) of the Shares of such defaulting Underwriter or Underwriters for which such arrangements have not been made, but nothing herein shall relieve a defaulting Underwriter from liability for its default. (c) If, after giving effect to any arrangements for the purchase of the Shares of a defaulting Underwriter or Underwriters by you and the Company as provided in subsection (a) above, the aggregate number of such Shares which remains unpurchased exceeds one-tenth of the aggregate number of all the Shares to be purchased at such Time of Delivery, or if the Company shall not exercise the right described in subsection (b) above to require non-defaulting Underwriters to purchase Shares of a defaulting Underwriter or Underwriters, then this Agreement (or, with respect to the Second Time of Delivery, the obligations of the Underwriters to purchase and of the Company to sell the Optional Shares) shall thereupon terminate, without liability on the part of any non-defaulting Underwriter or, the Company, except for the expenses to be borne by the Company and the Underwriters as provided in Section 6 hereof and the indemnity and contribution agreements in Section 8 hereof; but nothing herein shall relieve a defaulting Underwriter from liability for its default. 10. The respective indemnities, agreements, representations, warranties and other statements of the Company and the several Underwriters, as set forth in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement, shall remain in full force and 16 17 effect, regardless of any investigation (or any statement as to the results thereof) made by or on behalf of any Underwriter or any controlling person of any Underwriter, or the Company, or any officer or director or controlling person of the Company, and shall survive delivery of and payment for the Shares. 11. If this Agreement shall be terminated pursuant to Section 9 hereof, the Company shall not then be under any liability to any Underwriter except as provided in Sections 6 and 8 hereof; but, if for any other reason, any Shares are not delivered by or on behalf of the Company as provided herein, the Company will reimburse the Underwriters through you for all out-of-pocket expenses approved in writing by you, including fees and disbursements of counsel, reasonably incurred by the Underwriters in making preparations for the purchase, sale and delivery of the Shares not so delivered, but the Company shall then be under no further liability to any Underwriter except as provided in Sections 6 and 8 hereof. 12. In all dealings hereunder, you shall act on behalf of each of the Underwriters, and the parties hereto shall be entitled to act and rely upon any statement, request, notice or agreement on behalf of any Underwriter made or given by you. All statements, requests, notices and agreements hereunder shall be in writing, and if to the Underwriters shall be delivered or sent by mail, telex or facsimile transmission to Roney at One Griswold, Detroit, Michigan 48226, Attention Syndicate Department; and if to the Company shall be delivered or sent by mail to the address of the Company, respectively set forth in the Registration Statement, Attention: _____________________; provided, however, that any notice to an Underwriter pursuant to Section 8(c) hereof shall be delivered or sent by mail, telex or facsimile transmission to such Underwriter at its address set forth in its Underwriters' Questionnaire, or telex constituting such Questionnaire, which address will be supplied to the Company by you upon request. Any such statements, requests, notices or agreements shall take effect upon receipt thereof. 13. This Agreement shall be binding upon, and inure solely to the benefit of, the Underwriters and the Company, and, to the extent provided in Sections 8 and 10 hereof, the officers and directors of the Company, and each person who controls the Company or any Underwriter, and their respective heirs, executors, administrators, successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No purchaser of any of the Shares from any Underwriter shall be deemed a successor or assign by reason merely of such purchase. 14. As used herein, the term "business day" shall mean any day when the Commission's office in Washington, D.C. is open for business. 15. This Agreement shall be governed by and construed in accordance with the laws of the State of Michigan. 17 18 16. This Agreement may be executed by any one or more of the parties hereto in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. If the foregoing is in accordance with your understanding, please sign and return to us one counterpart for the Company plus one for each counsel thereof, and upon the acceptance hereof by you, on behalf of each of the Underwriters, this letter and such acceptance hereof shall constitute a binding agreement between each of the Underwriters and the Company. It is understood that your acceptance of this letter on behalf of each of the Underwriters is pursuant to the authority set forth in a form of Agreement among Underwriters, the form of which shall be submitted to the Company for examination upon request, but without warranty on your part as to the authority of the signers thereof. Very truly yours, Bioanalytical Systems, Inc. By:____________________________________ Name: Title: Accepted as of the date hereof: Roney & Co., L.L.C. By:_________________________ Name: Title: The Ohio Company By:_________________________ Name: Title: 18 19 SCHEDULE I
Number of Optional Shares to be Total Number of Purchased if Shares to be Maximum Option Underwriter Purchased Exercised -------------- -------------- ---------------- Roney & Co, L.L.C. . . . . . . . . . . . . . . . . The Ohio Company . . . . . . . . . . . . . . . . . _________ _________ Total 1,500,000 225,000
19 20 ANNEX I ANNEX 1 (a) ANNEX 1 (b) 21 ANNEX II FORM OF LOCK-UP AGREEMENT EX-3.1 3 FORM OF SECOND REST. ARTICLES OF INC. 1 EXHIBIT 3.1 SECOND RESTATED ARTICLES OF INCORPORATION OF BIOANALYTICAL SYSTEMS, INC. This corporation ("Corporation") is governed by the applicable provisions of the Indiana Business Corporation Law ("Act"). ARTICLE I Name The name of the Corporation is Bioanalytical Systems, Inc. ARTICLE II Shares Section 2.1. Number. The total number of shares which the Corporation is authorized to issue is 20 million shares. Section 2.2. Classes. There shall be two classes of shares of the Corporation. One class shall be designated as "Common Shares" and shall consist of 19 million of the authorized shares, and the other class shall be designated as "Preferred Shares", and shall consist of one million of the authorized shares. Section 2.3. Relative Rights, Preferences, Limitations and Restrictions of Shares. (a) Common Shares. Except to the extent granted to the Preferred Shares, the Common Shares shall have all of the rights accorded to shares under the Act including but not limited to voting rights and all rights to distribution of the net assets of the Corporation upon dissolution. (b) Preferred Shares. By amendment of these Second Restated Articles of Incorporation in the manner provided in the Act, the Preferred Shares shall have such preferences, limitations, restrictions and relative voting and other rights as may be determined, in whole or in part, by the Board of Directors prior to the issuance thereof. 2 Section 2.4. Voting Rights of Common Shares. Each holder of Common Shares shall be entitled to one vote for each share owned of record on the books of the Corporation on each matter submitted to a vote of the holders of Common Shares. ARTICLE III Registered Office and Registered Agent Section 3.1. Registered Office. The street address of the Corporation's registered office is 2701 Kent Avenue, West Lafayette, Indiana 47906. Section 3.2. Registered Agent. The name of the Corporation's registered agent at such registered office is Peter T. Kissinger. ARTICLE IV Board of Directors Section 4.1. Number, Terms. The total number of directors shall be that specified in or fixed in accordance with these Second Restated Articles of Incorporation or in the By-Laws. In the absence of a provision in the By-Laws specifying the number of directors or setting forth the manner in which such number shall be fixed, the number of directors shall be nine. The By-Laws may provide for staggering the terms of directors into two or three groups in the manner provided in the Act. Section 4.2. Election by Voting Groups. The terms of Preferred Shares may provide for the election of one or more directors by the holders of Common Shares and/or by the holders of one or more series of Preferred Shares. Section 4.3. Removal of Directors. One or more directors may be removed with or without cause by the vote of the holders of a majority of the outstanding Common Shares, subject to any limitation on the removal of directors contained in the terms of Preferred Shares. ARTICLE V Indemnification Section 5.1. General. The Corporation shall, to the fullest extent to which it is empowered to do so by the Act, or any other applicable law, as from time to time in effect, indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative and whether formal or informal, by reason of the fact that he or she is or was a Director, Officer, employee or agent of the Corporation, or who, while serving as such Director, Officer, employee or agent of the Corporation, is or was serving at the request - 2 - 3 of the Corporation as a director, officer, partner, trustee, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, whether for profit or not, against expenses (including counsel fees), judgments, settlements, penalties and fines (including excise taxes assessed with respect to employee benefit plans) actually or reasonably incurred by him in accordance with such action, suit or proceeding, if he acted in good faith and in a manner he reasonably believed, in the case of conduct in his official capacity, was in the best interests of the Corporation, and in all other cases, was not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, he either had reasonable cause to believe his conduct was lawful or no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not meet the prescribed standard of conduct. Section 5.2. Authorization of Indemnification. To the extent that a Director, Officer, employee or agent of the Corporation has been successful, on the merits or otherwise, in the defense of any action, suit or proceeding referred to in Section 5.1 of this Article V, or in the defense of any claim, issue or matter therein, the Corporation shall indemnify that person against expenses (including counsel fees) actually and reasonably incurred by that person in connection therewith. Any other indemnification under Section 5.1 of this Article V (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case, upon a determination that indemnification of the Director, Officer, employee or agent is permissible in the circumstances because he has met the applicable standard of conduct. Such determination shall be made (a) by the Board of Directors by a majority vote of a quorum consisting of Directors who were not at the time parties to such action, suit or proceeding; or (b) if a quorum cannot be obtained under subdivision (a), by a majority vote of a committee duly designated by the Board of Directors (in which designation Directors who are parties may participate), consisting solely of two (2) or more Directors not at the time parties to such action, suit or proceeding; or (c) by special legal counsel: (i) selected by the Board of Directors or its committee in the manner prescribed in subdivision (a) or (b), or (ii) if a quorum of the Board of Directors cannot be obtained under subdivision (a) and a committee cannot be designated under subdivision (b), selected by a majority vote of the full Board of Directors (in which selection Directors who are parties may participate), or (iii) by the Shareholders, but shares owned by or voted under the control of Directors who are at the time parties to such action, suit or proceeding may not be voted on the determination. Authorization of indemnification and evaluation as to reasonableness of expenses shall be made in the same manner as the determination that indemnification is permissible, except that if the determination is made by special legal counsel, authorization of indemnification and evaluation as to reasonableness of expenses shall be made by those entitled under subdivision (c) to select counsel. Section 5.3. Good Faith Defined. For purposes of any determination under Section 5.1 of this Article V, a person shall be deemed to have acted in good faith and to have otherwise met - 3 - 4 the applicable standard of conduct set forth in Section 5.1 if his action is based on information, opinions, reports or statements, including financial statements and other financial data, if prepared or presented by (a) one or more Officers or employees of the Corporation or another enterprise whom he reasonably believes to be reliable and competent in the matters presented; (b) legal counsel, public accountants, appraisers or other persons as to matters he reasonably believes are within the person's professional or expert competence; or (c) a committee of the Board of Directors of the Corporation or another enterprise of which the person is not a member if he reasonably believes the committee merits confidence. The term "another enterprise" as used in this Section 5.3 shall mean any other corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise of which the person is or was serving at the request of the Corporation as a director, officer, partner, trustee, employee or agent. The provisions of this Section 5.3 shall not be deemed to be exclusive or to limit in any way the circumstances in which a person may be deemed to have met the applicable standards of conduct set forth in Section 5.1 of this Article V. Section 5.4. Payment of Expenses in Advance. Expenses incurred in connection with any civil or criminal action, suit or proceeding may be paid for or reimbursed by the Corporation in advance of the final disposition of such action, suit or proceeding, as authorized in the specific case in the same manner described in Section 5.2 of this Article V, upon receipt of a written affirmation of the Director, Officer, employee or agent's good faith belief that he has met the standard of conduct described in Section 5.1 of this Article V and upon receipt of a written undertaking by or on behalf of the Director, Officer, employee or agent to repay such amount if it shall ultimately be determined that he did not meet the standard of conduct set forth in Section 5.1 of this Article V, and a determination is made that the facts then known to those making the determination would not preclude indemnification under this Article V. Section 5.5. Provisions Not Exclusive. The indemnification provided by this Article V shall not be deemed exclusive of any other rights to which a person seeking indemnification may be entitled under these Articles, the Corporation's Amended and Restated Bylaws, any resolution of the Board of Directors or Shareholders, any other authorization, whenever adopted, after notice, by a majority vote of all voting stock then outstanding, or any contract, both as to action in his official capacity and as to action in another capacity while holding that office, and shall continue as to a person who has ceased to be a Director, Officer, employee or agent, and shall inure to the benefit of the heirs, executors and administrators of that person. Section 5.6. Vested Right to Indemnification. The right of any individual to indemnification under this Article V shall vest at the time of occurrence or performance of any event, act or omission giving rise to any action, suit or proceeding of the nature referred to in Section 5.1 of this Article V and, once vested, shall not later be impaired as a result of any amendment, repeal, alteration or other modification of any or all of these provisions. Notwithstanding the foregoing, the indemnification afforded under this Article V shall be applicable to all alleged prior acts or omissions of any individual seeking indemnification hereunder, regardless of the fact that such alleged acts or omissions may have occurred prior to - 4 - 5 the adoption of this Article V. To the extent such prior acts or omissions cannot be deemed to be covered by this Article V, the right of any individual to indemnification shall be governed by the indemnification provisions in effect at the time of the prior acts or omissions. Section 5.7. Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was a Director, Officer, employee or agent of the Corporation, or who is or was serving at the request of the Corporation as a director, officer, partner, trustee, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against any liability asserted against or incurred by the individual in that capacity or arising from the individual's status as a Director, Officer, employee or agent, whether or not the Corporation would have power to indemnify the individual against the same liability under this Article V. Section 5.8. Additional Definitions. For purposes of this Article V, references to the "Corporation" shall include any domestic or foreign predecessor entity of the Corporation in a merger or other transaction in which the predecessor's existence ceased upon consummation of the transaction. For purposes of this Article V, "serving an employee benefit plan at the request of the Corporation" shall include any service as a Director, Officer, employee or agent of the Corporation which imposes duties on, or involves services by that Director, Officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries. A person who acted in good faith and in a manner he reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interest of the Corporation" referred to in this Article V. For purposes of this Article V, "party" includes any individual who is or was a plaintiff, defendant or respondent in any action, suit or proceeding, or who is threatened to be made a named defendant or respondent in any action, suit or proceeding. For purposes of this Article V, "official capacity," when used with respect to a Director, shall mean the position of director of the Corporation; and when used with respect to an individual other than a Director, shall mean the office in the Corporation held by the Officer or the employment or agency relationship undertaken by the employee or agent on behalf of the Corporation. "Official capacity" does not include service for any other foreign or domestic corporation or any partnership, joint venture, trust, employee benefit plan, or other enterprise, whether for profit or not. Section 5.9. Payments a Business Expense. Any payments made to any indemnified party under this Article V under any other right to indemnification shall be deemed to be an ordinary and necessary business expense of the Corporation, and payment thereof shall not subject any person responsible for the payment, or the Board of Directors, to any action for corporate waste or to any similar action. - 5 - EX-3.2 4 FORM OF SECOND RESTATED BY-LAWS 1 EXHIBIT 3.2 SECOND RESTATED BYLAWS OF BIOANALYTICAL SYSTEMS, INC. ARTICLE I RECORDS PERTAINING TO SHARE OWNERSHIP Section 1. Recognition of Shareholders. Bioanalytical Systems, Inc. (the "Corporation") is entitled to recognize a person registered on its books as the owner of shares of the Corporation as having the exclusive right to receive dividends and to vote those shares, notwithstanding any other person's equitable or other claim to, or interest in, those shares. Section 2. Transfer of Shares. Shares are transferable only on the books of the Corporation, subject to any transfer restrictions imposed by the Articles of Incorporation, these Bylaws, or an agreement among shareholders and the Corporation. Shares may be so transferred upon presentation of the certificate representing the shares, endorsed by the appropriate person or persons, and accompanied by (a) reasonable assurance that those endorsements are genuine and effective, and (b) a request to register the transfer. Transfers of shares are otherwise subject to the provisions of the Indiana Business Corporation Law (the "Act"), Article 8 of the Indiana Uniform Commercial Code and federal securities laws. Section 3. Certificates. Each shareholder is entitled to a certificate signed (manually or in facsimile) by the President or a Vice President and the Secretary or an Assistant Secretary, setting forth (a) the name of the Corporation and that it was organized under Indiana law, (b) the name of the person to whom issued, (c) the number, class, and series of shares represented, and (d) a conspicuous statement that the Corporation will furnish to the holder of the certificate on request, in writing, and without charge, a summary of the designations, relative rights, preferences, and limitations applicable to each such class of shares, and the variations in rights, preferences, and limitations determined for each series within a class (and the authority of the Board of Directors to determine variations for future series). The Board of Directors shall prescribe the form of the certificate. Section 4. Lost or Destroyed Certificates. A new certificate may be issued to replace a lost or destroyed certificate. Unless waived by the Board of Directors, the shareholder in whose name the certificate was issued shall make an affidavit or affirmation of the fact that the certificate is lost or destroyed, shall advertise the loss or destruction in such manner as the Board of Directors may require, and shall give the Corporation a bond of indemnity in the amount and form which the Board of Directors may prescribe. 2 ARTICLE II MEETINGS OF THE SHAREHOLDERS Section 1. Annual Meetings. Annual meetings of the shareholders shall be held on the second Monday in February of each year, or on such other date as may be designated by the Board of Directors. Section 2. Special Meetings. Special meetings of the shareholders may be called by the President or by the Board of Directors. Special meetings of the shareholders shall be called upon delivery to the Secretary of the Corporation of one or more written demands for a special meeting of the shareholders describing the purposes of that meeting and signed and dated by the holders of at least 25% of all the votes entitled to be cast on any issue proposed to be considered at that meeting. Section 3. Notice of Meetings. The Corporation shall deliver or mail written notice stating the date, time, and place of any shareholders' meeting and, in the case of a special shareholders' meeting or when otherwise required by law, a description of the purposes for which the meeting is called, to each shareholder of record entitled to vote at the meeting, at such address as appears in the records of the Corporation and at least 10, but no more than 60, days before the date of the meeting. Section 4. Waiver of Notice. A shareholder may waive notice of any meeting, before or after the date and time of the meeting as stated in the notice, by delivering a signed waiver to the Corporation for inclusion in the minutes. A shareholder's attendance at any meeting, in person or by proxy (a) waives objection to lack of notice or defective notice of the meeting, unless the shareholder at the beginning of the meeting objects to holding the meeting or transacting business at the meeting, and (b) waives objection to consideration of a particular matter at the meeting that is not within the purposes described in the meeting notice, unless the shareholder objects to considering the matter when it is presented. Section 5. Record Date. The Board of Directors may fix a record date, which may be a future date, for the purpose of determining the shareholders entitled to notice of a shareholders' meeting, to demand a special meeting, to vote, or to take any other action. A record date shall be at least 10, but not more than 70, days before the meeting or action requiring a determination of shareholders. If the Board of Directors does not fix a-record date, the record date shall be the 10th day prior to the date of the meeting or other action. Section 6. Voting by Proxy. A shareholder may appoint a proxy to vote or otherwise act for the shareholder pursuant to a written appointment form executed by the shareholder or the shareholder's duly authorized attorney-in-fact. An appointment of a proxy is effective when received by the Secretary or other officer or agent of the Corporation authorized to tabulate votes. The general proxy of a fiduciary is given the same effect as the general proxy of any other - 2 - 3 shareholder. A proxy appointment is valid for 11 months unless otherwise expressly stated in the appointment form. Section 7. Voting Lists. Following the record date for a shareholders' meeting, the Secretary shall prepare an alphabetical list of all shareholders entitled to notice of the meeting, arranged by voting group and within each voting group by class and series, and showing the address and number of shares held by each shareholder. The list shall be kept on file at the principal office of the Corporation or at a place identified in the meeting notice in the city where the meeting will be held. The list shall be available for inspection and copying by any shareholder entitled to vote at the meeting, or by the shareholder's agent or attorney authorized in writing, at any time during regular business hours, beginning 5 business days before the date of the meeting through the meeting. The list shall also be made available to any shareholder, or to the shareholder's agent or attorney authorized in writing, at the meeting and any adjournment thereof. Failure to prepare or make available a voting list with respect to any shareholder's meeting shall not affect the validity of any action taken at such meeting. Section 8. Quorum; Approval. At any meeting of shareholders, a majority of the votes entitled to be cast on a matter by a voting group at the meeting constitutes a quorum of that voting group. If a quorum of a voting group is present when a vote is taken, action on a matter is approved by that voting group if the votes cast in favor of the action exceed the votes cast in opposition to the action, unless a greater number is required by law, the Articles of Incorporation, or these Bylaws. If more than one voting group is entitled to vote on a matter, approval by each voting group is required for the matter to be approved by the shareholders as a whole. Section 9. Action by Consent. Any action required or permitted to be taken at a shareholders' meeting may be taken without a meeting if the action is taken by all the shareholders entitled to vote on the action. The action must be evidenced by one or more written consents describing the action taken, signed by all the shareholders entitled to vote on the action, and delivered to the Corporation for inclusion in the minutes. If not otherwise determined pursuant to Section 5 of this Article II, the record date for determining shareholders entitled to take action without a meeting is the date the first shareholder signs the consent to such action. Section 10. Presence. Any or all shareholders may participate in any annual or special shareholders' meeting by, or through the use of, any means of communication by which all shareholders participating may simultaneously hear each other during the meeting. A shareholder so participating is deemed to be present in person at the meeting. - 3 - 4 ARTICLE III BOARD OF DIRECTORS Section 1. Powers and Duties. All corporate powers are exercised by or under the authority of, and the business and affairs of the Corporation are managed under the direction of, the Board of Directors, unless otherwise provided in the Articles of Incorporation. Section 2. Number and Terms of Office; Qualifications. The Corporation shall have no fewer than seven and no greater than nine directors. Subject to the limitations contained in this Section 2, the number of directors may be fixed or changed from time to time by a majority vote of the Board of Directors. Directors are elected at each annual shareholders' meeting and serve for a term expiring at the following annual shareholders' meeting. A director who has been removed pursuant to Section 3 of this Article III ceases to serve immediately upon removal; otherwise, a director whose term has expired continues to serve until a successor is elected and qualifies or until there is a decrease in the number of directors. A person need not be a shareholder or an Indiana resident to qualify to be a director. Section 3. Removal. Subject to any limitations on, and requirements for, removal of directors contained in the Articles of Incorporation, any director may be removed with or without cause by action of the shareholders taken at any meeting the notice of which states that one of the purposes of the meeting is removal of the director. Section 4. Vacancies. Subject to any provisions concerning the filling of vacancies contained in the Articles of Incorporation, if a vacancy occurs on the Board of Directors, including a vacancy resulting from an increase in the number of directors, the Board of Directors may fill the vacancy; and if the directors remaining in office constitute fewer than a quorum of the Board, the directors remaining in office may fill the vacancy by the affirmative vote of a majority of those directors. Any director elected to fill a vacancy holds office until the next annual meeting of the shareholders and/or until a successor is elected and qualifies. Section 5. Annual Meetings. Unless otherwise agreed by the Board of Directors, the annual meeting of the Board of Directors shall be held immediately following the annual meeting of the shareholders, at the place where the meeting of shareholders was held, for the purpose of electing officers and considering any other business which may be specifically set forth in the notice of the meeting. Section 6. Regular and Special Meetings. Regular meetings of the Board of Directors may be held pursuant to a resolution of the Board of Directors establishing a method for determining the date, time, and place of those meetings. Special meetings of the Board of Directors may be held upon the call of the President or of any one director. - 4 - 5 Section 7. Notice and Agenda. Notice of a meeting may be waived in writing before or after the time of the meeting. The waiver must be signed by the director entitled to the notice and filed with the minutes of the meeting. A director's attendance at or participation in a meeting waives any required notice of the meeting, unless at the beginning of the meeting (or promptly upon the director's arrival) the director objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting. All notices of a meeting of the Board of Directors shall include an agenda specifically setting forth in reasonable detail any and all matters to be officially acted upon at such meeting. Section 8. Quorum. A quorum for the transaction of business at any meeting of the Board of Directors consists of a majority of the number of directors then in office. In all cases, except as otherwise expressly required by the Act or the Articles of Incorporation, the approval or consent of a majority of the directors then in office shall be required in order to authorize or approve actions or other matters presented to the Board of Directors. Section 9. Action by Consent. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if the action is taken by all directors then in office. The action must be evidenced by one or more written consents describing the action taken, signed by each director, and included in the minutes. Action of the Board of Directors taken by consent is effective when the last director signs the consent, unless the consent specifies a prior or subsequent effective date. Section 10. Committees. The Board of Directors may create one or more committees and appoint members of the Board of Directors to serve on them. Each committee may have one or more members, who serve at the pleasure of the Board of Directors. All rules applicable to action by the Board of Directors apply to committees and their members. The Board of Directors may specify the authority that a committee may exercise; however, a committee may not (a) authorize distributions, except a committee may authorize or approve a reacquisition of shares if done according to a formula or method prescribed by the Board of Directors, (b) approve or propose to shareholders action that must be approved by shareholders, (c) fill vacancies on the Board of Directors or on any of its committees, (d) amend the Articles of Incorporation, (e) adopt, amend, or repeal these Bylaws, (f) approve a plan of merger not requiring shareholder approval, or (g) authorize or approve the issuance or sale or a contract for the sale of shares, or determine the designation and relative rights, preferences, and limitations of a class or series of shares. Section 11. Presence. The Board of Directors may permit any or all directors to participate in any annual, regular, or special meeting by any means of communication by which all directors participating may simultaneously hear each other during the meeting. A director so participating is deemed to be present in person at the meeting. Section 12. Compensation. Each director shall receive such compensation for service as a director as may be fixed by the Board of Directors. - 5 - 6 ARTICLE IV OFFICERS Section 1. Officers. The Corporation shall have a President, a Vice President, a Secretary, a Treasurer, and such assistant officers as the Board of Directors or the President designates. The same individual may simultaneously hold more than one office. Section 2. Terms of Office. Officers are elected at each annual meeting of the Board of Directors and serve for a term expiring at the following annual meeting of the Board of Directors. An officer who has been removed pursuant to Section 4 of this Article IV ceases to serve as an officer immediately upon removal; otherwise, an officer whose term has expired continues to serve until a successor is elected and qualifies. Section 3. Vacancies. If a vacancy occurs among the officers, the Board of Directors may fill the vacancy. Any officer elected to fill a vacancy holds office until the next annual meeting of the Board of Directors and until a successor is elected and qualifies. Section 4. Removal. Any officer may be removed by the Board of Directors at any time with or without cause. Section 5. Compensation. Each officer shall receive such compensation for service in office as may be fixed by the Board of Directors. Section 6. President. The President is the chief executive officer of the Corporation and is responsible for managing and supervising the affairs and personnel of the Corporation, subject to the general control of the Board of Directors. The President presides at all meetings of shareholders and directors. The President, or proxies appointed by the President, may vote shares of other corporations owned by the Corporation. The President has authority to execute, with the Secretary, powers of attorney appointing other corporations, partnerships, or individuals as the agents of the Corporation, subject to law, the Articles of Incorporation, and these Bylaws. The President has such other powers and duties as the Board of Directors may from time to time prescribe. Section 7. Vice President. The Vice President has all the powers of, and performs all the duties incumbent upon, the President during the President's absence or disability. The Vice President has such other powers and duties as the Board of Directors may from time to time prescribe. Section 8. Secretary. The Secretary is responsible for (a) attending all meetings of the shareholders and the Board of Directors, (b) preparing true and complete minutes of the proceedings of all meetings of the shareholders, the Board of Directors, and all committees of the Board of Directors, (c) maintaining and safeguarding the books (except books of account) and - 6 - 7 records of the Corporation, and (d) authenticating the records of the Corporation. If required, the Secretary attests the execution of deeds, leases, agreements, powers of attorney, certificates representing shares of the Corporation, and other official documents by the Corporation. The Secretary serves all notices of the Corporation required by law, the Board of Directors, or these Bylaws. The Secretary has such other duties as the Board of Directors may from time to time prescribe. Section 9. Treasurer. The Treasurer is responsible for (a) keeping correct and complete books of account which show accurately at all times the financial condition of the Corporation, (b) safeguarding all funds, notes, securities, and other valuables which may from time to time come into the possession of the Corporation, and (c) depositing all funds of the Corporation with such depositories as the Board of Directors shall designate. The Treasurer shall furnish at meetings of the Board of Directors, or when otherwise requested, a statement of the financial condition of the Corporation. The Treasurer has such other duties as the Board of Directors may from time to time prescribe. Section 10. Assistant Officer. The Board of Directors or the President may from time to time designate and elect assistant officers who shall have such powers and duties as the officers whom they are elected to assist specify and delegate to them, and such other powers and duties as the Board of Directors or the President may from time to time prescribe. An Assistant Secretary may, during the absence or disability of the Secretary, discharge all responsibilities imposed upon the Secretary of the Corporation, including, without limitation, attest the execution of all documents by the Corporation. ARTICLE V MISCELLANEOUS Section 1. Records. The Corporation shall keep as permanent records minutes of all meetings of the shareholders, the Board of Directors, and all committees of the Board of Directors, and a record of all actions taken without a meeting by the shareholders, the Board of Directors, and all committees of the Board of Directors. The Corporation or its agent shall maintain a record of the shareholders in a form that permits preparation of a list of the names and addresses of all shareholders, in alphabetical order by class of shares showing the number and class of shares held by each. The Corporation shall maintain its records in written form or in a form capable of conversion into written form within a reasonable time. The Corporation shall keep a copy of the following records at its principal office: (a) the Articles of Incorporation then currently in effect, (b) the Bylaws then currently in effect, (c) all resolutions adopted by the Board of Directors with respect to one or more classes or series of shares and fixing their relative rights, preferences, and limitations, if shares issued pursuant to those resolutions are outstanding, (d) minutes of all shareholders' meetings, and records of all actions taken by shareholders without a meeting, for the past 3 years, (e) all written communications to shareholders generally during the past 3 years, including annual financial statements furnished upon request of the shareholders, - 7 - 8 (f) a list of the names and business addresses of the current directors and officers, and (g) the most recent annual report filed with the Indiana Secretary of State. Section 2. Execution of Contracts and Other Documents. Unless otherwise authorized or directed by the Board of Directors, all written contracts and other documents entered into by the Corporation shall be executed on behalf of the Corporation by the President or a Vice President, and, if required, attested by the Secretary or an Assistant Secretary. Section 3. Accounting Year. The accounting year of the Corporation begins on October l of each year and ends on the September 30 immediately following. Section 4. Corporate Seal. The Corporation has no seal. ARTICLE VI AMENDMENT These Bylaws may be amended or repealed only by the Board of Directors. ------------------------------------ Secretary's Initial ------------------------------------ Date - 8 - EX-4.3 5 FORM OF LETTER AGMT. 9/97 1 EXHIBIT 4.3 Bioanalytical Systems, Inc. 2701 Kent Avenue West Lafayette, Indiana 47906 Primus Capital Fund II Limited Partnership Suite 2700 One Cleveland Center Cleveland, Ohio 44114 Attention: William C. Mulligan Middlewest Ventures II, L.P. 20 North Meridian Street Indianapolis, Indiana 46204 Attention: Thomas A. Hiatt Dear Bill and Tom: As you are aware, Bioanalytical Systems, Inc. (the "Company") intends to file a registration statement on Form S-1 for the purpose of registering an aggregate of 1.8 million shares of its Common Shares for sale to the public (the "Offering") through underwriters led by Roney & Co. L.L.C. and The Ohio Company (the "Underwriters"). The Common Shares being registered include Common Shares subject to an over-allotment option to be granted to the Underwriters. It is anticipated that the registration statement will be filed with the Securities and Exchange Commission on or about September 26, 1997, and that the Offering will be made on or about November 25, 1997. I have enclosed a draft of the registration statement and schedules showing the pro forma share capitalization of the Company prior to and after giving effect to the Offering. It is anticipated that the public offering price of the Common Shares will be between $9 and $11 per share. This purpose of this letter is to confirm our agreement that: 1. Effective immediately prior to the time of the closing of the underwriting agreement to be entered into between the Company and the Underwriters with respect to the Offering (the "Underwriting Agreement") and without the necessity of any further action on your part or on the part of the Company (other that those actions required to deliver to you the certificates representing the Common Shares to which you will be entitled as a result of the conversion of the Convertible Preferred Shares and the split of the Common Shares contemplated in connection with the Offering): (a) All of the Convertible Preferred Shares of the Company held by each of Primus Capital Fund II Limited Partnership ("Primus") and Middlewest Ventures II, L.P. 2 ("Middlewest"), aggregating 104,167 and 62,500 shares, respectively will be converted into Common Shares in accordance with the terms set forth in Section 2.3(c) of the Articles of Incorporation of the Company, as amended (the "Preferred Share Terms"), and you as holders of Convertible Preferred Shares shall not have any rights under the Preferred Share Terms with respect to the transactions contemplated by the Underwriting Agreement. Simultaneously with your execution of this letter, you will deliver to the Company: (i) the certificates representing the Convertible Preferred Shares, (ii) written notice of conversion and (iii) a proper assignment of the certificates to the Company, as contemplated by Paragraph 5 of the Preferred Share Terms, to be held by the Company in escrow pending the satisfaction of the conditions to the conversion of the shares described herein or returned to you if those conditions are not met. We hereby confirm to you that, based upon the current share capitalization of the Company, each outstanding Convertible Preferred Share is convertible into one Common Share of the Company, based upon the Preferred Share Terms. (b) The Share Purchase Agreement between Primus, Middlewest and the Company dated as of March 15, 1991, shall be terminated and of no further force or effect; provided, however, that the termination of the Share Purchase Agreement shall not affect the rights of the parties described in Exhibit E to the Share Purchase Agreement (a copy of which is attached hereto) (the "Registration Rights Agreement"), which shall continue in full force and effect. You agree, however, that you will not exercise your rights under Section 1 of the Registration Rights Agreement at any time prior to the expiration of the period set forth in the lock-up agreement required pursuant to the Underwriting Agreement and that you will not exercise your rights under Section 2 of the Registration Rights Agreement with respect to the Offering. (c) The Shareholders Agreement between you and the "Management Shareholders" of the Company named therein, dated as of March 15, 1991, shall be terminated and of no further force or effect. The Company agrees that, for so long as either of you hold more than 5% of the outstanding Common Shares of the Company, it will use its best efforts to cause one person designated by that shareholder to be nominated for election to the Board of Directors of the Company upon the expiration of the term of office of the directorships now held by you or any successive term. Consistent with the Company's past practice, service on the Board would not entail compensation beyond out of pocket expenses. 2. You will vote all of the Convertible Preferred Shares held by you in favor of the approval of an amendment to the Articles of Incorporation of the Company that, among other things, will (a) delete the current provisions of Section 2.3(c) thereof, and (b) increase the number of authorized Preferred Shares of the Company to 1,000,000 shares (the "Amended Articles of Incorporation"). To that end, you hereby appoint Peter T. Kissinger and Ronald E. Shoup, and either of them, with power of substitution, as your proxy and agent with full power to attend any meeting - 2 - 3 of shareholders of the Company and to vote on your behalf all of the Convertible Preferred Shares outstanding in your names in favor of the approval of the Amended Articles of Incorporation as described herein (or to execute a consent to shareholder action in lieu of a meeting), and this proxy shall be deemed to be coupled with an interest and shall not be subject to revocation by you without the consent of the Company. 3. You agree to execute the lock-up agreement as required pursuant to the Underwriting Agreement. In the event that the Offering is not made on or before December 31, 1997, then your agreements set forth in paragraph 1 above shall terminate at the close of business on that date. The Company agrees that the Amended Articles of Incorporation described in paragraph 2 above shall not be filed with the Secretary of State of Indiana and will not become effective until immediately prior to the effective time of the closing of the Underwriting Agreement. If this letter correctly sets forth the terms of our agreements, I would appreciate it if you would sign and return the copy provided for that purpose, and the documents described in paragraph 1(a) above (forms of which are provided herewith). Thank you for your cooperation in this matter. Very truly yours, Bioanalytical Systems, Inc. By:_______________________________ Peter T. Kissinger, President Accepted and agreed to: Primus Capital Fund II, L.P. By: Primus Management II, General Partner By: Primus Venture Partners, General Partner By:______________________________ , General Partner Date: ____________________, 1997 - 3 - 4 Middlewest Ventures II, L.P. By: Middlewest Management Company, a General Partner By: _______________________________________ , General Partner Date: ____________________, 1997 - 4 - 5 EXHIBIT E Registration of Common Shares 1. Required Registration. At any time and from time to time, upon the receipt by the Company from an Investor of a written request for the registration of all or any portion of the Common Shares owned by such Investor, the Company shall prepare and file within 60 days of receipt of such request a registration statement under the Securities Act of 1933 (the "1933 Act") covering the Common Shares which are subject to such request and shall use its best efforts to cause such registration statement to become effective within 120 days of receipt of such request. The Investors shall be entitled to an unlimited number of registrations under this Section l; provided, however, that the Company shall not be required to bear the expense of more than one such registration for all the Investors and the Investor making the request shall bear the expense of any additional registrations. In the event that an Investor determines for any reason not to proceed with a registration of Common Shares requested pursuant to this Section l at any time before the registration statement has been declared effective by the Securities and Exchange Commission ("SEC"), and such registration statement, if theretofore filed with the SEC, is withdrawn with respect to the Common Shares covered thereby, and such Investor agrees to bear its own expenses incurred in connection therewith and to reimburse the Company for the expenses incurred by it attributable to the registration of such Common Shares, then the Investors shall not be deemed to have exercised their right to require the Company to register Common Shares pursuant to this Section l at the expense of the Company. The Company shall not effect any registration of its securities (other than on Forms S-4 or S-8, or any successor or similar form) from the date of a request to register Common Shares pursuant to this Section 1 until the earlier of (i) 90 days after the date on which all securities covered by such registration statement have been sold or (ii) 180 days after the effective date of such registration statement. 2. Incidental Registration. Each time the Company shall determine to proceed with the preparation and filing of a registration statement under the 1933 Act in connection with the proposed offer and sale for money of any of its securities by the Company or any of its security holders (other than on Forms S-4 or S-8, or any successor or similar form), the Company will give written notice of its determination to the Investors and the other record holders of the Common Shares. Upon the written request of an Investor or holder given to the Company within 20 days after the mailing of any such notice by the Company as provided in this Section 2, the Company shall, subject to Sections 5 and 9 hereof, cause all such Common Shares which such Investor or holder has requested to be registered to be included in such registration statement. Neither the delivery of a notice under this Section 2 nor a request by an Investor or holder under this Section 2 shall, in any way, obligate the Company to file any registration statement and notwithstanding the filing of a registration statement, the Company may, at any time before the effective date thereof, elect to terminate the entire registration process without any further obligation to the Investors or record holders. 3. Short Form Registration. In addition to the registration rights provided in Sections 1 and 2 hereof, if the Company qualifies for the use of Form S-3 or any similar short form registration - 5 - 6 then in force, the Company shall, at its expense, register Common Shares on behalf of the Investors at the request of an Investor from time to time on such form. 4. Limitations. Notwithstanding the provisions of Sections l and 3 hereof, (i) the Company shall have the right to delay or suspend the preparation and filing of a registration statement for up to 90 days if in the reasonable judgment of a majority of the Board of Directors of the Company such preparation or filing would harm or hinder in any material fashion the ability of the Company to conduct its affairs or would have a material adverse effect on the business, properties or financial condition of the Company, provided, that the Company shall use its best efforts to cause any such registration statement to become effective within 150 days of receipt of an Investor's request therefor; and (ii) if, prior to an Investor's request for registration, the Company has given notice under Section 2 hereof that it intends to prepare and file a registration statement ("Section 2 Registration Statement"), then the Company shall have the right to delay or suspend the filing of the registration statement requested by an Investor, provided, that the Company shall use its best efforts to cause any such registration statement requested by an Investor to become effective within 90 days after the date on which all securities covered by the Section 2 Registration Statement have been sold. 5. Pro Ration. If Common Shares, including any Common Shares of the Company to be issued and sold by it, are to be included under Sections 1, 2 or 3 above in a registration statement which pertains to one or more underwritten public offerings and the managing underwriters advise the Company in writing that in their opinion the number of Common Shares requested to be included exceeds the number of Common Shares which can be sold in such offering, the Company will include in such registration (i) first, such Common Shares as to which demand registration rights have been exercised under Section 1 or 3, as the case may be (the "Demand Shares"), on a pro rata basis among the holders of Demand Shares based on the number of Common Shares with respect to which demand is made; (ii) second, the Common Shares which the Company proposes to issue and sell; and (iii) third, the number of Common Shares requested by the Investors (to the extent their request was not pursuant to Section 1 or 3) to be included which in the opinion of such underwriters can be sold (the "Secondary Shares"), on a pro rata basis among holders of such Secondary Shares according to the relation the number of Common Shares owned by any such holder bears to the total number of Common Shares owned by all such holders (exclusive of Demand Shares in each case). 6. Registration Procedures. If and whenever the Company is required by the provisions of Sections 1, 2 or 3 to effect the registration of Common Shares under the 1933 Act, the Company will: (a) prepare and file with the SEC, within 60 days of receipt of an Investor's request thereof or, a registration statement with respect to such securities, and use its best efforts to cause such registration statement to become effective within 120 days of receipt of such request and remain effective for such period as may be reasonably necessary to effect the sale of such securities, not to exceed six months; - 6 - 7 (b) prepare and file with the SEC such amendments to such registration statement and supplements to the prospectus contained therein as may be necessary to keep such registration statement effective until the earlier of (i) the date on which all securities covered by such registration statement have been sold and (ii) 180 days after the effective date of such registration statement; (c) use its best efforts to register or qualify the Common Shares for sale under such other securities or blue sky laws of such jurisdictions as the Investors may reasonably request and do any and all other acts and things which may be reasonably necessary or desirable to enable the Investors to consummate the disposition of the Common Shares in such jurisdictions; provided, however, that the Company shall not be required to qualify to do business or to file a general consent to service of process in any such jurisdictions; (d) furnish to the Investors and to the underwriters of the securities being registered a reasonable number of copies of the registration statement, preliminary prospectus, final prospectus, and such other documents as the Investors or underwriters may reasonably request in order to facilitate the public offering of such securities; (e) notify the participating Investors, promptly after it shall receive notice thereof, of the time when such registration statement has become effective or a supplement to any prospectus forming a part of such registration statement has been filed; (f) notify the Investors promptly of any request by the SEC for the amending or supplementing of such registration statement or prospectus or for additional information; (g) prepare and file with the SEC, promptly upon the request of the Investors, any amendments or supplements to such registration statement or prospectus which, in the opinion of counsel for the Investors (and concurred in by counsel for the Company), is required under the 1933 Act or the rules and regulations thereunder in connection with the distribution of the Common Shares by the Investors; (h) prepare and promptly file with the SEC, and promptly notify the Investors of the filing of, any amendment or supplement to such registration statement or prospectus as may be necessary to correct any statements or omissions if, at the time when a prospectus relating to such securities is required to be delivered under the 1933 Act, any event shall have occurred as the result of which any such prospectus or any other prospectus as then in effect would include an untrue statement of a material fact or omit to state any material fact necessary to make the statement therein, in the light of the circumstances in which they were made, not misleading; - 7 - 8 (i) advise the Investors, promptly after it shall receive notice or obtain knowledge thereof, of the issuance of any stop order by the SEC suspending the effectiveness of such registration statement or the initiation or threatening of any proceeding for that purpose and promptly use its best efforts to prevent the issuance of any stop order or to obtain its withdrawal if such stop order should be issued; (j) at least three days prior to the filing of any amendment or supplement to such registration statement or prospectus, furnish copies thereof to the Investors and refrain from filing any such amendment or supplement to which the Investors shall have reasonably objected on the grounds that such amendment or supplement does not comply in all material respects with the requirements of the 1933 Act or the rules and regulations thereunder, unless in the opinion of counsel for the Company the filing of such amendment or supplement is reasonably necessary to protect the Company from any liabilities under any applicable federal or state law and such filing will not violate applicable law; and (k) at the request of the Investors, furnish on the date or dates provided for in the underwriting agreement: (i) an opinion of counsel addressed to the Investors underwriters, if any, opining as to such matters as may be reasonably agreed to by such underwriters and the Company; and (ii) a letter or letters from the independent certified public accountants of the Company, addressed to the underwriters, if any, and to the Investors, covering such matters as such underwriters and the Investors reasonably request, in which letters such accountants shall state (without limiting the generality of the foregoing) that they are independent certified public accountants within the meaning of the 1933 Act and that in the opinion of such accountants the financial statements and other financial data of the Company included in the registration statement or any amendment or supplement thereto comply in all material respects with the applicable accounting requirements of the 1933 Act. 7. Expenses. With respect to the registrations requested pursuant to Section 1 hereof which are to be at the expense of the Company, and with respect to each inclusion of Common Shares in a registration statement pursuant to Section 2 hereof and with respect to all registrations requested pursuant to Section 3 hereof, the Company shall bear the following fees, costs, and expenses: all registration, filing, and stock exchange fees, printing expenses, fees and disbursements of counsel and accountants for the Company, fees and disbursements of counsel for the underwriter or underwriters of such securities retained by the Company, and all legal fees and disbursements and other expenses of complying with state securities or blue sky laws of any jurisdictions in which the securities to be offered are to be registered or qualified. Fees and disbursements of counsel and accountants for the Investors and for any counsel for underwriters retained solely by the Investors, underwriting discounts and commissions and transfer taxes for the Investors, and any other expenses incurred by the Investors not expressly included above shall be borne by the Investors. - 8 - 9 8. Indemnification (a) By the Company. The Company shall indemnify and hold harmless each holder of Common Shares that are included in a registration statement pursuant to these provisions and any underwriter (as defined in the 1933 Act) for such holder and each person, if any, who controls such holder or such underwriter within the meaning of the 1933 Act, from and against any and all loss, damage, liability or claim to which such holder or any such underwriter or controlling person becomes subject under the 1933 Act or otherwise, and to reimburse them, from time to time upon request, for any legal or other costs or expenses reasonably incurred by them in connection with investigating any claims or defending any actions, insofar as such losses, damages, liabilities, costs or expenses are caused by any untrue statement or alleged untrue statement of any material fact contained in such registration statement, any prospectus contained therein or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading; provided, however, that the -------- ------- Company will not be liable in any such case to the extent that any such loss, damage, liability, cost or expense arises out of or is based upon (i) an untrue statement or alleged untrue statement or omission or alleged omission (other than a statement or omission about the Company) made in conformity with information furnished by the Investors in writing specifically for use in the preparation of a registration statement or (ii) an untrue or alleged untrue statement or omission or alleged omission (other than a statement or omission about the Company) made in any preliminary prospectus made in conformity with information furnished by the Investors where the prospectus contained in the registration statement in the form filed by the Company with the SEC pursuant to Rule 424 under the 1933 Act shall have corrected such statement or omission and a copy of such prospectus shall, through no fault of the Company, not have been sent or given to the person bringing the claim at or prior to the confirmation of such sale to him. (b) By Holders of Common Shares. Each holder of Common Shares that are included in a registration pursuant to these provisions will indemnify and hold harmless the Company, each other holder, any underwriter and each person, if any, who controls the Company, such other holder or such underwriter, from and against any and all loss, damage, liability or claim, to which the Company or such other holder or any controlling person and/or any underwriter becomes subject under the 1933 Act or otherwise and to reimburse them, from time to time upon request, for any legal or other costs or expenses reasonably incurred by them in connection with investigating any claims or defending any actions, insofar as such losses, damages, liabilities, costs, or expenses are caused by any untrue or alleged untrue statement of any material fact contained in such registration statement, any prospectus contained therein, or any amendment or supplement thereto, or arise out of or are based upon the omission or - 9 - 10 the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was so made in reliance upon and in strict conformity with written information furnished by such holder specifically for use in the preparation thereof. (c) Notice. Promptly after receipt by an Sections indemnified party pursuant to the provisions of paragraph (a) or (b) of this Section 8 of notice of the commencement of any action involving the subject matter of the foregoing indemnity provision, such indemnified party will, if a claim thereof is to be made against the indemnifying party pursuant to the provisions of said paragraph (a) or (b), promptly notify the indemnifying party in writing of the commencement thereof; but the omission to so notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party otherwise than hereunder. In case such action is brought against any indemnified party and it notifies the indemnifying party of the commencement thereof, the indemnifying party shall have the right to participate in, and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party; provided, however, if the defendants in any action include both the indemnified -------- ------- party and the indemnifying party and there is a conflict of interest which would prevent counsel for the indemnifying party from also representing the indemnified party, the indemnified party or parties shall have the right to elect separate counsel to participate in the defense of such action on behalf of such indemnified party or parties. After notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party pursuant to the provisions of said paragraph (a) or (b) for any legal or other expense subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation, unless (i) the indemnified party shall have employed counsel in accordance with the proviso of the preceding sentence, (ii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after the notice of the commencement of the action, or (iii) the indemnifying party has authorized the employment of counsel for the indemnified party at the expense of the indemnifying party. (d) Contribution. If for any reason the indemnification provided for paragraphs (a) and (b) is unavailable to an indemnified party or insufficient to hold it harmless as contemplated by such paragraphs, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect not only the relative benefits received by the indemnified party and the indemnifying party, but also the relative fault of the indemnified party and the indemnifying party, as well as any other - 10 - 11 relevant equitable considerations; provided, however, that, in any such case, (i) no holder of Common Shares will be required to contribute any amount in excess of the purchase price of all such Common Shares sold by such holder pursuant to such registration statement, and (ii) no holder of Common Shares guilty of a fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) will be entitled to contribution from any holder of Common Shares who was not guilty of such fraudulent misrepresentation. Promptly after receipt by a holder of Common Shares of notice of the commencement of any action, suit or proceeding in connection with a public offering of Common Shares, such holder will, if a claim for contribution in respect thereof is able to be made against another party, notify the contributing party of the commencement thereof. The omission so to notify the contributing party will not relieve it from any liability which it may have to any other party other than for contribution under the Act. In case any such action, suit or proceeding is brought against any party, and such party notifies a contributing party of the commencement thereof, the contributing party will be entitled to participate therein with the notifying party and any other contributing party similarly notified. 9. Limitation of Market Activity. In connection with any registration of Common Shares pursuant to Sections 1, 2 or 3 hereof, each holder of Common Shares who is granted registration rights under Sections 1, 2 or 3 shall, in consideration of such grant, agree in writing prior to the date on which the registration statement becomes effective not to offer or sell any Common Shares for a period of up to 120 days following the date upon which such registration statement becomes effective under the 1933 Act if the managing underwriter so requests. 10. Transfer of Registration Rights. The registration rights and related obligations provided herein may be transferred with the securities to which they relate; provided, however, that (i) the Company shall be given written notice by the transferor thereof at the time of such transfer stating the name and address of the transferee and identifying the securities with regard to which such rights are being transferred, and (ii) the transferee shall agree in writing to assume the obligations of the transferor hereunder. 11. Investors to Provide Information. In the event the Investors request a registration of Common Shares, the Investors shall provide all such information and materials and shall take all such actions as may be reasonably required in order to permit the Company to comply with all applicable requirements of the SEC and to obtain any desired acceleration of the effective date of such registration statement. Specifically, the Company may require the Investors to furnish the Company with such information regarding the Investors and the distribution of its securities as the Company may from time to time reasonably request in writing and as shall be required by law or the SEC. - 11 - 12 12. Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the SEC which may permit the sale of the Common Shares to the public without registration, the Company agrees to: (a) Make and keep public information available, as those terms are understood and defined in Rule 144 under the 1933 Act, at all times from and after 90 days following the effective date of the first registration under the 1933 Act filed by the Company for an offering of its securities to the general public; (b) Use its best efforts to file with the SEC in a timely manner all reports and other documents required of the Company under the 1933 Act and the Securities Exchange Act of 1934 (the "1934 Act"); (c) So long as an Investor owns any Common Shares, furnish to the Investor forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of Rule 144 and of the 1933 Act and the 1934 Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed as an Investor may reasonably request in availing itself of any rule or regulation of the SEC allowing an Investor to sell any such securities without registration. 13. Definition of Common Shares. For the purposes of this Exhibit E, the term "Common Shares" shall mean the Common Shares of the Company and any Common Shares into which the Company's Convertible Preferred Shares, par value $8.00 per share, may be converted. - 12 - EX-5.1 6 OPIN. OF ICE,MILLER 1 EXHIBIT 5.1 September 26, 1997 Board of Directors Bioanalytical Systems, Inc. 2701 Kent Avenue West Lafayette, IN 47906 Gentlemen/and Mrs. Kissinger: We have acted as counsel to Bioanalytical Systems, Inc., an Indiana corporation (the "Company"), in connection with the filing of a Registration Statement on Form S-1 (the "Registration Statement") with the Securities and Exchange Commission (the "Commission") for the purposes of registering under the Securities Act of 1933, as amended (the "Securities Act"), an aggregate of up to 1,725,000 Common Shares of the Company (the "Shares") which are to be offered to the public. Of the Shares, up to 225,000 Shares may be issued by the Company to cover the over-allotment option to be granted to the underwriters. In connection therewith, we have investigated those questions of law we have deemed necessary or appropriate for purposes of this opinion. We have also examined originals, or copies certified or otherwise identified to our satisfaction, of those documents, corporate or other records, certificates and other papers that we deemed necessary to examine for the purpose of this opinion, including: 1. The proposed form of Second Restated Articles of Incorporation of the Company. 2. A proposed form of specimen certificate representing the Shares; and 2 Board of Directors September 23, 1997 Page 2 3. The Registration Statement. For purposes of this opinion, we have assumed (i) that the Shares will be issued pursuant to the terms of the Registration Statement; and (ii) that no changes will occur in the applicable law or the pertinent facts before the issuance of the Shares. Based upon the foregoing and subject to the qualifications set forth in this letter, we are of the opinion that when (a) the Second Restated Articles of Incorporation of the Company have been adopted and approved by the Board of Directors and shareholders of the Company and filed with the Secretary of State of the State of Indiana in the manner contemplated by the Indiana Business Corporation Law and the Registration Statement, (b) the pertinent provisions of the Securities Act and all relevant state securities laws have been complied with and (c) the Shares have been delivered against payment therefor as contemplated by the Registration Statement, the Shares will be validly authorized, legally issued, fully paid and non-assessable. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to this Firm under the caption "Legal Matters" in the Prospectus included as a part of the Registration Statement. In giving this consent, we do not admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act or under the rules and regulations relating thereto. Very truly yours, /s/ ICE MILLER DONADIO & RYAN EX-10.1 7 FORM OF EMP. CONF. AGMT. 1 EXHIBIT 10.1 EMPLOYEE AGREEMENT (Inventions and confidential information) for BIOANALYTICAL SYSTEMS INC. In consideration of my employment (or continuation of such employment) by BIOANALYTICAL SYSTEMS INC. and in consideration of the compensation to be paid me for my services in the course of such employment, I for myself, my heirs, executors, administrators or other legal representatives and assigns, do hereby agree: 1. That "company" whenever used in this agreement includes BIOANALYTICAL SYSTEMS and/or any of its divisions and subsidiaries. 2. That I will (a) promptly disclose and assign, and do hereby assign to the company, any and all inventions, discoveries and improvements which I may discover or conceive either solely or jointly with others during the period of my employment (whether or not during usual working hours) and which relate to or are susceptible of use in the business of the Company; (b) disclose promptly any technical data, know-how or information which I may acquire with respect to any matters relating to the Company's business; (c) assist the Company at the Company's expense in obtaining for its benefit patents in the United States and in any and all foreign countries on all such inventions, discoveries and improvements in enforcing and defending its rights relating to any such patents, inventions, discoveries or improvements; (d) testify on its behalf with respect thereto; and (e) execute all proper papers for use in applying for, obtaining and maintaining such patents, and in maintaining or enforcing the rights of the Company thereunder. 3. That any such inventions, discoveries and improvements and any technical data, information or knowhow made, discovered or conceived or acquired by me in the course of my employment and relating to the Company's business (other than information of public knowledge), whether patented or not, are to be and remain the property of the Company. 4. That I will not, without the authorization of the Company, disclose to any person outside the Company or use at any time (either during or subsequent to my said employment) any trade secrets, technical data, or know-how relating to the Company's products, processes, methods, equipment and business practices which I have acquired during my employment until such information shall have become public knowledge. 5. That the foregoing obligations shall survive the termination of my employment and that I will perform all necessary acts to make the agreement effective; that on leaving the employ of the Company, I will not take with me, without its consent, any drawings, blueprints, documents or records belonging to the Company, or copies or transcripts thereof, and that at such time prior thereto on demand, I will turn over to the Company all notebooks, drawings, blueprints, Page 1 of 4 2 copies, transcripts or other notes, records or material belonging to the Company which are in my possession or under my control. 6. That I have set forth in Schedule A on the following page, made a part of this agreement, a list and written description of all inventions, patented or unpatented, if any owned by me prior to my employment by the Company. These inventions are to be excluded from this agreement. 7. I represent that I do not have in my possession, and will not use for the benefit of BAS, any confidential information or documents belonging to others, including but not limited to previous employers. I represent that employment by BAS will not require me to violate any obligation to others, under contract or otherwise, or to violate any confidence of others. I represent that I have executed no prior non_competition, non_disclosure or confidentiality agreements that are currently binding, and that at the time of signing this agreement, I know of no written or oral contract or of any other impediment that would inhibit my employment with the Company. 8. That I have set forth in Schedule B below, made a part of this agreement, a list of all agreements with or obligations to other companies or parties which require that I keep secret or confidential knowledge or information which I acquired from such other company or party. I represent that except as stated on the reverse of this agreement I have no agreements with or obligations to others in conflict with the foregoing provisions of this agreement. 9. Upon leaving the Company for any cause, I will sign and honor the attached TERMINATION AGREEMENT which verifies my review of the above material. 10. My signature below indicates that l have understood the significance of the above. Employee's Name:_____________________________ (printed) Witness. ___________________________ Employee's_____________________________ Supervisor or Corp. Officer Signature:_____________________________ Date:__________________________________ SCHEDULE A -- Inventions (List and describe): | | not applicable_________________________________(initial) Page 2 of 4 3 SCHEDULE B -- Confidential Information (List agreements with or obligations to others): | | not applicable________________________(initial) Do not Write Below This Line ________________________________________________________________________________ Accepted: BIOANALYTICAL SYSTEMS, INC. By:_____________________________________ Page 3 of 4 4 TERMINATION AGREEMENT I hereby acknowledge that I have reviewed with my supervisor and understand the attached EMPLOYMENT AGREEMENT which I signed on _________________________ when I joined Bioanalytical Systems, Inc. I furthermore assure that I have not retained any technical material, files, laboratory notebooks, circuit diagrams, software, marketing plans, equipment, prototypes, customers lists, financial data, and like materials covered by the AGREEMENT or otherwise in my possession while at Bioanalytical Systems and that I will not disclose the contents of such to third parties. I have furthermore returned to Bioanalytical Systems, Inc. all keys, credit cards, and telephone calling cards and have not duplicated such materials or transferred them to third parties. I further agree that any outstanding money owed by me to Bioanalytical Systems, Inc. or the cost of equipment owned by Bioanalytical Systems, Inc. but retained by me may be deducted from any wages/salaries/commissions due me from Bioanalytical Systems, Inc. _________________________________________ _______________________ Signed Date _________________________________________ Witness (Supervisor or BAS Corporate Officer) Page 4 of 4 EX-10.2 8 OUTSIDE DIRECTORS SOP 1 EXHIBIT 10.2 BIOANALYTICAL SYSTEMS, INC. OUTSIDE DIRECTOR STOCK OPTION PLAN 1. DEFINITIONS. The following terms shall have the meanings hereinafter set forth: (a) "Affiliate" means a corporation which is a parent or subsidiary corporation of the Company, or a corporation or a parent or a subsidiary corporation of the Company issuing or assuming the options issued under the Plan in a transaction in which Section 425(a) of the Code applies. (b) "Board of Directors" means the board of directors of the Company, as it shall exist from time to time. (c) "Code" means the Internal Revenue Code of 1986, as it shall be amended from time to time. (d) "Committee" means the director stock option committee administering the Plan as provided in paragraph 3 hereof. (e) "Common Shares" means the Common Shares, $1.00 par value, of the Company. (f) "Company" means Bioanalytical Systems, Inc., an Indiana corporation. (g) "Nonstatutory Stock Option" means an option which is not an incentive stock option within the meaning of Section 422A of the Code and which is governed by Section 83 of the Code for Federal income tax purposes. (h) "Optionee" means an Outside Director granted an option under the Plan. (i) "Outside Director" means any director of the Company or an Affiliate who is not employed by the Company or any Affiliate in any capacity. (j) "Plan" means this Bioanalytical Systems, Inc. Outside Director Stock Option Plan. 2. PURPOSE. This Plan is intended to be an incentive to, and to encourage ownership of the Common Shares by, Outside Directors of the Company and its Affiliates in order to provide such Outside Directors with a more direct and proprietary interest in the welfare and success of the Company and to encourage their continuation as directors of the Company. The Plan is further intended to promote continuity of membership on the Board of Directors and to increase the incentive 2 to promote the welfare of the Company by those who are primarily responsible for shaping and carrying out the long-term plans and objectives of the Company, thereby furthering and securing the Company s continued growth and financial success. It is contemplated that only Nonstatutory Stock Options will be granted under the Plan. 3. ADMINISTRATION. The Plan shall be administered by the Committee which shall consist of all of the members of the Board of Directors who are not Outside Directors and such Outside Directors who are not then participating in the Plan. Members of the Committee shall not be eligible to participate in the Plan while serving on the Committee. The Committee shall have the power (a) to interpret and construe the provisions of the Plan or any option granted under it, and such interpretation or construction shall be final and binding; (b) to select Outside Directors to whom grants of options under the Plan shall be made as more particularly set forth in paragraph 4 hereof; (c) to determine the terms and conditions of each option granted hereunder; (d) to determine the time at which such grants shall be made and the number of Common Shares to be optioned under such grant; and (e) to make any other determinations regarding the Plan which are not otherwise expressly provided herein. The Committee may prescribe, amend and rescind rules and regulations relative to the Plan or its construction or interpretation. A majority of the Committee shall constitute a quorum. All determinations of the Committee shall be made by the vote of a majority of its members; provided, however, that if there are fewer than three (3) members of the Committee at any time, all determinations shall be a joint determination of its members. No member of the Committee shall be liable for any action or determination made in good faith. 4. ELIGIBILITY. Only those persons who are Outside Directors shall be eligible to participate in the Plan. The Committee shall determine from time to time the particular Outside Directors who shall be eligible to participate in the Plan and the extent of their participation therein. 5. SHARES. The shares subject to the options and other provisions of the Plan shall be the Company's authorized, but unissued, or reacquired Common Shares. The total number of the Common Shares on which options may be granted under the Plan shall not exceed in the aggregate twenty-four thousand (24,000) shares, except as such number of shares shall be adjusted in accordance with the provisions set forth in paragraph 6(g) hereof. The total amount of Common Shares on which options may be granted in any calendar year shall not exceed six thousand (6,000), adjusted in accordance with paragraph 6(g) hereof. In the event any outstanding option under the Plan expires or is terminated for any reason prior to the end of the period during which options may be granted, the Common Shares allocable to the unexercised portion of such option may again be subject to an option under the Plan. During the period that any options granted hereunder are outstanding, the Company shall reserve and keep available such number of Common Shares as will be sufficient to satisfy all outstanding, unexercised options. 6. TERMS AND CONDITIONS OF OPTIONS. Options granted pursuant to the Plan shall be evidenced by agreements in such form as the Committee shall from time to time prescribe, which agreements shall comply with and be subject to the following terms and conditions: -2- 3 (a) MEDIUM AND TIME OF PAYMENT. The option price shall be payable in United States dollars upon the exercise of the option and shall be paid in cash, by certified check, or by bank cashier's check, personal check or by the delivery to the Company of Common Shares owned by the grantee, the fair market value of which equals the option price, or by a combination of cash and Common Shares which together equal the option price. Fair market value of any Common Shares surrendered shall be determined by the Committee in the same manner that it is determined in establishing option prices. Payment of the option price shall be accompanied by a written subscription agreement in a form to be prescribed by the Committee. (b) NUMBER OF SHARES; DATE OF GRANT. The option agreement shall state the total number of shares to which it pertains, and the date of the grant of the option. (c) OPTION PRICE. The option price shall be an amount per share not less than the fair market value per share of the Common Shares on the date of grant of the option. Fair market value shall be determined by the Committee in accordance with such procedures as the Committee shall from time to time prescribe. (d) TERM OF OPTIONS. Each option granted under the Plan shall expire within the period prescribed in the agreement relating thereto, which shall not be more than ten (10) years from the date the option is granted. (e) TIME OF EXERCISE. Each option granted pursuant to the Plan shall be exercisable in four equal installments. The option may be exercised as to the shares covered by the first installment from and after the second anniversary of the grant of the option, with second, third and fourth installments becoming exercisable on the three succeeding anniversary dates. Except as specifically restricted by the provisions of this paragraph 6(e) or by the Committee acting hereunder, any option may be exercised in whole at any time or in part from time to time during its term. (f) CESSATION OF SERVICE AS A DIRECTOR. In the event an Optionee ceases to serve as a director of the Company or an Affiliate all options outstanding in the hands of the Optionee shall terminate immediately as to any unexercised portion thereof; provided, however, that if any cessation of service is due to retirement with the consent of the Company or is due to permanent and total disability, the Optionee shall have the right, subject to the provisions of paragraphs 6(d) and 6(e) hereof, to exercise the option, with respect to the Common Shares for which it could have been exercised on the effective date of the Optionee's cessation of service, at any time within three (3) months after such cessation of service due to retirement with the consent of the Company or at any time within twelve (12) months after such cessation of service due to permanent and total disability; and provided further, that if the Optionee shall die while serving as a director of the Company or an Affiliate, the Optionee's personal representative shall have the right, subject to the provisions of paragraphs 6(d) and 6(e) hereof, to exercise the option with respect to the Common Shares -3- 4 for which the option could have been exercised on the date of death, at any time within twelve (12) months from the date of the Optionee's death. Whether a cessation of service is a retirement with the consent of the Company or due to permanent and total disability, and whether an authorized leave of absence or absence on military or government service shall be deemed to constitute cessation of service for the purposes of the Plan, shall be determined by the Committee in its sole discretion, which determination shall be final and conclusive. (g) RECAPITALIZATION. The aggregate number of Common Shares on which options may be granted hereunder, the number of Common Shares covered by each outstanding option, and the price per share set forth in each option agreement, shall all be proportionately adjusted for any increase or decrease in the number of issued Common Shares resulting from a subdivision or consolidation of shares of the Company or any other capital adjustment of the Company, the payment of a share dividend, a share split or any other increase or decrease in the Common Shares effected without receipt of consideration by the Company. In the event that, prior to the delivery by the Company of the Common Shares remaining unexercised under any outstanding option hereunder, there shall be a capital reorganization or reclassification of the capital of the Company resulting in a substitution of other shares for the Common Shares, there shall be substituted the number of substitute shares which would have been issued in exchange for the Common Shares then remaining under the option if such Common Shares had been then issued and outstanding. (h) MERGER, DISSOLUTION. If the Company shall be a party to any merger or consolidation, the Company shall have the right to terminate any option outstanding on thirty (30) days' written notice; provided, however, if such merger or consolidation is not consummated within 180 days from the date of the aforementioned notice, all options terminated shall be deemed to have been continuously in effect since the date of execution thereof. In the event of a dissolution or liquidation of the Company, the Company shall give each optionee thirty (30) days written notice specifying the effective date thereof. Every unexercised option outstanding hereunder on the date set by the Company as the effective date of the dissolution or liquidation shall be deemed to be terminated upon such dissolution or liquidation. (i) NONASSIGNABILITY. No option granted under the Plan shall be assignable or transferable except by will or under the laws of descent and distribution. During the lifetime of an Optionee, the option shall be exercisable only by the Optionee. (j) ISSUANCE OF SHARES AND COMPLIANCE WITH SECURITIES LAWS. The Company may postpone the issuance and delivery of certificates representing Common Shares until (a) the admission of such shares to listing on any stock exchange on which shares of the Company of the same class are then listed and (b) the completion of such registration or other qualification of such shares under any state or Federal law, rule or regulation or the rules and regulations of any exchange upon which the Common Shares are treated as the Company shall determine to be necessary or advisable, which registration or other -4- 5 qualification the Company shall use its best efforts to complete. Any person purchasing Common Shares pursuant to the Plan may be required to make such representations and furnish such information as may, in the opinion of counsel for the Company, be appropriate to permit the Company, in light of the existence or non- existence with respect to such shares of an effective registration under the Securities Act of 1933, as amended, or any similar state statute, to issue the shares in compliance with the provisions of those or any comparable acts. (k) RIGHTS AS A SHAREHOLDER. An Optionee shall have no rights as a shareholder with respect to Common Shares covered by an option until the date of issuance of a certificate to the Optionee. The certificate shall not be issued until the Optionee has exercised the option and has fully paid for the Common Shares acquired thereby. No adjustment will be made for dividends or other rights for which the record date is prior to the date such certificate is issued. (l) OTHER PROVISIONS. The option agreements entered into under the Plan shall contain such other provisions, limitations, restrictions and requirements as the Committee shall deem advisable. 7. TERM OF PLAN. The Plan shall become effective upon the receipt of approval by the holders of a majority of the issued and outstanding Common Shares voting in person or by proxy at a duly held shareholders' meeting; provided, however, that the Plan shall become effective only if approved by such shareholders within twelve (12) months before or after the date the Plan is adopted by the Board of Directors. The Plan shall terminate ten (10) years after the earlier of the date the Plan is adopted by the Board of Directors or the date the Plan is approved by the shareholders, or on such earlier date as the Board of Directors may determine. No option shall be granted under the Plan after such termination date. 8. AMENDMENT OF THE PLAN. The Board of Directors, excluding any members of the Board of Directors participating in the Plan, may from time to time, alter, amend, suspend, or discontinue the Plan with respect to any Common Shares as to which options have not been granted; provided, however, that no action may be taken hereunder which would alter or impair any of the rights or obligations of the Company or any Optionee with respect to any outstanding option without the consent of the Optionee thereof. 9 APPLICATION OF FUNDS. The proceeds received by the Company from the sale of Common Shares pursuant to options granted hereunder will be used for general corporate purposes. 10. NO OBLIGATION TO EXERCISE OPTION. The granting of an option hereunder shall impose no obligation upon the Optionee to exercise such an option. 11. NO RIGHT TO REELECTION. Neither the adoption of the Plan, the granting of an option hereunder, nor any other action taken relating to the Plan shall impose any obligation on the -5- 6 Company or any Affiliate or the Board of Directors of either to nominate any Outside Director for reelection as a director by the shareholders of the Company or any Affiliate. 12. APPLICABILITY OF AMENDMENTS. All outstanding options shall be deemed to be amended so as to include, to the extent applicable thereto, any amendments made to the Plan subsequent to the granting of such options. 13. WITHHOLDINGS. The Company shall have the right to require the Optionee to remit to the Company amounts sufficient to satisfy any applicable withholding requirements set forth in the Code or under state or local law relating to options granted to the Optionee. The Company shall have the right, to the extent permitted by law, to deduct from any payment of any kind otherwise due to an Optionee who exercises an option any federal, state or local taxes of any kind required by law to be withheld with respect to the Common Shares subject to such option. -6- EX-10.3 9 FORM OF OUTSIDE DIRECTOR SOP AGT 1 EXHIBIT 10.3 BIOANALYTICAL SYSTEMS, INC. OUTSIDE DIRECTOR STOCK OPTION AGREEMENT THIS AGREEMENT, made this 9th day of January, 1989, by and between Bioanalytical Systems, Inc., an Indiana corporation with its principal office at Purdue Research Park, West Lafayette, Indiana (hereinafter called "Company"), and E. Keith Moore, residing at 3335 Woodland Parkway, Columbus, Indiana (hereinafter called the "Grantee"), pursuant to the terms, conditions and limitations contained in the Company's Outside Director Stock Option Plan (hereinafter called the "Plan"), a copy of which is attached hereto as Exhibit A, WITNESSETH THAT: WHEREAS, in the interests of affording an incentive to the Grantee to give his best efforts to the Company as a Director, the Company wishes to provide that the Grantee shall have an option to buy Common Shares of the Company: NOW, THEREFORE, it is hereby mutually agreed as follows: 1. The Company hereby grants to the Grantee the right and option to purchase, on the terms and conditions hereinafter set forth, all or any part of an aggregate of 6,000 shares (hereinafter called "Subject Shares") of the presently authorized, but unissued, or treasury, Common Shares of the Company (hereinafter called the "Common Shares"), granted in three equal installments as of January 9, 1989; January 8, 1990; and January 14, 1991, at a purchase price of $3.00 per share, exercisable in whole or in part from time to time subject to the limitation that no option may be exercised with respect to fewer than twenty-five (25) shares unless there are fewer than twenty-five (25) shares then subject to option hereunder, in which event any exercise must be as to all such shares 2 and subject to the further limitation that the options represented by this Agreement shall be exercisable in four equal installments as set forth in Section 6(e) of the Plan. The option shall expire as to all shares subject to purchase hereunder on the 10th anniversary date of this Agreement if not exercised on or before such date. 2. Subject to the limitation specified in Section 1 hereof and in Section 6(e) of the Plan, the Grantee may from time to time exercise this option by delivering a written notice of exercise and subscription agreement to the Secretary of the Company specifying the number of whole shares to be purchased, accompanied by payment in cash, by certified check, or bank cashier's check, of the aggregate option price of such number of shares. Such exercise shall be effective upon receipt by the Secretary of such written notice, subscription agreement and payment of the purchase price. Only the Grantee may exercise the option during the lifetime of the Grantee. No fractional shares may be purchased at any time hereunder. 3. Upon the effective exercise of the option, or any part thereof, certificates representing the shares so purchased, marked fully paid and non-assessable, shall be delivered to the person who exercised the option, except as provided in Section 6(j) of the Plan. Until certificates representing such shares shall have been issued and delivered, the Grantee shall not have any of the rights or privileges of a shareholder of the Company in respect of any of such shares. 4. In the event that, prior to the delivery of the Company of all the Subject Shares, there shall be an increase or reduction in the number of Common Shares of the Company issued and outstanding by reason of any subdivision or consolidation of Common Shares or any other capital adjustment, the number of shares then subject to this option shall be increased or decreased as provided in Section 6(g) of the Plan. - 2 - 3 5. The option and the rights and privileges conferred by this Option Agreement shall not be assigned or transferred by the Grantee in any manner except by will or under the laws of descent and distribution. In the event of any attempted assignment or transfer in violation of this Section 5, the option, rights and privileges conferred by this Option Agreement shall become null and void. 6. Nothing herein contained shall be deemed to create any limitation or restriction upon such rights as the Company would otherwise have to terminate a person as a director of the Company. 7. The option, rights and privileges herein conferred are granted subject to the terms and conditions set forth herein and in the Plan. 8. Any notices to be given or served under the terms of this Option Agreement shall be addressed to the Secretary of the Company at Purdue Research Park, West Lafayette, Indiana, and to the Grantee at the address set forth on page one of this Option Agreement, or such other address or addresses as either party may hereafter designate in writing to the other. Any such notice shall be deemed to have been duly given or served, if and when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, postage prepaid, and deposited in the United States mail. 9. The interpretation by the Stock Option Plan Committee, appointed by the Company's Board of Directors, of any provisions of the Plan or of this Option Agreement shall be final and binding on the Grantee unless otherwise determined by the Company's Board of Directors. 10. This option, and any Common Shares which may be acquired hereby, are being acquired by the Grantee for investment only and not for resale. Neither this option nor the Subject Shares have been registered under the Securities Act of 1933 or any state securities law. None of the Subject Shares may be sold, transferred, pledged, or hypothecated unless first registered under such - 3 - 4 laws, or unless counsel for the Company has given an opinion that registration under such laws is not required, and the Grantee agrees to the placement of a legend to that effect upon any certificates evidencing Common Shares acquired by him through the exercise of the option granted hereby. 11. This Option Agreement shall be governed by the laws of the State of Indiana. IN WITNESS WHEREOF, the Company and the Grantee have signed this Option Agreement as of the day and year first above written. "COMPANY" BIOANALYTICAL SYSTEMS, INC. By: ------------------------------------ ATTEST: - ----------------------- "GRANTEE" By: ------------------------------------ - 4 - EX-10.4 10 1990 EMPLOYEE INCENTIVE SOP 1 EXHIBIT 10.4 BIOANALYTICAL SYSTEMS, INC. EMPLOYEE INCENTIVE STOCK OPTION PLAN Adopted January 8, 1990 1. PURPOSE. This Employee Incentive Stock Option Plan (hereinafter referred to as the Plan") is intended to be an incentive to, and to encourage share ownership by, key employees of Bioanalytical Systems, Inc. and its subsidiaries (hereinafter collectively referred to as the "Employer") in the manner contemplated by Section 422A of the Internal Revenue Code of 1986, as amended ("Code"), in order to provide such employees with a more direct and proprietary interest in the welfare and success of the Employer and to insure their continuation as employees of the Employer. 2. ADMINISTRATION. The Plan shall be administered by an Incentive Stock Option Committee (hereinafter referred to as the "Committee") consisting of three (3) or more members of the Board of Directors of Bioanalytical Systems, Inc. (the "Company") who are appointed from time to time by the Board of Directors of the Company. The Board of Directors of the Company may from time to time remove members from, or add members to, the Committee. Vacancies on the Committee, howsoever caused, shall be filled by the Board of Directors of the Company. Members of the Committee shall not be eligible to participate in the Plan while serving on the Committee. The Committee shall have the power to interpret and construe the provisions of the Plan or any option granted under it, and such interpretation or construction shall be final and binding. The Committee may prescribe, amend and rescind rules and regulations relative to the Plan or its construction or interpretation. A majority of the Committee shall constitute a quorum. All determinations of the Committee shall be made by not less than a majority of its members. No member of the Committee shall be liable for any action or determination made in good faith. 3. ELIGIBILITY. Only those persons who are key employees of the Employer shall be eligible to participate in the Plan. The Committee shall determine from time to time the particular employees of the Employer who shall be eligible to participate in the Plan and the extent of their participation therein. No option shall be granted under the Plan to any employee of the Employer, who, at the time such option is granted, owns shares possessing more than ten percent (10%) of the total combined voting power of all classes of shares of the Company or of any parent or subsidiary corporation of the Company or any parent or subsidiary corporation of any of the foregoing (such employee being hereinafter referred to as a "10% Shareholder"), except as provided below. In determining whether the percentage limitations of this paragraph are met, an employee shall be considered as owning any shares owned, directly or indirectly, by or for his brothers or sisters (whether by the whole or half blood), spouse, ancestors, and lineal descendants. For purposes of this paragraph 3, shares owned, directly or indirectly, by or for a corporation, partnership, estate, or trust shall be considered as being owned proportionately by or for its shareholders, partners, or beneficiaries. The percentage limitations of this paragraph 3 shall not apply, however, if at the time such option is granted the option price is at least one hundred ten percent (110%) of the fair market 2 value of the shares subject to the option and such option by its terms is not exercisable after the expiration of five (5) years from the date such option is granted. 4. SHARES. The shares subject to the options and other provisions of the Plan shall be shares of the Company's authorized, but unissued, or reacquired Common Shares (the "Common Shares"). The total amount of the Common Shares on which options may be granted shall not exceed in the aggregate Two Hundred Fifty Thousand (250,000) shares, except as such number of shares shall be adjusted in accordance with the provisions set forth in paragraph 6(g) hereof. The total amount of Common Shares on which options may be granted in any calendar year shall not exceed Fifty Thousand (50,000), adjusted in accordance with paragraph 6(g) hereof. In the event any outstanding option under the Plan expires or is terminated for any reason prior to the end of the period during which options may be granted, the Common Shares allocable to the unexercised portion of such option may again be subject to an option under the Plan. During the period that any options granted hereunder are outstanding, the Employer shall reserve and keep available such number of Common Shares as will be sufficient to satisfy all outstanding, unexercised options. 5. MAXIMUM EXERCISE RULE. The aggregate fair market value (determined at the time the option is granted) of the shares with respect to which incentive stock options are exercisable for the first time by an employee during any calendar year under all such plans of the Employer and any parent or subsidiary corporation of the Employer shall not exceed One Hundred Thousand Dollars ($100,000.00). 6. TERMS AND CONDITIONS OF OPTIONS. Options granted pursuant to the Plan shall be evidenced by agreements in such form as the Committee shall from time to time prescribe, which agreements shall comply with and be subject to the following terms and conditions: (a) MEDIUM AND TIME OF PAYMENT. The option price shall be payable in United States dollars upon the exercise of the option and shall be paid in cash, by certified check, or by bank cashier's check, or by the delivery to the Company of Common Shares of the Company owned by the optionee, the fair market value of which equals the option price, or by a combination of cash and Common Shares which together equal the option price. Fair market value of the Common Shares shall be determined by the Committee in the same manner that it is determined in establishing option prices. Payment of the option price shall be accompanied by a written subscription agreement in a form to be prescribed by the Committee. (b) NUMBER OF SHARES. The option shall state the total number of shares to which it pertains, and the date of the grant of the option. (c) OPTION PRICE. The option price shall be an amount per share not less than the fair market value per share of the Common Shares on the date of granting of the option. In the case of options granted to an employee of the Employer who is a 10% Shareholder, the option price shall be an amount per share not less than one hundred ten percent (110%) of the fair market value per share of the Common Shares on the date of the granting of the option. Fair market value shall be determined by the Committee in accordance with such procedures as the Committee shall from time to time prescribe. - 2 - 3 (d) TERM OF OPTIONS. The term of each option granted under the Plan shall expire within the period prescribed in the agreement relating thereto, which shall not be more than five (5) years from the date the option is granted if the optionee is a 10% Shareholder and not more than ten (10) years from the date the option is granted if the optionee is not a 10% Shareholder. (e) DATE OF EXERCISE. Each option granted pursuant to the Plan shall be exercisable in four equal installments. The option may be exercised as to the shares covered by the first installment from and after the second anniversary of the grant of the option, with second, third and fourth installments becoming exercisable on the three succeeding anniversary dates. Except as specifically restricted by the provisions of this paragraph 6(e) or the Committee acting hereunder, any option may be exercised in whole at any time or in part from time to time during its term. (f) TERMINATION OF EMPLOYMENT. In the event an optionee shall cease to be employed by the Employer, a parent corporation of the Employer, or a corporation or a parent or a subsidiary corporation of such corporation issuing or assuming an option in a transaction to which Section 425(g) of the Code applies, all options outstanding in the hands of the optionee shall terminate immediately as to any unexercised portion thereof; provided, however, that if any cessation of employment is due to retirement with the consent of the Employer or permanent and total disability, the optionee shall have the right, subject to the provisions of paragraph 6(d) and paragraph 6(e) hereof, to exercise the option, with respect to the shares for which it could have been exercised on the effective date of his cessation of employment, at any time within three (3) months after such cessation of employment due to retirement with the consent of the Employer or at any time within twelve (12) months after such cessation of employment due to permanent and total disability; and provided further, that if the employee shall die while in the employ of the Employer, the employee's personal representative shall have the right, subject to the provisions of paragraph 6(d) and paragraph 6(e) hereof, to exercise the option with respect to the shares for which it could have been exercised on the date of death, at any time within twelve (12) months from the date of death. Whether a cessation of employment is to be considered a retirement with the consent of the Employer or due to permanent and total disability, and whether an authorized leave of absence or absence on military or government service shall be deemed to constitute termination of employment, for the purposes of the Plan, shall be determined by the Committee, which determination shall be final and conclusive. (g) RECAPITALIZATION. The aggregate number of Common Shares on which options may be granted hereunder, the number of shares thereof covered by each outstanding option, and the price per share thereof in each such option, shall all be proportionately adjusted for any increase or decrease in the number of issued Common Shares resulting from a subdivision or consolidation of shares or any other capital adjustment, the payment of a share dividend, or other increase or decrease in the Common Shares effected without receipt of consideration by the Employer. In the event that, prior to the delivery by the Employer of - 3 - 4 the Common Shares remaining under any outstanding option hereunder, there shall be a capital reorganization or reclassification of the capital of the Employer resulting in a substitution of other shares for the Common Shares, there shall be substituted the number of substitute shares which would have been issued in exchange for the Common Shares then remaining under the option if such Common Shares had been then issued and outstanding. (h) MERGER, DISSOLUTION. If the Employer shall be a party to any merger or consolidation, the Employer shall have the right to terminate any option outstanding on thirty (30) days' written notice; provided, however, if such merger or consolidation is not consummated within 180 days from the date of the aforementioned notice, all options terminated shall be deemed to have been continuously in effect since the date of execution thereof. In the event of a dissolution or liquidation of the Employer, the Employer shall give each optionee thirty (30) days written notice thereof; every unexercised option outstanding hereunder shall be deemed to be terminated upon such dissolution or liquidation. (i) ASSIGNABILITY. No option shall be assignable or transferable except by will or under the laws of descent and distribution. During the lifetime of an optionee, the option shall be exercisable only by the optionee. (j) ISSUANCE OF SHARES AND COMPLIANCE WITH SECURITIES LAWS. The Employer may postpone the issuance and delivery of certificates representing shares until (a) the admission of such shares to listing on any stock exchange on which shares of the Employer of the same class are then listed and (b) the completion of such registration or other qualification of such shares under any state or federal law, rule or regulation as the Employer shall determine to be necessary or advisable, which registration or other qualification the Employer shall use its best efforts to complete. Any person purchasing shares pursuant to the Plan may be required to make such representation and furnish such information as may, in the option of counsel for the Employer, be appropriate to permit the Employer, in light of the existence or non-existence with respect to such shares of an effective registration under the Securities Act of 1933, as amended, or any similar state statute, to issue the shares in compliance with the provisions of those or any comparable acts. (k) RIGHTS AS A SHAREHOLDER. An optionee shall have no rights as a shareholder with respect to shares covered by an option until the date of issuance of a certificate to him and only after such shares are fully paid. No adjustment will be made for dividends or other rights for which the record date is prior to the date such certificate is issued. (l) OTHER PROVISIONS. The option agreements entered into under the Plan shall contain such other provisions as the Committee shall deem advisable. 7. TERM OF PLAN. The Plan shall become effective upon the approval by the holders of a majority of the issued and outstanding shares of each class of the voting shares of the Company - 4 - 5 voting in person or by proxy at a duly held shareholders' meeting; provided, however, the Plan shall become effective only if approved by such shareholders within twelve (12) months before or after the date the Plan is adopted by the Company's Board of Directors. The Plan shall terminate ten (10) years after the earlier of the date the Plan is adopted or the date the Plan is approved by the shareholders, (1) or on such earlier date as the Board of Directors may determine. No option shall be granted under the Plan thereafter. 8. AMENDMENT OF THE PLAN. The Board of Directors of the Company, except any members participating in the Plan, may from time to time, alter, amend, suspend or discontinue the Plan with respect to any shares as to which options have not been granted; provided, however, that the Board of Directors may not, without further approval by the holders of a majority of the issued and outstanding shares of each class of voting shares of the Company: (a) increase the maximum number of shares as to which options may be granted under the Plan (other than to reflect a stock split or stock dividend); (b) change the class of shares for which options may be granted under the Plan; (c) change the class of shares for which options may be granted under the Plan; receive options under the Plan; (d) change the provisions of paragraph 6(c) concerning the option price; or (e) permit the granting of options to members of the Committee. 9. APPLICATION OF FUNDS. The proceeds received by the Company from the sale of shares pursuant to options granted hereunder will be used for general corporate purposes. 10. NO OBLIGATION TO EXERCISE OPTION. The granting of an option hereunder shall impose no obligation upon the optionee to exercise such an option. 11. CONTINUANCE OF EMPLOYMENT. Neither the adoption of the Plan nor the granting of an option hereunder shall impose any obligation on the Employer to continue the employment of an optionee. 12. APPLICABILITY OF AMENDMENTS. All outstanding options shall be deemed to be amended so as to include, to the extent application thereto, any amendments made to the Plan subsequent to the granting of such options. 13. WITHHOLDINGS.. The Committee shall have the right to require optionees to remit to the Company amounts sufficient to satisfy any federal, state or local income tax withholding - -------- (1) January 8, 1990. - 5 - 6 requirements (or make other arrangements satisfactory to the Company with regard to such taxes) at such time as the Company deems necessary or appropriate for compliance with such laws. - 6 - EX-10.5 11 FORM OF 1990 EMP. INC. SOP AGT 1 EXHIBIT 10.5 BIOANALYTICAL SYSTEMS, INC. EMPLOYEE INCENTIVE STOCK OPTION AGREEMENT THIS AGREEMENT, made this 8th day of January, 1990, by and between Bioanalytical Systems, Inc., an Indiana corporation with its principal office at Purdue Research Park, West Lafayette, Indiana (hereinafter called "Company"), and Peter T. Kissinger, residing at 111 Lorene Place, West Lafayette, Indiana (hereinafter called the "Grantee"), pursuant to the terms, conditions and limitations contained in the Company's Employee Incentive Stock Option Plan (hereinafter called the "Plan"), a copy of which is attached hereto as Exhibit A, WITNESSETH THAT: WHEREAS, in the interests of affording an incentive to the Grantee to give his best efforts to the Company as a key employee, the Company wishes to provide that the Grantee shall have an option to buy Common Shares of the Company: NOW, THEREFORE, it is hereby mutually agreed as follows: 1. The Company hereby grants to the Grantee the right and option to purchase, on the terms and conditions hereinafter set forth, all or any part of an aggregate of 6,000 shares (hereinafter called "Subject Shares") of the presently authorized, but unissued, or treasury, Common Shares of the Company (hereinafter called the "Common Shares"), at a purchase price of $3.30 per share, exercisable in whole or in part from time to time subject to the limitation that no option may be exercised with respect to fewer than twenty-five (25) shares unless there are fewer than twenty-five (25) shares then subject to option hereunder, in which event any exercise must be as to all such shares and subject to the further limitation that the options represented by this Agreement shall be 2 exercisable in four equal installments as set forth in Section 6(e) of the Plan. The option shall expire as to all shares subject to purchase hereunder on the 5th anniversary date of this Agreement if not exercised on or before such date. 2. Subject to the limitation specified in Section 1 hereof and in Section 6(e) of the Plan, the Grantee may from time to time exercise this option by delivering a written notice of exercise and subscription agreement to the Secretary of the Company specifying the number of whole shares to be purchased, accompanied by payment in cash, by certified check, or bank cashier's check, of the aggregate option price of such number of shares. Such exercise shall be effective upon receipt by the Secretary of such written notice, subscription agreement and payment of the purchase price. Only the Grantee may exercise the option during the lifetime of the Grantee. No fractional shares may be purchased at any time hereunder. 3. Upon the effective exercise of the option, or any part thereof, certificates representing the shares so purchased, marked fully paid and non-assessable, shall be delivered to the person who exercised the option, except as provided in Section 6(j) of the Plan. Until certificates representing such shares shall have been issued and delivered, the Grantee shall not have any of the rights or privileges of a shareholder of the Company in respect of any of such shares. 4. In the event that, prior to the delivery by the Company of all the Subject Shares, there shall be an increase or reduction in the number of Common Shares of the Company issued and outstanding by reason of any subdivision or consolidation of Common Shares or any other capital adjustment, the number of shares then subject to this option shall be increased or decreased as provided in Section 6(g) of the Plan. - 2 - 3 5. The option and the rights and privileges conferred by this Option Agreement shall not be assigned or transferred by the Grantee in any manner except by will or under the laws of descent and distribution. In the event of any attempted assignment or transfer in violation of this Section 5, the option, rights and privileges conferred by this Option Agreement shall become null and void. 6. Nothing herein contained shall be deemed to create any limitation or restriction upon such rights as the Company would otherwise have to terminate a person as an employee of the Company. 7. The option, rights and privileges herein conferred are granted subject to the terms and conditions set forth herein and in the Plan. 8. Any notices to be given or served under the terms of this Option Agreement shall be addressed to the Secretary of the Company at Purdue Research Park, West Lafayette, Indiana, and to the Grantee at the address set forth on page one of this Option Agreement, or such other address or addresses as either party may hereafter designate in writing to the other. Any such notice shall be deemed to have been duly given or served, if and when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, postage prepaid, and deposited in the United States mail. 9. The interpretation by the Employee Incentive Stock Option Plan Committee, appointed by the Company's Board of Directors, of any provisions of the Plan or of this Option Agreement shall be final and binding on the Grantee unless otherwise determined by the Company's Board of Directors. 10. This option, and any Common Shares which may be acquired hereby, are being acquired by the Grantee for investment only and not for resale. Neither this option nor the Subject Shares have been registered under the Securities Act of 1933 or any state securities law. None of the - 3 - 4 Subject Shares may be sold, transferred, pledged, or hypothecated unless first registered under such laws, or unless counsel for the Company has given an opinion that registration under such laws is not required, and the Grantee agrees to the placement of a legend to that effect upon any certificates evidencing Common Shares acquired by him through the exercise of the option granted hereby. 11. This Option Agreement shall be governed by the laws the State of Indiana. IN WITNESS WHEREOF, the Company and the Grantee have sign this Option Agreement as of the day and year first above written. "COMPANY" BIOANALYTICAL SYSTEMS, INC. By: ------------------------------ ATTEST: - ------------------------ "GRANTEE" By: ------------------------------ - 4 - EX-10.6 12 LETTER LOAN AGMT. 5/31/97 1 EXHIBIT 10.6 May 31, 1996 Peter T. Kissinger, President Bioanalytical Systems, Inc. 2701 Kent Avenue West Lafayette, IN 47906 Dear Pete: I am pleased to inform you that Bank One, Lafayette, NA has approved the following credit facility subject to the terms and conditions detailed below: BORROWER Bioanalytical Systems, Inc. AMOUNT Up to $5 Million Dollars ($5,000,000.00) PURPOSE Purchase and renovation/addition to Great Lakes Chemical Annex Building at 2801 Kent Avenue, West Lafayette, Indiana 47906 COLLATERAL A first mortgage on the existing Bioanalytical Systems, Inc. land, building and improvements located at 2701 Kent Avenue, Tippecanoe County, Indiana and a first mortgage on the Great Lakes Chemical Annex Building located at 2801 Kent Avenue, West Lafayette, Tippecanoe County, Indiana. TERM Eighteen (18) months INTEREST RATE Bank One, Indianapolis' prime lending rate, floating plus one quarter of one percent (1/4%) calculated on a 360 day basis with interest payable monthly based upon the principal balance outstanding. COMMITMENT FEE One quarter of one percent (1/4%) of the mortgage amount ($12,500.00), due upon acceptance of this commitment. 2 REPAYMENT At maturity, conversion to five (5) year term loan based upon a twenty (20) year amortization funding either on a conventional commercial mortgage basis or through Capital One Funding Corp. With fixed principal payments plus interest. OTHER CONDITIONS If permanent mortgage funding is through Capital One Funding Corp., this commitment will be supported by a Letter of Credit priced at one percent (1%) fee per annum. GENERAL COVENANTS AND CONDITIONS Availability of borrowing under this credit facility is conditional upon the following covenants and conditions which shall survive the loan closing: 1. The Borrower certifies that their respective financial statements dated September 30, 1995 and March 31, 1996 are true and correct in all aspects and that no material adverse change has taken place as of this date. 2. The Borrower agrees to maintain their primary deposit account at Bank One, Lafayette, NA until all indebtedness hereunder has been repaid. 3. The Borrower agrees to submit its annual financial report prepared by an independent Certified Public Accountant on an audited basis within one hundred and twenty days of its year end until all indebtedness has been repaid. 4. The Borrower agrees to provide interim financial statements prepared on a compiled basis within forty five (45) days of each quarter end. 5. The Borrower agrees, prior to closing, to provide and maintain fire and casualty insurance acceptable to Bank One, Lafayette, NA on all tangible collateral with a loss payable/mortgage endorsement in favor of Bank One, Lafayette, NA. 6. The Borrower agrees to provide a certified copy of the building plans and costs estimates prepared by a registered Architect or Engineer, prior to closing. 7. The Borrower agrees to provide, prior to closing, a schedule of the proposed development costs including a list of all suppliers and subcontractors, reflecting the amount of their respective costs to the Borrower. 8. The Borrower agrees that all requests for construction funds will be accompanies by a Certificate of Inspection certified by a registered Architect or Engineer affirming that the improvements are in compliance with the approved plans and the amount of the funding requested is represented by labor and material in place or delivered on sight. 3 9. The Borrower agrees to provide, prior to closing, a preconstruction appraisal which complies with USPAP and FIRREA appraisal guidelines acceptable to Bank One, Lafayette, NA, which evidences a Fair Market Value of at least $6,250,000.00. 10. The Borrower agrees to provide an acceptable Title Insurance Commitment, prior to closing, which shows the proposed mortgage to be a valid first lien on the property against the Borrower's fee simple title with deletion of Title Insurance Company Endorsements of the standing exceptions as requested by the Bank of the Bank's Legal Counsel. 11. The Borrower agrees to provide an acceptable mortgage survey on the 2701 and 2801 Kent Avenue, West Lafayette, Indiana property prepared and certified by a professional engineer or registered land surveyor which reflects a complete legal description and shows the location of all improvements with no encroachments or violations of set back or property lines and all easements and rights of way; and certifies that the property is not located in a Special Flood Hazard Area as defined by the Federal Emergency Management Agency. 12. The Borrower agrees to provide, prior to closing, finalized copies of all documents pertaining to the purchase of the Great Lakes Chemical Annex Building. These documents are to include, but are not limited to, public record searches for liens, encumbrances and judgments; sellers affidavit; copy of an executed offer to purchase; Bank One, Lafayette, NA reserves the right, in its sole discretion, to accept or reject any terms or provisions contained in these documents as a condition to closing this loan. 13. The Borrower agrees to provide, upon acceptance of this commitment, a completed environmental disclosure document for transferal of all property, or an acceptable representation and warranties statement certifying that a disclosure document is not required pursuant to Indiana Public Law 166-1989. The Borrower further agrees to provide the Bank an indemnification against any violation of Indiana Public Law 166-1989 resulting from a failure to comply with the above law. 14. The Borrower agrees that this commitment is based on the Borrower's representation that there are no known environmental defects in the property to be mortgaged and that no such defects are discovered prior to closing. 15. The Borrower agrees to provide an acceptable Phase I Environmental Audit, prior to closing, that reveals no environmental hazards or defects in the property to be mortgaged. 16. The Borrower agrees, until this loan is paid in full, to observe and maintain the following financial covenants: a. RATIO OF DEBT TO TANGIBLE NET WORTH The Company shall maintain the ratio of its total liabilities less Subordinated Debt to its Tangible Net Worth at levels not greater than 1.25 to 1. 4 b. TANGIBLE NET WORTH The Company shall maintain its Tangible Net Worth at a level not less than $6,000,000.00. c. DEBT SERVICE COVERAGE The Company shall maintain a debt service coverage ratio of not less than 1.30 to 1. For purposes of this covenant, the phrase "debt service coverage ratio" means the ratio of the sum of net income plus depreciation, amortization and interest expense over the sum of current maturities of term debt, including current capital lease payments, plus interest expense, plus cash expenditures for fixed assets. 17. The Borrower agrees to promptly pay and discharge all taxes and assessments levied and assessed or imposed upon its property or upon its income as well as other claims that, if unpaid, might by law become a lien or charge upon that property. 18. The Borrower agrees to execute any additional documents that the Bank or the Bank's Legal Counsel deem necessary to perfect the Bank's collateral lien position. 19. The Borrower agrees that the monthly payment amount may increase at any time it is determined that a negative amortization would be in effect. 20. The Borrower shall have the option of prepayment without penalty. 21. The Borrower agrees that all costs associated with originating, perfecting, documenting, and maintaining any and all terms of this commitment will be at its expense. EVENTS OF DEFAULT/TERMINATION OF COMMITMENT. If the Borrower fails to pay any sum to the Bank when due, if any representation of warranty made by the Borrower to the Bank in any document or agreement relating to this financing proves to be in any material sense false or misleading, if the Borrower fails to comply with any other conditions, covenants or obligations contained herein or in any agreements or instruments relating hereto, if any default occurs under any other agreement involving the extension of credit to which the Borrower is a party and if such default gives the holder of the obligation the right to accelerate the indebtedness, or if any bankruptcy, reorganization, arrangement, insolvency, dissolution or similar proceedings are instituted by or against the Borrower under the laws of any jurisdiction, or if there should be a material adverse change in the Borrower's financial condition, the Bank's commitment to extend credit and to make this Loan shall terminate and, at the Bank's option, all sums outstanding hereunder shall become immediately due and payable together with all accrued interest thereon. Peter, once again, it is my pleasure to offer you the above commitment on behalf of Bank One, Lafayette, NA. If the terms of this commitment are acceptable, please acknowledge your 5 acceptance by signing this original below returning it in the envelope provided along with a check for the $12,500.00 commitment fee. If you should have any questions about any of the terms or conditions detailed in this commitment letter, please feel free to contact me at 423-0321. If not acted upon, this commitment will expire after July 15, 1996. Sincerely yours, /s/ MURRAY N. MARSHALL Murray N. Marshall Vice President ACCEPTANCE The above terms and conditions are hereby accepted this ______ day of ___________________, 1996. Bioanalytical Systems, Inc. By:____________________________ EX-10.7 13 NOTE DATED 7/19/96 1 EXHIBIT 10.7 Bioanalytical Systems, Inc. Bank One, Lafayette, NA Loan Number #398/406 2701 Kent Avenue 201 Main Street Date: July 19, 1996 West Lafayette, IN 47906 Lafayette, IN 47901 Maturity Date: January 19, 1998 Loan Amount: $4,720,000.00 Renewal Of BORROWER'S NAME AND ADDRESS LENDER'S NAME AND ADDRESS "I"includes each borrower above, "You" means the lender, its jointly and severally. successors and assigns
For value received, I promise to pay to you, or your order, at your address listed above the PRINCIPAL sum of Four Million Seven Hundred Twenty Thousand and no/100 Dollars $4,720,000.00. [ ] SINGLE ADVANCE: I will receive all of this principal sum on ____________________. No additional advances are contemplated under this note. [X] MULTIPLE ADVANCE: The principal sum shown above is the maximum amount of principal I can borrow under this note. On July 19, 1986 I will receive the amount of $1,972,002.87 and future principal advances are contemplated. Conditions: the conditions for future advances are _________________________________________________________________ [ ] OPEN END CREDIT: You and I agree that I may borrow up to the maximum amount of principal more than one time. This feature is subject to all other conditions and expires on _______________________. [x] CLOSED END CREDIT: You and I agree that I may borrow up to the maximum only one time (and subject to all other conditions). INTEREST: I agree to pay interest on the outstanding principal balance from July 19, 1996 at the rate of 8.5%. [x] VARIABLE RATE: This rate may them change as stated below: [x] INDEX RATE: The future rate will be 1/4% above the following index rate: Bank One, Indianapolis, NA prime lending rate [ ] NO INDEX: The future rate will not be subject to any internal or external index. It will be entirely in your control. [x] FREQUENCY AND TIMING. The rate on this note may change as often as daily. A change in the interest rate will take effect on the same day Bank One, Indianapolis, NA prime rate changes. [ ] LIMITATIONS: During the term of this loan, the applicable annual interest rate will not be more than _________% or less than ___________%. The rate may not change more than _________% each ______________. EFFECT OF VARIABLE RATE: A change in the interest rate will have the following effect on the payments: [ ] The amount of each scheduled payment will change. [x] The amount of the final payment will change. [ ] _________________________________________ ACCRUAL METHOD: Interest method will be calculated on a 360 day basis. POST MATURITY RATE: I agree to pay interest on the unpaid balance of this note owing after maturity, and until paid in full, as stated below: [ ] on the same fixed or variable rate basis in effect before maturity (as indicated above) [x] at a rate equal to Four (4%) percent above Bank One, Indianapolis, NA prime lending rate [x] LATE CHARGE: If a payment is made more than 15 days after it is due, I agree to pay a late charge of 5% of the payment amount, subject to a minimum of $25.00 and a maximum of $250.00. [ ] ADDITIONAL CHARGES: In addition to interest, I agree to pay the following charges which [ ] are [ ] are not included in the principal amount above: PAYMENTS: I agree to pay this note as follows: [x] INTEREST: I agree to pay accrual interest commencing August 19, 1996 and continuing on the 19th day of each month thereafter. [x] PRINCIPAL: I agree to pay the principal on January 19, 1998 [ ] INSTALLMENTS: I agree to pay this note on _________ payments. The first payment will be in the amount of $_______________ and will be due ________________. A payment of $________________ will be due _______________________ thereafter. The final payment of the entire unpaid balance of principal and interest will be due ________________________. [ ] UNPAID INTEREST: Any accrued interest note paid when due (whether due by reason of a schedule of payments or due because of Lender's demand) will become part of the principal hereafter, and will bear interest at the interest rate in effect from time to time as provided for in this agreement. ADDITIONAL TERMS: This loan is issued under the provisions of a letter/Loan Agreement dated May 31, 1996. This loan is accrued by a mortgage dated July 19, 1996. [ ] SECURITY. This note is a separately secured by (describe separate PURPOSE: The purpose of this loan is purchase and document by type and date). renovation/addition to Great Lakes Chemical Annex Bldg. __________________________________________________________ (This section is for your internal use. Failure to list a SIGNATURES: I AGREE TO THE TERMS OF THIS NOTE separate security document does not mean the (INCLUDING THOSE ON PAGE 2). I have received a copy on agreement will not secure this note.) today's date. Bioanalytical Systems, Inc. Signature for Lender By: /s/ LINA L. REEVES-KERNER Bank One, Lafayette, NA VICE PRESIDENT By: /s/ MURRAY N. MARSHALL, Vice President __________________________________________________________
EX-10.8 14 LOAN AGMT. DATED 7/22/92 1 EXHIBIT 10.8 July 22, 1992 Peter T. Kissinger, President Bioanalytical Systems, Inc. 2701 Kent Avenue West Lafayette, IN 47906 Dear Pete, I am pleased to inform you that Bank One, Lafayette, NA has approved the following credit facility subject to the terms and conditions detailed below: Borrower : Bioanalytical Systems, Inc. Amount : Up to Seven Hundred Thousand Dollars ($700,000.00) Purpose : Payoff first mortgage bonds on the 2701 Kent Avenue, West Lafayette, Indiana commercial facility held by 1st National Bank of Louisville. Collateral : A first mortgage on all land, building and improvements on the 2701 Kent Avenue, West Lafayette, Indiana commercial property. Term : Seven (7) years. Interest Rate : Options as follows: 1. Bank One, Indianapolis's prime lending rate, floating plus one and one quarter percent (1 1/4%), calculated on a 360 day basis with interest payable monthly, or 2. A fixed rate of 8 1/2% for a term of three years, or 3. A fixed rate of 9% for a term of five years. During the term of this mortgage, the interest rate will never exceed twelve (12%) percent and will never be lower than seven (7%) percent. Repayment : Interest Rate Option: 2 Page No. 2 Bioanalytical Systems, Inc. July 22, 1992 1. Monthly payments of $10,651.00 which include principal and interest commencing thirty (30) days from the date of the mortgage or annual payments of $100,000.00 commencing one (1) year from the date of the mortgage with interest payable monthly commencing thirty (30) days from the date of the mortgage, or 2. Monthly payments of $11,086.00 which include principal and interest commencing thirty (30) days from the date of the mortgage or annual payments of $100,000.00 commencing one (1) year from the date of the mortgage with interest payable monthly commencing thirty (30) days from the date of the mortgage, or 3. Monthly payments of $11,263.00 which include principal and interest commencing thirty (30) days from the date of the mortgage or annual payments of $100,000.00 commencing one (1) year from the date of the mortgage with interest payable monthly commencing thirty (30) days from the date of the mortgage. This commitment will be supported by the enclosed Credit Agreement which will be executed at the closing. Pete, it is once again my pleasure to offer Bioanalytical Systems, Inc. the above commitment on behalf of Bank One, Lafayette, NA. If the terms of this commitment are acceptable, please acknowledge your acceptance by signing this original below and returning it in the envelope provided. If you should have any questions about any of the terms or conditions detailed in this commitment letter, please feel free to contact me at 423-0321. Very Truly Yours, /s/ MURRAY N. MARSHALL Murray N. Marshall Vice President MNM:tjd - 2 - 3 Page No. 3 Bioanalytical Systems, Inc. July 22, 1992 ACCEPTANCE The above terms and conditions are hereby accepted this 24th day of July, 1992. BIOANALYTICAL SYSTEMS, INC. BY: /s/ PETER T. KISSINGER President Interest Rate Option: Repayment Option: _____1. Prime + 1 1/4% __X__1. Monthly _____2. Fixed 3 yrs @ 8 1/2% _____2. Annual __X__3. Fixed 5 yrs @ 9% - 3 - EX-10.9 15 CREDIT AGMT. DATED 7/24/92 1 EXHIBIT 10.9 CREDIT AGREEMENT BANK ONE, LAFAYETTE, NA, a national banking association (the "Bank") and Bioanalytical Systems, an Indiana corporation (the "Company") hereby enter into this Credit Agreement ("Agreement") as of this 24th day of, July , 1992. I. CREDIT FACILITY. A. THE TERM LOAN. The Bank agrees to make a term loan to the Company in the principal amount of Three Hundred Thousand and no/l00 Dollars ($300,000.00) (the "Term Loan"). 1. Interest Rate. The Term Loan shall bear interest until maturity at a per annum rate equal to the Prime Rate plus One and One-quarter percent (l 1/4%) or a fixed rate of Eight and 50/l00 percent (8.50%) or a fixed rate of nine and 00/l00 (9%) percent calculated on the basis of a 360 day year. "Prime Rate" is the rate of interest established and quoted by Bank One, Indianapolis, NA from time to time as its Prime Rate, such rate to change contemporaneously with each change in such established and quoted rate; provided, that it is understood that the Prime Rate shall not necessarily be representative of the rate of interest actually charged by the Bank on any loan or class of loans. After maturity, whether at scheduled maturity or at maturity resulting from acceleration upon the occurrence of an Event of Default (as hereinafter defined), and until paid in full, the Term Loan shall bear interest rate per annum equal to the prime rate plus four (4%) percent. 2. Principal and Interest Payments. The Company shall repay the principal amount of the Term Loan in monthly installments beginning on August 24, 1992, and on the 24th day of each successive month thereafter until July 24, 1997, on which date the entire unpaid principal balance of the Term Loan and all accrued interest thereon shall be due and payable. Monthly installments would be $4,565.00 based upon a variable rate at one and one-quarter percent above the Prime Rate, or $4,751.00 based upon a fixed interest rate of 8 1/2% for a term of three (3) years, or $4,827.00 based upon a fixed interest rate of 9% for a term of five (5) years with monthly payments which include principal and interest beginning thirty (30) days from the date of the note. The Term Loan shall be repaid on the 24th day of each consecutive month in the aggregate amount for principal and interest of Four Thousand Eight Hundred and Twenty Seven Dollars ($4,827.00) each based on a seven (7) year level payment amortization schedule. In the event the Prime Rate changes such that the amount of such payment does not adequately cover interest, the Bank reserves the right to adjust the amount of such monthly payments. "Banking Day" is a day on which the principal office of the Bank in Lafayette, Indiana is open for the purpose of conducting substantially all of its banking activities. 2 3. Use of Proceeds of Term Loan. Proceeds of the Term Loan shall be used to payoff first mortgage bonds on the 2701 Kent Avenue, West Lafayette, Indiana commercial facility held by 1st National Bank of Louisville. II. REPRESENTATIONS AND WARRANTIES. The company hereby represents and warrants to the Bank that: A. Corporate Existence and Authority. The Company is a corporation duly organized and validly existing under the laws of the State of Indiana. B. Proper Authorization and No Conflict. The execution and delivery of this Agreement and the promissory notes evidencing the Term Loan and the collateral documents described herein (all such agreements and documents called the "Loan Documents") and the performance by the Company of its obligations thereunder, are within the Company's corporate powers, have been duly authorized by all necessary corporate action, and do not and will not contravene or conflict with any provision of law, the Articles of Incorporation or By-Laws of the Company, or any agreement binding upon the Company or its property. C. Valid and Binding Nature of Loan Documents. The Loan Documents are the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except to the extent that the enforcement thereof may be limited by bankruptcy or other laws enacted for the relief of debtors generally. D. Financial Statements. All financial statements and other financial data which have been or will be furnished to the Bank by the Company are and will be true and correct, reflect and will reflect fairly the financial condition of the Company, and have been and will be prepared in accordance with generally accepted accounting principals consistently applied. E. Litigation and Contingent Liabilities. No litigation or other legal or regulatory proceedings are pending or threatened against the Company which, if adversely determined, would have a material adverse effect on the financial condition of the Company or on the results of its operations. F. Taxes. All required tax returns of the Company have been filed. All taxes which are due and payable have been paid, together with interest and penalties, if any. G. Hazardous Substances. To the best knowledge of the Company after due inquiry and investigation, there are no underground storage tanks of any kind on any premises owned or occupied by or under lease to the Company, and there are no tanks, drums or other containers of any kind on premises owned or occupied by or under lease to the Company, the contents of which are unknown to the Company, and no premises owned or occupied by or under lease to the Company have ever been used, and as of the date of this Agreement, no such premises are being used, for any activities involving the use, treatment, transportation, generation, storage or disposal of any Hazardous -2- 3 Substances in hazardous quantities, and no Hazardous Substances in hazardous quantities have been released on any such premises, nor is there any threat of release of any Hazardous Substances in hazardous quantities on any such premises. For purposes of this Agreement, "Hazardous Substances" means any hazardous or toxic substance regulated by any federal, state or local statute. III. COLLATERAL. The Term Loan will be secured by: A. Mortgage. A real estate mortgage on the real property of the company located at 2701 Kent Avenue, West Lafayette, Tippecanoe County, State of Indiana, and more particularly described in the Real Estate Mortgage, executed by the Company in favor of the Bank (the "Mortgage"). All of the documents described in this Section shall be in form and substance acceptable to the Bank. IV. AFFIRMATIVE COVENANTS. Until the Term Loan is paid in full, the Company agrees that it will: A. Financial Statements. Furnish the Bank within One Hundred and Twenty (120) days after the close of each fiscal year audited financial statements of the Company for such fiscal year prepared by independent certified public accountants approved by the Bank, and within forty five (45) days after the close of each month a balance sheet and statement of income for the month and for the partial fiscal year ended as of the end of the month all in reasonable detail and certified by the chief financial officer of the Company as accurate and as having been prepared in accordance with generally accepted accounting principals, to the extend applicable, consistently applied, and with such other financial information as the Bank may request from time to time. B. Audit. At all reasonable times permit the Bank and its duly authorized representatives to examine and audit the books, records and physical properties of the Company. C. Discharge Liabilities. Pay and discharge all current obligations as they mature and all taxes, assessments, and other governmental charges or levies before penalties attach, except such as are being appropriately contested in good faith and for which adequate reserves are being maintained. D. Insurance. Maintain adequate insurance such as is customarily maintained by similar businesses and as may be reasonably requested by the Bank, with all policies naming the Bank as lender loss payee. E. Notice. Inform the Bank immediately of any occurrence, including litigation, which may have a material adverse effect on the financial condition of the Company. -3- 4 F. Hazardous Substances. Immediately notify the Bank of the commencement of any use, treatment, transportation, generation, storage or disposal of any Hazardous Substance (defined above) in hazardous quantities in its operations or the operations of any subsidiary, and cause any Hazardous Substances which are now or may hereafter be used or generated in the operations of the Company or any subsidiary in hazardous quantities to be accounted for and disposed of in compliance with all applicable federal, state, and local laws and regulations. Further, the Company shall also notify the Bank immediately upon obtaining knowledge that: (a) any premises which have at any time have been owned or occupied by or have been under lease to the Company or any subsidiary are the subject of an environmental investigation by any federal, state or local governmental agency having jurisdiction over the regulation of any Hazardous Substances, the purpose of which investigation is to quantify the levels of Hazardous Substances located on such premises, and (b) the Company or any subsidiary has been named or is threatened to be named as a party responsible for the possible contamination of any real property or ground water with Hazardous Substances, including but not limited to, the contamination of past and present waste disposal sites. The Company shall establish reserves (determined in accordance with generally accepted accounting principals) in the amount of such potential liability. G. Maintain Existence. Maintain the corporate existence of the Company. H. Banking Accounts. Maintain the company's deposit account with Bank One, Lafayette, NA until all indebtedness under this agreement has been repaid. V. NEGATIVE COVENANTS. Until the Term Loan is paid in full, the company will not: A. Merge. Merge or consolidate with or into any other entity or acquire any equity interest in any other business entity, without prior written Bank approval. B. Hazardous Substances. Allow or permit to continue the release or threatened release of any Hazardous Substances on any premises owned or occupied by or under lease to the Company or any subsidiary. C. Debt. Incur or permit to exist any indebtedness for borrowed money except to the Bank (other than in the normal course of business), without prior written Bank approval. D. Guaranties and Loans. Assume, guarantee, or endorse any obligation of any other person, firm or corporation, except negotiable instruments for deposit in the ordinary course of business, or loan or make any advances to any other person or entity except credit accommodations to customers or vendors in the ordinary course of business and reasonable salary advances to non-executive employees, without prior written Bank approval. E. Liens. Create or permit any liens on the Company's property, except liens in favor of the Bank and any other liens permitted to exist with the Bank's prior written approval. -4- 5 VI. DEFAULT AND REMEDIES. A. Events of Default. An Event of Default shall occur hereunder if: 1. Non Payment the Company fails to pay within 30 days when due any installment of principal or interest on the Term Loan; or 2. Negative and Financial Covenant Default the Company fails or omits to perform, observe, or comply with any of the terms, agreements, conditions or covenants contained in the Section of this Agreement regarding Negative Covenants, or financial covenants in the Section of this Agreement regarding Affirmative Covenants, or in any agreement executed in connection herewith; or 3. Affirmative Covenant Default the Company fails or omits to perform, observe, or comply with any of the terms, agreements, conditions or covenants contained in the Section of this Agreement regarding Affirmative Covenants other than financial covenants and the failure of the Company to cure such failure of omission within 30 days after delivery of written notice of such a failure or omission by the Bank to the Company. 4. Misrepresentation any warranty, representation, certificate or statement of the Company made in or pursuant to this Agreement is false or materially misleading in any material respect; or 5. Cross-Default the Company defaults under any other agreement, indenture, instrument or note for borrowed money, the effect of which accelerates or entitles the holder of any such indebtedness to accelerate the maturity thereof; or 6. Transfer of Assets any assignment, transfer, or other disposition of any interest in the Company occurs outside the ordinary course of business without the express written consent of the Bank; or 7. Dissolution if the dissolution, termination of existence, or business failure of the Company occurs; or 8. Receiver the Company consents to the appointment of a receiver, liquidator, assignee, trustee or custodian for the Company, or a receiver, liquidator, assignee, trustee or custodian takes possession of any substantial part of the property of the Company, or if the Company makes any assignment for the benefit of any creditors; or 9. Liens any property of the Company is subject to attachment, garnishment, lien, or other legal process (except the lien in favor of the Bank or any other liens permitted by the Bank in writing or pursuant to the terms of this Agreement); or -5- 6 10. Bankruptcy any proceedings under any bankruptcy or insolvency laws are commenced by or against the Company, in the event such proceedings are commenced against the Company have not been dismissed within sixty (60) days after their institution. B. Remedies. Upon the occurrence of a Event of Default described in the subsection above captioned "Bankruptcy," the outstanding principal balance of the Term Loan together with accrued interest thereon shall become immediately due and payable, all without notice of any kind. Upon the occurrence of any other Event of Default described above, the Bank may, at its option, declare immediately due and payable the outstanding principal balance of the Term Loan, together with interest thereon, which shall be immediately due and payable without demand or notice of any kind. Upon the occurrence of an Event of Default, the Bank, in addition to any other rights or remedies it may have, shall have and may exercise immediately and without demand any and all rights and remedies granted to the Bank under the Loan Documents. VII. CONDITIONS PRECEDENT. This Agreement shall become effective and the Bank shall make the Term Loan only if no Event of Default has occurred and is continuing and upon receipt of the following in form and substance satisfactory to the Bank: A. The Term Note evidencing the term loan and real estate mortgage. B. A certificate of the Secretary of the Company certifying the name of the officer or officers of the Company authorized to sign this Agreement and the other Loan Documents to which the Company is a party, together with a sample of the true signature of each such person. C. A written appraisal acceptable to the Bank that meets all recent OCC and FIRREA lending appraised guidelines, reflecting a minimum fair market value of $875,000.00. D. A Title Insurance commitment, which shows that the proposed mortgage will be a valid first lien on the property (following the repayment of the first mortgage bonds) against the company's fee simple title with deletion of Title Insurance Company Endorsements of the standing exceptions as requested by the Bank or the Bank's Legal Counsel. E. An acceptable Phase I Environmental Audit that reveals no environmental hazards or defects in the property to be mortgaged. F. Such other documents reasonably requested by the Bank. VIII. MISCELLANEOUS. The Company shall reimburse the Bank for all costs and expenses incurred by the Bank in connection with the Term Loan, including but not limited to attorneys' fees (in the case of enforcement), appraisal fees, filing fees, lien searches and credit investigations. No delay or omission on the part of the Bank to exercise any right or remedy hereunder or at law or in equity shall impair such right or power or be construed as a waiver of any Event of Default, or shall any single or partial exercise of any right or remedy by the Bank preclude any other or further -6- 7 exercise thereof. No amendment, modification, waiver or consent of the Bank with respect to any provisions of this Agreement or any other Loan Document shall be effective unless in writing and signed by the Bank. This Agreement shall be binding upon and shall inure to the benefit of the Company and the Bank in their respective successors and assigns. This Agreement shall be governed by the laws of the State of Indiana. Bioanalytical Systems, Inc. By: \S\PETER T. KISSINGER ------------------------------ Peter T. Kissinger, Pres. ------------------------------ [printed name and title] BANK ONE, LAFAYETTE, [national association] Attest: \S\SUE E. HUMPHREY-OAKLEY By: \S\MURRAY N. MARSHALL, V.P. - ------------------------- ----------------------------- Sue E. Humphrey-Oakley, Comm. Ln. Proc. Murray N. Marshall, V.P. [printed name and title] [printed name and title] -7- EX-10.10 16 NOTE DATED 7/24/92 1 EXHIBIT 10.10 PROMISSORY NOTE BANK1ONE Note number: 00182 Date: July 24, 1992 Amount $ 300,000.00 For value received, receipt of which is hereby acknowledged the undersigned jointly and severally promise to pay to the order of BANK ONE Lafayette, NA, 201 Main Street, Lafayette, Indiana 47901 (hereinafter "BANK ONE") Three hundred thousand and 00/100 Dollars with interest from 7/24/92 until due as hereinafter provided. RATE OF INTEREST AND ITS CALCULATION [x] Nine and 00/100 percent (9.0%) per annum [ ] BANK ONE prime lending rate: Plus ______________________ percent per annum : Times _____________________ percent per annum If the rate of interest on this note is to fluctuate with the BANK ONE prime lending rate, the rate of interest will be adjusted to reflect the change in the BANK ONE prime lending rate: [ ] on the first day of each month following the month in which the BANK ONE lending rate changes, [ ] on the same day as the BANK ONE prime lending rate changes. "Prime lending rate" means the rate announced from time to time by BANK ONE as its prime lending rate, which rate may not be the lowest rate offered by BANK ONE. Interest shall be calculated on a 30/360 day year basis and is based on the actual number of days which elapse during the lending period. TIME AND METHOD OF PAYMENT [ ] PRINCIPAL AND INTEREST PAYABLE ON DATE CERTAIN. The principal balance is due and payable on ______________________. Interest is due and payable [ ] at maturity or [ ] beginning _______________________ and __________________________________________ thereafter until the principal balance is paid. [ ] PRINCIPAL PAYABLE ON DEMAND, INTEREST PAYABLE PERIODICALLY. Principal is due and payable beginning ____________ and ___________ thereafter until demand is made for payment of principal at which time principal and any unpaid interest shall be immediately due and payable. [x] PRINCIPAL AND INTEREST PAYABLE PERIODICALLY. Principal is payble on demand but until such time as demand for payment is made, principal plus accrued interest thereon is due in installments as hereinafter provided: Payment frequency: [x] Monthly [ ] Quarterly [ ] Semiannually [ ] Annually Type payment: [x] Payment includes both principal and interest [ ] Payment amount is principal -- interest is calculated Date of first payment August 24, 1992 Payment amount $4,827.00 After the principal sum is due, whether by acceleration or otherwise, the interest rate will be the BANK ONE prime lending rate plus Four and 00/100 percent. This note is [x] Secured [ ] Unsecured This note [x] is [ ] is not issued under the provisions of a loan agreement dated July 22, 1992 and Credit Agreement dated July 24, 1992. The undersigned have deposited with BANK ONE the following property and/or have given a security interest in the following property: (not applicable if note is unsecured) A Mortgage dated July 24, 1992. 1. The above-described property (if any), all credits, deposits, accounts or money of any of the undersigned and all other property belonging to or in which any of the undersigned has any interest, now or hereafter, in the possession or control of BANK ONE, shall be held by BANK ONE as security for the payment of this note and of every other liability now or hereafter existing of any of the undersigned to BANK ONE, absolute or contingent, due or not due, and in whatsoever manner acquired by or accruing to BANK ONE (hereinafter "obligations"). 2. At the option of BANK ONE, all obligations shall become immediately, due and payable without notice or demand upon the occurrence of any of the following events of default: (a) failure of the undersigned to make payments when due of the principal or interest of this note and/or any obligations; (b) failure of the undersigned to furnish satisfactory additional collateral as hereinafter agreed; (c) failure of the undersigned or any endorser or guarantor hereof to comply with any of the terms and conditions of this note and/or any obligations of the undersigned or contained in any security agreement or device securing this note or any obligations; (d) death, dissolution, termination of existence, insolvency, business failure, appointment of receiver for the undersigned or any property of the undersigned, assignment for the benefit of creditors or commencement of any proceeding under any bankruptcy, reorganization, arrangement or liquidation law, or if such proceedings are commenced by a creditor and remain undismissed for thirty days; (e) failure of any of the undersigned to pay when due any premium on any policy of life or other insurance pledged hereunder, or held in connection with any security hereof; (f) BANK ONE deeming itself insecure and in good faith believing that the prospect of payment or performance is impaired; (g) the institution of any garnishment proceedings by attachment, levy or otherwise against any deposit balance maintained or any property deposited with BANK ONE by the undersigned or any endorser or guarantor hereof; (h) failure of the undersigned to furnish BANK ONE within thirty (30) days after written request by BANK ONE, current financial statements in form satisfactory to BANK ONE or (i) any representation, warranty, statement, report, or application made or furnished, by the undersigned providing to have been false, or erroneous in any material respect at the time of the making thereof. 3. No delay or omission on the party of BANK ONE in exercising any right hereunder shall operate as a waiver of such right or of any other right under this note. A waiver on any one occasion shall not be construed as a bar to or waiver of any such right and/or remedy on any future occasion. 4. The undersigned and each endorser and guarantor of this note, or the obligation represented hereby waive presentment, demand, notice , protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this note, and assent to any extension or postponement of the time of payment or any other indulgence, and/or to the addition or release of any other party or person primarily of secondarily liable. 5. This note shall be governed by and construed in accordance with the laws of the state in which BANK ONE has its principal office in all respects. 6. The undersigned will pay on demand all costs of collection and attorneys' fees incurred or paid by BANK ONE in enforcing this note when the same has become due whether by acceleration or otherwise. 7. All parties to this note, including endorsers are jointly and severally liable. All sums that become due hereunder, whether principal, interest, attorneys fees or other costs of collection shall be paid without relief from valuation and appraisement laws. (Paragraphs 8 through 12 are applicable only if this note is secured) 8. When the obligations become due, whether by acceleration or otherwise, and at any time thereafter, BANK ONE shall have all of the remedies provided in the security documents including the remedies as a secured party under the Uniform Commercial Code. Unless the collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, BANK ONE will give the undersigned reasonable notice of the time and place of any public sale thereof or of the time after which any private sale or other intended disposition is to be made. The requirement of reasonable notice shall be met if such notice is mailed, postage prepaid, to the last known address of the undersigned at least ten days before the time of the sale or disposition. 9. Right is expressly granted to BANK ONE at its option to transfer at any time to itself or to its nominee any securities pledged hereunder, to receive the income thereon, and hold the same as security hereto, or apply it on the principal or interest which has become due hereon of which has become due on any liability secured hereby, whether by acceleration or otherwise, and in the case of voting shares or interests pledged hereunder, to vote the same when BANK ONE deems the exercise of such power necessary to maintain or protect such collateral. 10. When the obligations become due, whether by acceleration or otherwise, and at any time thereafter, BANK ONE may, at its option, demand, sue for, collect, or make any compromise or settlement it deems desirable with reference to collateral held hereunder. BANK ONE shall not be bound to take any steps necessary to preserve any rights in the collateral against prior parties, in as much as the undersigned agree to assume such responsibility. 11. The undersigned will deliver to BANK ONE satisfactory additional collateral should BANK ONE so require. 12. The undersigned and each endorser and guarantor of this note or the obligations represented hereby agree that BANK ONE may retake possession of any collateral without prior judicial hearing or process, and hereby expressly waive any right to such judicial hearing or process and hereby assent to any substitution, exchange or release of collateral. BANK ONE is an affiliate of BANC ONE CORPORATION, Columbus, Ohio BIOANALYTICAL SYSTEMS, INC., an Indiana Corporation By: /s/ PETER T. KISSINGER Peter T. Kissinger, President EX-10.11 17 LETTER/LOAN AGMT. DATED 4/15/97 1 EXHIBIT 10.11 April 15, 1997 Peter T. Kissinger, President Bioanalytical Systems Inc. 2701 Kent Avenue West Lafayette, IN 47906 Dear Pete: I am pleased to inform you that BANK ONE, INDIANA, NA has approved the following credit facility subject to the terms and conditions detailed below: BORROWER Bioanalytical Systems Inc. AMOUNT Two Million Two Hundred Thousand and 00/100 Dollars ($2,200,000.00). Up to $200,000.00 of this amount will be available for issuance of Letters of Credit. FACILITY TYPE Line of credit to support general working capital requirements. COLLATERAL A Security Agreement covering a priority lien on inventory and receivables and a Real Estate Mortgage on the Tech Center property located at 1205 Kent Avenue, West Lafayette, IN. TERM Through March l, 1998 INTEREST RATE BANK ONE, INDIANA, NA prime rate, floating plus one-quarter of one percent (1/4%), calculated on a 360 day basis with interest payable monthly based upon the principal balance outstanding. GUARANTOR None COMMITMENT FEES None 2 Bioanalytical Systems Inc. April 15, 1997 Page 2 GENERAL COVENANTS AND CONDITIONS Availability of borrowing under this credit facility is conditional upon the following covenants and conditions which shall survive the loan closing: 1. The Borrower certifies that their financial statements dated September 30, 1996 and December 31, 1996 are true and correct in all aspects and that no material adverse change has taken place as of this date. 2. The Borrower agrees to maintain their main deposit account at BANK ONE, INDIANA, NA until all indebtedness hereunder has been repaid. 3. The Borrower agrees to submit its annual financial report prepared by an independent Certified Public Accountant on an audited basis within 120 days of its year end until all indebtedness has been repaid. 4. The Borrower agrees to provide quarterly interim financial statements prepared on a compiled basis within 45 days of quarter end. 5. The Borrower agrees, prior to closing, to provide and maintain fire and casualty insurance acceptable to BANK ONE, INDIANA, NA on all tangible collateral with a loss payable endorsement in favor of BANK ONE, INDIANA, NA. 6. The Borrower agrees to promptly pay and discharge all taxes and assessments levied and assessed or imposed upon its property or upon its income as well as other claims that, if unpaid, might by law become a lien or charge upon that property. 7. The Borrower agrees not to guaranty the indebtedness of any individual, corporation, or subsidiary. 8. The Borrower agrees to execute any additional documents that the Bank or the Bank's Legal Counsel deem necessary to perfect the Bank's collateral lien position. 9. The Borrower agrees that all costs associated with originating, perfecting and documenting any and all terms of this commitment will be at its expense. 10. Tangible Net Worth. Maintain its shareholders' equity (less allowance for goodwill, patents, trademarks, and other intangible assets) at a level not less than $4,700,000.00. 3 Bioanalytical Systems Inc. April 15, 1997 Page 3 11. Debt to Tangible Net Worth. Maintain the ratio of its total liabilities to its shareholders' equity (less allowance for goodwill, patents, trademarks, and other intangible assets) at a level not greater than 1.80 to 1.0. 12. Debt Service Coverage. For each period of four consecutive fiscal quarters, the Company shall maintain a debt service coverage ratio of not less than 1.2 to 1.0. For purposes of this covenant the phrase "debt service coverage ratio" means the ratio of the sum of net income plus depreciation, amortization and interest expense over the sum of current maturities of term debt, including current capital lease payments, plus interest expense and expenditures for fixed assets. EVENTS OF DEFAULT/TERMINATION OF COMMITMENT. If the Borrower fails to pay any sum to the Bank when due, if any representation or warranty made by the Borrower to the Bank in any document or agreement relating to this financing proves to be in any material sense false or misleading, if the Borrower fails to comply with any other conditions, covenants or obligations contained herein or in any agreements or instruments relating hereto, if any default occurs under any other agreement involving the extension of credit to which the Borrower is a party and if such default gives the holder of the obligation the right to accelerate the indebtedness, or if any bankruptcy, reorganization, arrangement, insolvency, dissolution or similar proceedings are instituted by or against the Borrower under the laws of any jurisdiction, or if there should be a material adverse change in the Borrower's financial condition, the Bank's commitment to extend credit and to make these Loans shall terminate and, at the Bank's option, all sums outstanding hereunder shall become immediately due and payable together with all accrued interest thereon. Pete, it is my pleasure to offer Bioanalytical Systems Inc. the above commitment on behalf of BANK ONE, INDIANA, NA. If the terms of this commitment are acceptable, please acknowledge your acceptance by signing this original below and returning it in the envelope provided. If you should have any questions about any of the terms or conditions detailed in this commitment letter, please feel free to contact me at 423-0490. If not acted upon, this commitment will expire after May 15, 1997. Sincerely yours, \S\TONY S. ALBRECHT Tony S. Albrecht Vice President 4 Bioanalytical Systems Inc. April 15, 1997 Page 4 ACCEPTANCE The above terms and conditions are hereby effective this 29th day of April , 1997. BIOANALYTICAL SYSTEMS INC. By: \S\PETER T. KISSINGER ---------------------------------- Peter T. Kissinger, President EX-10.12 18 PROM. NOTE DATED 5/9/97 1 EXHIBIT 10.12 BORROWER'S NAME AND ADDRESS LENDER'S NAME AND ADDRESS Loan Number: ________________ "I" includes each borrow above, "You" means the lender, its Date: May 9, 1997 jointly, and severally. successors and assigns. Maturity Date: March 1, 1998 Bioanalytical Systems, Inc. Bank One, Indiana, NA Loan Amount: $2,200,000.00 2701 Kent Avenue 201 Main Street Renewal of: 299 West Lafayette, IN 47906 Lafayette, IN 47902 35-1345024
For value received, I promise to pay to you, or your order, at your address listed above the PRINCIPAL sum of Two Million Two Hundred Thousand and 00/100 Dollars $2,200,000.00 [ ] SINGLE ADVANCE: I will receive all of this principal sum on ____________. No additional advances are contemplated under this note. [X] MULTIPLE ADVANCE: The principal sum shown above is the maximum amount of principal I can borrow under this note. On May 9, 1997 I will receive the amount of $______________ and future principal advances are contemplated. CONDITIONS: The conditions for future advances are ________________________ ________________________________________________________________________ ________________________________________________________________________ [X] OPEN END CREDIT: You and I agree that I may borrow up to the maximum amount of principal more than one time. This feature is subject to all other conditions and expires on March 1, 1998. [ ] CLOSED END CREDIT: You and I agree that I may borrow up to the maximum only one time (and subject to all other conditions). INTEREST. I agree to pay interest on the outstanding principal balance from May 9, 1997 at the rate of 8.75% per year until _________________. [X] VARIABLE RATE: This rate may then change as stated below. [X] INDEX RATE: The future rate will be 1/4% above the following index rate: Bank One, Indiana, NA Prime Rate. [ ] NO INDEX: The future rate will not be subject to any internal or external index. It will be entirely in your control. [x] FREQUENCY AND TIMING: The rate on this note may change as often as daily. A change in the interest rate will take effect on the same day Bank One, Indiana, NA Prime Rate changes. 2 [ ] LIMITATIONS: During the term of this loan, the applicable annual interest rate will not be more than ________% or less than ________%. The rate may not change more than _________% each ________________. EFFECT OF VARIABLE RATE: A change in the interest rate will have the following effect on the payments: [ ] The amount of each scheduled payment will change. [ ] The amount of the final payment will change. [ ] ___________________________________________________________________ ACCRUAL METHOD: Interest will be calculated on a 360 day basis. POST MATURITY RATE: I agree to pay interest on the unpaid balance of this note owing after maturity, and until paid in full, as stated below: [ ] on the same fixed or variable rate basis in effect before maturity (as indicated above). [x] at a rate equal to four (4%) above Bank One, Indiana, NA Prime Rate. [x] LATE CHARGE: If a payment is made more than 15 days after it is due, I agree to pay a late charge of five (5%) of the payment amount, subject to a minimum of $25.00 and a maximum of $250.00. [ ] ADDITIONAL CHARGES: In addition to interest, I agree to pay the following charges which [ ] are [ ] are not included in the principal amount above: _______________________________ PAYMENTS: I agree to pay this note as follows: [x] INTEREST: I agree to pay accrued interest commencing June 1, 1997 and continuing on the 1st day of each month thereafter. [x] PRINCIPAL: I agree to pay the principal March 1, 1998. [ ] INSTALLMENTS: I agree to pay this note in _____ payments. The first payment will be in the amount of $______________ and will be due ______________. A payment of $____________ will be due ____________________________ thereafter. The final payment of the entire unpaid balance of principal and interest will be due ______________________. [ ] UNPAID INTEREST: Any accrued interest not paid when due (whether due by reason of a schedule of payments or due because of Lender's demand) will become part of the principal thereafter, and will bear interest at the interest rate in effect from time to time as provided for in this agreement. -2- 3 ADDITIONAL TERMS: This loan is issued under the provisions of a Letter Loan Agreement dated April 15, 1997. [x] SECURITY: This note is separately secured by (describe separate document by type and date): Security Agreement dated April 22, 1991 (inventory and receivables) and Mortgage dated January 23, 1987. (This section is for your internal use. Failure to list a separate security document does not mean the agreement will not secure this note.) PURPOSE: The purpose of this loan is general working capital. SIGNATURES: I AGREE TO THE TERMS OF THIS NOTE (INCLUDING THOSE ON PAGE 2). I have received a copy on today's date. Signature for Lender Bank One, Indiana, NA Bioanalytical Systems, Inc. By: /s/ TONY S. ALBRECHT By: ________________________ Tony S. Albrecht, Vice President -3- 4 DEFINITIONS: As used on page 1, "[x]" means the terms that apply to this loan. "I," "me" or "my" means each Borrower who signs this note and each other person or legal entity (including guarantors, endorsers, and sureties) who agrees to pay this note (together referred to as "us"). "You" or "your" means the Lender and its successors and assigns. APPLICABLE LAW: The law of the state of Indiana will govern this note. Any term of this note which is contrary to applicable law will not be effective, unless the law permits you and me to agree to such a variation. If any provision of this agreement cannot be enforced according to its terms, this fact will not affect the enforceability of the remainder of this agreement. No modification of this agreement may be made without your express written consent. Time is of the essence in this agreement. PAYMENTS: Each payment I make on this note will first reduce the amount I owe you for charges which are neither interest nor principal. The remainder of each payment will then reduce accrued unpaid interest, and then unpaid principal. If you and I agree to a different application of payments, we will describe our agreement on this note. I may prepay a part of, or the entire balance of this loan without penalty, unless we specify to the contrary on this note. Any partial prepayment will not excuse or reduce any later scheduled payment until this note is paid in full (unless, when I make the prepayment, you and I agree in writing to the contrary). INTEREST: Interest accrues on the principal remaining unpaid from time to time, until paid in full. If I receive the principal in more than one advance, each advance will start to earn interest only when I receive the advance. The interest rate in effect on this note at any given time will apply to the entire principal advanced at that time. You and I may provide in this agreement for accrued interest not paid when due to be added to principal. Notwithstanding anything to the contrary, I do not agree to pay and you do not intent to charge any rate of interest that is higher than the maximum rate of interest you could charge under applicable law for the extension of credit that is agreed to here (either before or after maturity). If any notice of interest accrual is sent and is in error, we mutually agree to correct it, and if you actually collect more interest than allowed by law and this agreement, you agree to refund it to me. INDEX RATE: The index will serve only as a device for setting the rate on this note. You do not guarantee by selecting this index, or the margin, that the rate on this note will be the same rate you charge on any other loans or class of loans to me or other borrowers. ACCRUAL METHOD: The amount of interest that I will pay on this loan will be calculated using the interest rate and accrual method stated on page 1 of this note. For the purpose of interest calculation, the accrual method will determine the number of days in a "year." If no accrual method is stated, then you may use any reasonable accrual method for calculating interest. POST MATURITY RATE: For purposes of deciding when the "Post Maturity Rate" (shown on page 1) applies, the term "maturity" means the date of the last scheduled payment indicated on page 1 of this note or the date of accelerate payment on the note, whichever is earlier. -4- 5 SINGLE ADVANCE LOANS: If this is a single advance loan, you and I expect that you will make only one advance of principal. However, you may add other amounts to the principal if you make any payments described in "PAYMENTS BY LENDER" paragraph below, or if we have agreed that accrued interest not paid when due may be added to principal. MULTIPLE ADVANCE LOANS: If this is a multiple advance loan, you and I expect that you will make more than one advance of principal. If this is closed end credit, repaying a part of the principal will not entitle me to additional credit. PAYMENTS BY LENDER: If you are authorized to pay, on my behalf, charges I am obligated to pay (such as property insurance premiums), then you may treat those payments made by you as advances and add them to the unpaid principal under this note or you may demand immediate payment of the charges. SET-OFF: I agree that you may set off any amount due and payable under this note against any right I have to receive money from you. "Right to receive money from you " means: (1) any deposit account balance I have with you; (2) any money owed to me on an item presented to you or in your possession for collection or exchange; and (3) any repurchase agreement or other nondeposit obligation. "Any amount due and payable under this note" means the total amount of which you are entitled to demand payment under the terms of this note at the time you set off. This total includes any balance the due date for which you properly accelerate under this note. If my right to receive money from you is also owned by someone who has not agreed to pay this note, your right of set-off will apply to my interest in the obligation and to any other amounts I could withdraw on my sole request or endorsement. You right of set-off does not apply to an account or other obligation where my rights are only as a representative. It also does not apply to any Individual Retirement Account or other tax-deferred retirement account. You will not be liable for the dishonor of any check when the dishonor occurs because you set off this debt against any of my accounts. I agree to hold you harmless from any such claims arising as a result of your exercise of you right of set-off. REAL ESTATE OR RESIDENCE SECURITY: If this note is secured by real estate or a residence that is personal property, the existence of a default and your remedies for such a default will be determined by applicable law, by the terms of any separate instrument creating the security interest and, to the extent not prohibited by law and not contrary to the terms of the separate security instrument, by the "Default" and "Remedies" paragraphs herein. -5- 6 DEFAULT: I will be in default if any one or more of the following occur: (1) I fail to make a payment on time or in the amount due; (2) I fail to keep the property insured, if required; (3) I fail to pay, or keep any promise, on any debt or agreement I have with you; (4) any other creditor of mine attempts to collect any debt I owe him through court proceedings; (5) I due, am declared incompetent, make an assignment for the benefit of creditors, or become insolvent (either because my liabilities exceed my assets or I am unable to pay my debts as they become due); (6) I make any written statement or provide any financial information that is untrue or inaccurate at the time if was provided; (7) I do or fail to do something which causes you to believe that you will have difficulty collecting the amount I owe you; (8) Any collateral securing this note is used in a manner or for a purpose which threatens confiscation by a legal authority:; (9) I change my name or assume an additional name without first notifying you before making such a change; (10) I fail to plant, cultivate and harvest crops in due season; (11) any loan proceeds are used for a purpose that will contribute to excessive erosion of highly erodible land or to the conversion of wetlands to produce an agricultural commodity, as further explained in 7 C.F.R. Part 1940, Subpart G, Exhibit M. REMEDIES: If I am in default on this note you have, but are not limited to, the following remedies: (1) You may demand immediate payment of all I owe you under this note (principal, accrued unpaid interest and other accrued charges). (2) You may set off this debt against any right I have to the payment of money from you, subject to the terms of the "Set-Off" paragraph herein. (3) You may demand security, additional security, or additional parties to be obligated to pay this note as a condition for not using any other remedy. (4) You may refuse to make advances to me or allow purchases on credit by me. (5) You may use any remedy you have under state or federal law. By selecting any one or more of these remedies you do not give up your right to later use any other remedy. By waiving your right to declare an event to be a default, you do not waive your right to later consider the event as a default if it continues or happens again. COLLECTION COSTS AND ATTORNEY'S FEES: I agree to pay all costs of collection, replevin or any other or similar type of cost if I am in default. In addition, if you hire an attorney to collect this note, I also agree to pay any fee you incur with such attorney plus court costs (except where prohibited by law). To the extent permitted by the United States Bankruptcy Code, I also agree to pay the reasonable attorney's fees and costs you incur to collect this debt as awarded by any court exercising jurisdiction under the Bankruptcy Code. WAIVER: I give up my rights to require you to do certain things. I will not require you to: (1) demand payment of amounts due (presentment); (2) obtain official certification of nonpayment (protest); or (3) give notice that amounts due have not been paid (notice of dishonor). -6- 7 I waive any defenses I have based on suretyship or impairment of collateral. I also give up any rights I may have under any valuation an appraisement laws which apply to me. OBLIGATIONS INDEPENDENT: I understand that I must pay this note event if someone else has also agree to pay it (by, for example, signing this form or a separate guarantee or endorsement). You may sue me alone, or anyone else who is obligated ton this note, or any number of us together, to collect this note. You may do so without any notice that it has not been paid (notice of dishonor). You may without notice release any party to this agreement without releasing any other party. If you give up any of your rights, with or without notice, it will not affect my duty to pay this note. Any extension of new credit to any of us, or renewal of this note by all or less than all of use will not release me from my duty to pay it. (Of course, you are entitled to only one payment in full.) I agree that you may at your option extend this note or the debt represented by this note, or any portion of the note or debt, from time to time without limit or notice and for any term without affecting my liability for payment of the note. I will not assign my obligation under this agreement without your prior written approval. CREDIT INFORMATION: I agree and authorize you to obtain credit information about me from time to time (for example, by requesting a credit report) and to report to others your credit experience with me (such as a credit reporting agency). I agree to provide you, upon request, any financial statement or information you may deem necessary. I warrant that the financial statements and information I provide to you are or will be accurate, correct and complete. NOTICE: Unless otherwise required by law, any notice to me shall be given by delivering it or by mailing it by first class mail addressed to me at my last known address. My current address is on page 1. I agree to inform you in writing of any change in my address. I will give any notice to you by mailing it first class to your address stated on page 1 of this agreement, or to any other address that you have designated.
BORROWER'S INTEREST DATE OF PRINCIPAL INITIALS PRINCIPAL PRINCIPAL INTEREST INTEREST PAID TRANSACTION ADVANCE (not PAYMENTS BALANCE RATE PAYMENTS THROUGH required) - -------------------------------------------------------------------------------------------------------------- / / $ $ $ % $ / / - -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------
-7- EX-10.13 19 PROM. NOTE DATED 5/9/97 1 EXHIBIT 10.13 BORROWER'S NAME AND ADDRESS LENDER'S NAME AND ADDRESS Loan Number: _____________________________________ "I" includes each borrower below, "You" means the lender, its Date: May 9, 1997 jointly and severally. successors and assigns. Maturity Date: September 30, 1997 Bioanalytical Systems, Inc. Bank One, Indiana, NA Loan Amount: $1,000,000.00 2701 Kent Avenue 201 Main Street Renewal of: West Lafayette, IN 47906 Lafayette, IN 47902 35-1345024
For value received, I promise to pay to you, or your order, at your address listed above the PRINCIPAL sum of One Million and 00/100 Dollars $1,000,000.00 [ ] SINGLE ADVANCE: I will receive all of this principal sum on ____________. No additional advances are contemplated under this note. [x] MULTIPLE ADVANCE: The principal sum shown above is the maximum amount of principal I can borrow under this note. On May 9, 1997 I will receive the amount of $______________ and future principal advances are contemplated. CONDITIONS: The conditions for future advances are __________________ ______________________________________________________________________ ______________________________________________________________________ [ ] OPEN END CREDIT: You and I agree that I may borrow up to the maximum amount of principal more than one time. This feature is subject to all other conditions and expires on ____________________. [x] CLOSED END CREDIT: You and I agree that I may borrow up to the maximum only one time (and subject to all other conditions). INTEREST. I agree to pay interest on the outstanding principal balance from May 9, 1997 at the rate of 8.75% per year. [x] VARIABLE RATE: This rate may then change as stated below. [x] INDEX RATE: The future rate will be 1/4% above the following index rate: Bank One, Indiana, NA Prime Rate. [ ] NO INDEX: The future rate will not be subject to any internal or external index. it will be entirely in your control. [x] FREQUENCY AND TIMING: The rate on this note may change as often as daily. A change in the interest rate will take effect on the same day Bank One, Indiana, NA Prime Rate changes. 2 [ ] LIMITATIONS: During the term of this loan, the applicable annual interest rate will not be more than ________% or less than ________%. The rate may not change more than _________% each ________________. EFFECT OF VARIABLE RATE: A change in the interest rate will have the following effect on the payments: [ ] The amount of each scheduled payment will change. [ ] The amount of the final payment will change. [ ] ______________________________________________________________ ACCRUAL METHOD: Interest will be calculated on a 360 day basis. POST MATURITY RATE: I agree to pay interest on the unpaid balance of this note owing after maturity, and until paid in full, as stated below: [ ] on the same fixed or variable rate basis in effect before maturity (as indicated above). [X] at a rate equal to four (4%) above Bank One, Indiana, NA Prime Rate. [X] LATE CHARGE: If a payment is made more than 15 days after it is due, I agree to pay a late charge of five (5%) of the payment amount, subject to a minimum of $25.00 and a maximum of $250.00. [ ] ADDITIONAL CHARGES: In addition to interest, I agree to pay the following charges which [ ] are [ ] are not included in the principal amount above: ________________________________ PAYMENTS: I agree to pay this note as follows: [x] INTEREST: I agree to pay accrued interest commencing June 30, 1997 and continuing on the last day of each month thereafter. [x] PRINCIPAL: I agree to pay the principal September 30, 1997. [ ] INSTALLMENTS: I agree to pay this note in _____ payments. The first payment will be in the amount of $______________ and will be due ______________. A payment of $____________ will be due ____________________________ thereafter. The final payment of the entire unpaid balance of principal and interest will be due ______________________. [ ] UNPAID INTEREST: Any accrued interest not paid when due (whether due by reason of a schedule of payments or due because of Lender's demand) will become part of the principal thereafter, and will bear interest at the interest rate in effect from time to time as provided for in this agreement. ADDITIONAL TERMS: This loan is issued under the provisions of a Letter Loan Agreement dated April 15, 1997. -2- 3 SECURED: Mortgage dated January 23, 1987 (1205 Kent Avenue) and Mortgage dated July 19, 1996 (2701 & 2801 Kent Avenue). Security Agreement dated April 22, 1991 (receivables & inventory) and Security Agreement dated August 22, 1996 (mass-spectrometer) Additionally, secured by equipment to be purchased. [ ] SECURITY: This note is separately secured by (describe separate document by type and date): See Above. (This section is for your internal use. Failure to list a separate security document does not mean the agreement will not secure this note.) PURPOSE: The purpose of this loan is support capital expenditures. SIGNATURES: I AGREE TO THE TERMS OF THIS NOTE (INCLUDING THOSE ON PAGE 2). I have received a copy on today's date. Signature for Lender Bank One, Indiana, NA Bioanalytical Systems, Inc. By: /s/ Tony S. Albrecht By: ------------------------------------ --------------------------- Tony S. Albrecht, Vice President -3- 4 DEFINITIONS: As Used on page 1, "[x]" means the terms that apply to this loan. "I," "me" or "my" means each Borrower who signs this note and each other person or legal entity (including guarantors, endorsers, and sureties) who agrees to pay this note (together referred to as "us"). "You" or "your" means the Lender and its successors and assigns. APPLICABLE LAW: The law of the state of Indiana will govern this note. Any term of this note which is contrary to applicable law will not be effective, unless the law permits you and me to agree to such a variation. If any provision of this agreement cannot be enforced according to its terms, this fact will not affect the enforceability of the remainder of this agreement. No modification of this agreement may be made without your express written consent. Time is of the essence in this agreement. PAYMENTS: Each payment I make on this note will first reduce the amount I owe you for charges which are neither interest nor principal. The remainder of each payment will then reduce accrued unpaid interest, and then unpaid principal. If you and I agree to a different application of payments, we will describe our agreement on this note. I may prepay a part of, or the entire balance of this loan without penalty, unless we specify to the contrary on this note. Any partial prepayment will not excuse or reduce any later scheduled payment until this note is paid in full (unless, when I make the prepayment, you and I agree in writing to the contrary). INTEREST: Interest accrues on the principal remaining unpaid from time to time, until paid in full. If I receive the principal in more than one advance, each advance will start to earn interest only when I receive the advance. The interest rate in effect on this note at any given time will apply to the entire principal advanced at that time. You and I may provide in this agreement for accrued interest not paid when due to be added to principal. Notwithstanding anything to the contrary, I do not agree to pay and you do not intent to charge any rate of interest that is higher than the maximum rate of interest you could charge under applicable law for the extension of credit that is agreed to here (either before or after maturity). If any notice of interest accrual is sent and is in error, we mutually agree to correct it, and if you actually collect more interest than allowed by law and this agreement, you agree to refund it to me. INDEX RATE: The index will serve only as a device for setting the rate on this note. You do not guarantee by selecting this index, or the margin, that the rate on this note will be the same rate you charge on any other loans or class of loans to me or other borrowers. ACCRUAL METHOD: The amount of interest that I will pay on this loan will be calculated using the interest rate and accrual method stated on page 1 of this note. For the purpose of interest calculation, the accrual method will determine the number of days in a "year." If no accrual method is stated, then you may use any reasonable accrual method for calculating interest. POST MATURITY RATE: For purposes of deciding when the "Post Maturity Rate" (shown on page 1) applies, the term "maturity" means the date of the last scheduled payment indicated on page 1 of this note or the date of accelerate payment on the note, whichever is earlier. -4- 5 SINGLE ADVANCE LOANS: If this is a single advance loan, you and I expect that you will make only one advance of principal. However, you may add other amounts to the principal if you make any payments described in "PAYMENTS BY LENDER" paragraph below, or if we have agreed that accrued interest not paid when due may be added to principal. MULTIPLE ADVANCE LOANS: If this is a multiple advance loan, you and I expect that you will make more than one advance of principal. If this is closed end credit, repaying a part of the principal will not entitle me to additional credit. PAYMENTS BY LENDER: If you are authorized to pay, on my behalf, charges I am obligated to pay (such as property insurance premiums), then you may treat those payments made by you as advances and add them to the unpaid principal under this note or you may demand immediate payment of the charges. SET-OFF: I agree that you may set off any amount due and payable under this note against any right I have to receive money from you. "Right to receive money from you " means: (1) any deposit account balance I have with you; (2) any money owed to me on an item presented to you or in your possession for collection or exchange; and (3) any repurchase agreement or other nondeposit obligation. "Any amount due and payable under this note" means the total amount of which you are entitled to demand payment under the terms of this note at the time you set off. This total includes any balance the due date for which you properly accelerate under this note. If my right to receive money from you is also owned by someone who has not agreed to pay this note, your right of set-off will apply to my interest in the obligation and to any other amounts I could withdraw on my sole request or endorsement. You right of set-off does not apply to an account or other obligation where my rights are only as a representative. It also does not apply to any Individual Retirement Account or other tax-deferred retirement account. You will not be liable for the dishonor of any check when the dishonor occurs because you set off this debt against any of my accounts. I agree to hold you harmless from any such claims arising as a result of your exercise of you right of set-off. REAL ESTATE OR RESIDENCE SECURITY: If this note is secured by real estate or a residence that is personal property, the existence of a default and your remedies for such a default will be determined by applicable law, by the terms of any separate instrument creating the security interest and, to the extent not prohibited by law and not contrary to the terms of the separate security instrument, by the "Default" and "Remedies" paragraphs herein. -5- 6 DEFAULT: I will be in default if any one or more of the following occur: (1) I fail to make a payment on time or in the amount due; (2) I fail to keep the property insured, if required; (3) I fail to pay, or keep any promise, on any debt or agreement I have with you; (4) any other creditor of mine attempts to collect any debt I owe him through court proceedings; (5) I due, am declared incompetent, make an assignment for the benefit of creditors, or become insolvent (either because my liabilities exceed my assets or I am unable to pay my debts as they become due); (6) I make any written statement or provide any financial information that is untrue or inaccurate at the time if was provided; (7) I do or fail to do something which causes you to believe that you will have difficulty collecting the amount I owe you; (8) Any collateral securing this note is used in a manner or for a purpose which threatens confiscation by a legal authority:; (9) I change my name or assume an additional name without first notifying you before making such a change; (10) I fail to plant, cultivate and harvest crops in due season; (11) any loan proceeds are used for a purpose that will contribute to excessive erosion of highly erodible land or to the conversion of wetlands to produce an agricultural commodity, as further explained in 7 C.F.R. Part 1940, Subpart G, Exhibit M. REMEDIES: If I am in default on this note you have, but are not limited to, the following remedies: (1) You may demand immediate payment of all I owe you under this note (principal, accrued unpaid interest and other accrued charges). (2) You may set off this debt against any right I have tot he payment of money from you, subject to the terms of the "Set-Off" paragraph herein. (3) You may demand security, additional security, or additional parties to be obligated to pay this note as a condition for not using any other remedy. (4) You may refuse to make advances to me or allow purchases on credit by me. (5) You may use any remedy you have under state or federal law. By selecting any one or more of these remedies you do not give up your right to later use any other remedy. By waiving your right to declare an event to be a default, you do not waive your right to later consider the event as a default if it continues or happens again. COLLECTION COSTS AND ATTORNEY'S FEES: I agree to pay all costs of collection, replevin or any other or similar type of cost if I am in default. In addition, if you hire an attorney to collect this note, I also agree to pay any fee you incur with such attorney plus court costs (except where prohibited by law). To the extent permitted by the United States Bankruptcy Code, I also agree to pay the reasonable attorney's fees and costs you incur to collect this debt as awarded by any court exercising jurisdiction under the Bankruptcy Code. WAIVER: I give up my rights to require you to do certain things. I will not require you to: (1) demand payment of amounts due (presentment); (2) obtain official certification of nonpayment (protest); or (3) give notice that amounts due have not been paid (notice of dishonor). -6- 7 I waive any defenses I have based on suretyship or impairment of collateral. I also give up any rights I may have under any valuation an appraisement laws which apply to me. OBLIGATIONS INDEPENDENT: I understand that I must pay this note event if someone else has also agree to pay it (by, for example, signing this form or a separate guarantee or endorsement). You may sue me alone, or anyone else who is obligated ton this note, or any number of us together, to collect this note. You may do so without any notice that it has not been paid (notice of dishonor). You may without notice release any party to this agreement without releasing any other party. If you give up any of your rights, with or without notice, it will not affect my duty to pay this note. Any extension of new credit to any of us, or renewal of this note by all or less than all of use will not release me from my duty to pay it. (Of course, you are entitled to only one payment in full.) I agree that you may at your option extend this note or the debt represented by this note, or any portion of the note or debt, from time to time without limit or notice and for any term without affecting my liability for payment of the note. I will not assign my obligation under this agreement without your prior written approval. CREDIT INFORMATION: I agree and authorize you to obtain credit information about me from time to time (for example, by requesting a credit report) and to report to others your credit experience with me (such as a credit reporting agency). I agree to provide you, upon request, any financial statement or information you may deem necessary. I warrant that the financial statements and information I provide to you are or will be accurate, correct and complete. NOTICE: Unless otherwise required by law, any notice to me shall be given by delivering it or by mailing it by first class mail addressed to me at my last known address. My current address is on page 1. I agree to inform you in writing of any change in my address. I will give any notice to you by mailing it first class to your address stated on page 1 of this agreement, or to any other address that you have designated.
- ------------------------------------------------------------------------------------------------------------- BORROWER'S INITIALS INTEREST DATE OF PRINCIPAL (not PRINCIPAL PRINCIPAL INTEREST INTEREST PAID TRANSACTION ADVANCE required) PAYMENTS BALANCE RATE PAYMENTS THROUGH - ------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------- / / $ $ $ % $ / / - ------------------------------------------------------------------------------------------------------------- / / $ $ $ % $ / / - ------------------------------------------------------------------------------------------------------------- / / $ $ $ % $ / / - ------------------------------------------------------------------------------------------------------------- / / $ $ $ % $ / / - ------------------------------------------------------------------------------------------------------------- / / $ $ $ % $ / / - ------------------------------------------------------------------------------------------------------------- / / $ $ $ % $ / / - ------------------------------------------------------------------------------------------------------------- / / $ $ $ % $ / / - ------------------------------------------------------------------------------------------------------------- / / $ $ $ % $ / / - ------------------------------------------------------------------------------------------------------------- / / $ $ $ % $ / / - ------------------------------------------------------------------------------------------------------------- / / $ $ $ % $ / / - -------------------------------------------------------------------------------------------------------------
-7- EX-10.14 20 INDEM. MTG. DATED 1/23/87 1 EXHIBIT 10.14 INDEMNIFYING MORTGAGE THIS INDENTURE WITNESSETH, That Bioanalytical Systems, Inc. of Tippecanoe County, in the State of Indiana, hereby mortgage and warrant to BANK ONE, LAFAYETTE, NA, Lafayette, Tippecanoe County, Indiana, the following described property in the County of Tippecanoe and State of Indiana , to wit: A part of Lot #3 in McClure Park Subdivision, Part One (1) as platted upon a part of the Northeast quarter of Section twelve (12), Township twenty-three (23) North, Range five (5) West, described as follows, to wit: Beginning at a point which is Due South 1911.64 feet and Due West 229.00 feet of the northeast corner of the northeast quarter of the aforesaid Section 12; thence Due South 1600.00 feet; thence Due West 214.26 feet; thence North 00#-02'-30" West 200.26 feet; thence in a Southeasterly direction on and along the arc of a curve whose radius is 460.33 feet a distance of 199.01 feet; thence Due East 21.00 feet to the place of beginning, containing 0.86 acres, more or less. Located in the City of West Lafayette, Wabash Township, Tippecanoe County, Indiana. This mortgage is given to the mortgagee for the purpose of securing all indebtedness already owing by Bioanalytical Systems, Inc., mortgagor, to said BANK ONE, LAFAYETTE, NA, in the sum of $500,000.00 and is also given to secure all indebtedness or liability, of every kind, character and description of the mortgagor, or either of them, to the mortgagee hereafter created, such as future loans, advances, overdrafts, and all indebtedness that may accrue to said Bank by reason of the mortgagor, or either of them, becoming surety or indorser for any other person, whether said indebtedness was originally payable to said Bank or has come to it by assignment or otherwise, and shall be binding upon the mortgagor and remain in full force and effect until all of said indebtedness is paid. This mortgage shall secure the full amount of said indebtedness without regard to the time when same was made. The mortgagor expressly agrees to pay all sums and indebtedness secured hereby, and the same shall be collectable without relief from valuation and appraisement laws and with attorney's fees, and in case it should become necessary to appoint a Receiver for any property that may be secured by this mortgage, it shall not be necessary to serve notice upon the mortgagor. IN WITNESS WHEREOF, Bioanalytical Systems, Inc. have hereunto set their hands and seals this 23rd day of January, 1987. Bioanalytical Systems, Inc. By:\S\PETER T. KISSINGER --------------------------- -------------------------- --------------------------- 2 STATE OF INDIANA, COUNTY OF Tippecanoe SS: Before the undersigned, a Notary Public in and for said County and State, this 23RD day of January _____, 1987 personally appeared Bioanalytical Systems, Inc., and acknowledged the execution of the above and foregoing mortgage for the uses and purposes therein set forth. WITNESS my hand and Notarial Seal. \S\LINA L. REEVES-KERNER ------------------------- NOTARY PUBLIC This instrument prepared by: Murray N. Marshall -2- EX-10.15 21 REAL EST. MTG. DATED 7/19/96 1 EXHIBIT 10.15 REAL ESTATE MORTGAGE THIS INDENTURE WITNESSETH: That Bioanalytical Systems, Inc., (hereinafter referred to as "Mortgagor") of Tippecanoe County, State of Indiana MORTGAGE AND WARRANT to BANK ONE, LAFAYETTE, NA, a national banking association with its main banking office at 201 Main Street, Lafayette, IN 47901 (hereinafter referred to as "Bank"), the following described real estate (hereinafter referred to as "Mortgaged Premises") in Tippecanoe County, State of Indiana: Lot numbered Two (2) in the Replat of Part of Lot 1 McClure Park Subdivision, Part Two, as per plat thereof dated March 30, 1983 and recorded April 18, 1983 in Plat Cabinet C, Slide C-59, in the Office of Recorder, Tippecanoe County, Indiana. Located in the City of West Lafayette, Wabash Township, Tippecanoe County, Indiana. Lot 1 in Replat of Part of Lot 1 McClure Park Subdivision, Part Two per the plat thereof dated March 30, 1983, recorded April 18, 1983, Plat Cabinet C, Slide C-59, Document #8302918 in the Office of the Recorder of Tippecanoe County, Indiana. Located in the City of West Lafayette, Wabash Township, Tippecanoe County, Indiana. together with all rights, privileges, interest easements, hereditaments, appurtenances, fixtures and improvements now or hereafter belonging, appertaining, attached to, or used in connection with, the Mortgaged Premises, and the rents, issues, income and profits thereof. This Mortgage is given to secure the performance of the provisions and the payment of: A. That certain promissory note from Bioanalytical Systems, Inc. to Bank dated July 19, 1996 in the principal sum of Four Million Seven Hundred Twenty Thousand and no/l00 ($4,720,000.00) with interest as therein stated and with a final maturity date of January 19, 1998, together with any future modifications, extensions, and renewals thereof, and any and all notes or other instrument(s) given in substitution therefore and/or replacement thereof (such note(s) or other instruments all included in the term "note"); and B. Any other indebtedness now or hereafter owing Bank by the Mortgagor when evidenced by a promissory note(s), guaranty, hypothocation(s), or any other instrument(s) reciting that they are secured by this Mortgage. In all cases the debt secured hereby includes advancements to protect the security, costs of collection and reasonable attorney's fees. This Mortgage shall secure payment of the note(s) whether the entire amount shall have been advanced to the Mortgagor at the date hereof or at a later date, or having been advanced, shall have been repaid in part and further advances made at a later date. The note(s) and this Mortgage, including the terms of repayment thereof, may from time to time be modified or amended in writing to include any future advance or advances whether or not related to 2 the original advances together with the specified interest thereon. It is agreed that this Mortgage shall secure the unpaid balance of loans or advances made by Bank not to exceed $4,720,000.00 in the aggregate and exclusive of interest, advances to protect the security, costs of collection and reasonable attorney's fees. If the unpaid balance at any time exceeds such amount, then this Mortgage shall secure that portion of the outstanding balance which does not exceed such amount. The Mortgagor, jointly and severally if more than one, covenant and agree with the Bank that: 1. Mortgagor will pay when due all indebtedness secured hereby, on the dates and in the amounts, respectively, as provided in any note or other evidence of indebtedness secured by this Mortgage and in this Mortgage, with attorneys' fees, and without relief from valuation or appraisements laws. 2. Mortgagor will not permit any lien of mechanics or materialmen to attach to the Mortgaged Premises. 3. Mortgagor will keep the Mortgaged Premises in good repair, and will not commit or permit waste thereon, and will pay when due all taxes and assessments levied or assessed against the Mortgaged Premises or any part thereof. The Bank may enter upon and inspect the Mortgaged Premises at any reasonable time. 4. Mortgagor will procure and maintain in effect at all times adequate insurance from reliable insurance companies acceptable to the Bank against loss or destruction of the Mortgaged Premises on account of fire, windstorm and such other hazards and in such amounts as the Bank may require from time to time, and all such policies of insurance shall contain proper clauses making all sums recoverable upon such policies payable to the Bank and to the Mortgagor as their respective interests may appear; all such policies of insurance and all abstracts of title or title insurance policies with respect to the Mortgaged Premises shall be delivered to and retained by the Bank until the indebtedness secured hereby is fully paid. 5. Bank may, at its option, advance and pay all sums necessary to protect and preserve the security intended to be given by this Mortgage; and all sums so advanced and paid by Bank shall become a part of the indebtedness secured hereby and shall bear interest from date of payment at the same rate or rates as the principal indebtedness evidenced by any note or other evidence of indebtedness; and such sums may include, but not by way of limitation, (i) insurance premiums, taxes and assessments, and liens which maybe or become prior and senior to this Mortgage as a lien on the Mortgaged Premises, or any part thereof, (ii) the cost of any title insurance, surveys, or other evidence which in the discretion of Bank may be required to establish and preserve the lien of this Mortgage; (iii) all costs, expenses and attorneys' fees incurred by Bank in respect of any and all legal or equitable actions which relate to this Mortgage or to the Mortgaged Premises, during the existence of the indebtedness secured by this Mortgage; and (iv) the cost of any repairs deemed necessary and advisable by Bank to be made to the Mortgaged Premises. -2- 3 6. Bank shall be subrogated to the rights of the holder of each lien or claim paid with monies secured hereby; and Bank at its option, an on such terms as it may desire, may extend the time of payment of any part or all of the indebtedness secured hereby without in any way impairing the lien of its Mortgage or releasing Mortgagor or any of them from liability under this Mortgage or under any note or other evidence of indebtedness. 7. If any default shall occur in the payment of any of the indebtedness secured hereby, or in the performance of any covenant or agreement or Mortgagor in the loan commitment(s), loan agreement(s) or hereunder, or if Mortgagor shall abandon the Mortgaged Premises, or shall be adjudged bankrupt, or if a trustee or receiver shall be appointed for Mortgagor or for any part of the Mortgaged Premises, then and in any such event all indebtedness secured hereby shall, at the option of Bank, become immediately due and payable without notice to mortgagor, and this Mortgage may be foreclosed accordingly. The waiver by Bank of any default of Mortgagor shall not operated as a waiver of other defaults. Notice by Bank of its intention to exercise any right or option hereunder is hereby expressly waived by Mortgagor, and any one or more of Bank's rights or remedies hereunder may be enforced successively or concurrently. Any delay in enforcing any such right or remedy shall not prevent its later enforcement while Mortgagor shall be in default hereunder. In the event of the foreclosure of this Mortgage, all abstracts of title and all title insurance policies for the Mortgaged Premises shall become the absolute property of Bank. 8. Unless otherwise agreed in writing, the Bank shall be entitled to all compensation, awards, damages, claims, rights of action and proceeds of, or on account of, any damage or taking through condemnation or eminent domain regarding the Mortgaged Premises, with any excess over all sums due hereunder paid to Mortgagor. 9. Mortgagor shall not sell, convey, transfer, lease or further encumber any interest in or any part of the Mortgaged Premises, nor shall a voluntary sale, pledge or other transfer of the beneficial interest in Mortgagor be effected without the prior written consent of the Bank having been obtained to the purchase, transfer, lease or pledge, to the purchaser, transferee, lessee or pledgee and to the form and substance of any instrument evidencing any such purchase, transfer, lease or pledge. Any such sale, conveyance, transfer, pledge, lease or encumbrance made without the Bank's prior written consent shall be void. 10. Upon default hereunder, the Bank, to the extent permitted by law and without regard to the value or occupancy of the Mortgaged Premises, shall be entitled as a matter of right if it so elects to the appointment of a receiver to enter upon and take possession of the Mortgaged Premises and to collect all rents, revenues, issues, income, and profits thereof and apply the same as the court may direct. 11. Mortgagor has not actual or constructive knowledge of the existence, release, or threatened release at the Mortgaged Premises of any substance deemed toxic or hazardous under any applicable federal, state, or local laws. And that the Mortgagor will not allow or cause the release or threatened release of hazardous or toxic substances or waste on the Mortgaged Premises and -3- 4 agrees to indemnify and hold the Bank harmless from all costs and damage caused by Mortgagor, or those claiming by and through Mortgagor, releasing or dumping any such hazardous waste. Bank may, at its option, advance all sums necessary to protect and preserve the security, which sums shall become a part of the indebtedness, including the cost of any necessary environmental inspection performed on the Mortgaged Premises; the cost of cleaning up any release or threatened release of hazardous or toxic material or waste at the Mortgaged premises. And Mortgagor is, and shall remain, in compliance with all environmental laws and shall not use, store, or dispose of hazardous substances, other than has been disclosed in writing to the Bank at the time the loan is made. And Mortgagor shall immediately inform the Bank of any notices, complaints, governmental investigations, fines or penalties imposed for noncompliance in regard to environmental statutes. 12. No rights, power or remedy conferred upon or reserved to the Bank by any note, this Mortgage or any other instrument is exclusive of any other right, power, or remedy but each and every such right, power, and remedy shall be cumulative and concurrent and shall be in addition to any other right, power, and remedy given hereunder or under a note or any other instrument securing the note, or now or hereafter existing at law, in equity or by statute. 13. If any term or provision of the note or this Mortgage shall be deemed invalid, illegal or unenforceable in any respect, the validity of the remaining terms or provisions shall not be affected or prejudiced; and if the application of any term or provision of the note or this Mortgage shall be deemed invalid, illegal or unenforceable, the application of the remaining terms or provisions shall not be affected or prejudiced unenforceable, the application of the remaining terms or provisions shall not be affected or prejudiced. 14. All rights and obligations of Mortgagor hereunder shall extend to and be binding upon the several heirs, representatives, successors and assigns of Mortgagor, and shall inure to the benefit of Bank, its successors and assigns. In the event this Mortgage is executed by more than one person, corporation, or other entity, the work "Mortgagor" as used herein shall be construed to mean and include each of them, and the terms and provisions of this Mortgage construed accordingly. 15. This Mortgage is ___ x ___ is not _____ a "purchaser money mortgage". IN WITNESS WHEREOF, the Mortgagor has executed this instrument on this 19th day of July, 1996. BIOANALYTICAL SYSTEMS, INC. By: \S\LINA L. REEVES-KERNER -------------------------------- Lina L. Reeves-Kerner Vice President -4- 5 STATE OF INDIANA ) SS: ) (Individual Acknowledgment) COUNTY OF TIPPECANOE ) Before me, a Notary Public in and for said County and State, personally appeared _______________________________________________________ who acknowledged the execution of the above and foregoing Real Estate Mortgage this _____ day of ________________, 19___. My Commission Expires: Signature: ----------------------- - ---------------------- Printed: ----------------------- Notary Public County of Residence: - ---------------------- STATE OF INDIANA ) SS: ) (Individual Acknowledgment) COUNTY OF TIPPECANOE ) Before me, a Notary Public in and for said County and State, personally appeared Lina L. Reeves-Kerner, the Vice President, respectively of Bioanalytical Systems, Inc. who acknowledged the execution of the above and foregoing Real Estate Mortgage for and on behalf of said corporation this 19th day of July, 1996. My Commission Expires: Signature: \S\BECKY MAURER ------------------ Printed: - ---------------------- ------------------ Notary Public County of Residence: - ---------------------- This instrument prepared by: Murray N. Marshall ------------------ -5- EX-10.16 22 SEC. AGMT. DATED 4/22/91 1 EXHIBIT 10.16 Bioanalytical Systems, Inc. Bank One, Lafayette, NA 2701 Kent Ave. 201 Main Street West Lafayette, IN 47906 Lafayette, IN 47901 DEBTOR'S NAME, ADDRESS AND SOC. SEC. OR TAXPAYER I.D. NO. SECURED PARTY'S NAME AND ADDRESS ("I" means each Debtor who Signs) ("You" means Secured Party its successors and assigns)
I am entering into this security agreement with you on April 22, 1991. SECURITY INTEREST AND COLLATERAL. To secure (check one): [x] the payment and performance of each and every debt, liability and obligation of every type and description, except in those cases listed in the "SECURED OBLIGATIONS" paragraph on the reverse side, which Bioanalytical Systems, Inc. may now or at any time hereafter owe to you (whether such debt, liability or obligation now exists or is hereafter created or incurred, and whether it is or may be direct or indirect, due or to become due, absolute or contingent, primary or secondary, liquidated or unliquidated, or joint, several or joint and several); [ ] the debt, liability or obligation of ____________________________________ ____________________ to you evidenced by the following: ___________________________________________________ and any extensions, renewals, refinancing, modifications or replacements thereof; I give you a security interest in the property indicated below, whether l own it now or may own it in the future, together with all parts, accessories, repairs, improvements and accessions to the property, wherever it is located, and all proceeds and products from the property. [x] INVENTORY: All inventory which I hold for ultimate sale or lease, or which has been or will be supplied under contracts of service, or which are raw materials, work in process, or materials used or consumed in my business. [ ] EQUIPMENT: All equipment including, but not limited to, all machinery, vehicles, furniture, fixtures, manufacturing equipment, farm machinery and equipment, shop equipment, office and record keeping equipment, and parts and tools. Any equipment described in a list or schedule which l give to you will also be included in the secured property. but such a list is not necessary for a valid security interest in my equipment. [ ] FARM PRODUCTS: All farm products including, but not limited to: (a) all poultry and livestock and their young, along with their products and produce; (b) all crops, annual or perennial, and all products of the crops; and (c) all feed, seed, fertilizer, medicines, and other supplies used or produced in my farming operations. [x] ACCOUNTS, INSTRUMENTS, DOCUMENTS, CHATTEL PAPER AND OTHER RIGHTS TO PAYMENT: All rights l have now or may have in the future to the payment of money including, but not limited to: (a) payment for goods sold or leased or for services rendered, whether or not l have earned such payment by performance; and (b) rights to payment arising out of all present and future debt instruments, chattel paper and loans and obligations receivable.
-3- 2 The above include any rights and interests (including all liens and security interests) which l may have by law or agreement against any account debtor or obligor of mine. [ ] GENERAL INTANGIBLES: All general intangibles including, but not limited to, tax refunds, applications for patents, patents, copyrights, trademarks, trade secrets, good will, trade names, customer lists, permits and franchises, and the right to use my name. [ ] If this agreement covers timber to be cut, County: ___________________________________________ minerals (including oil and County gas), fixtures or crops growing or to be grown, the legal Crop Year__________________________________________ description is: _________________________________________________ I am a(n) [ ] Individual [ ] partnership _________________________________________________ [x] corporation _________________________________________________ [ ]____________________________________ _________________________________________________ _________________________________________________ [ ] If checked, file this agreement in the real estate records. Record Owner (if not me): _______________________ The property will be used for [ ] personal _________________________________________________ _________________________________________________ [x] business [ ] agricultural [ ] ____________________ reasons I AGREE TO THE TERMS SET OUT ON THE FRONT AND BACK OF THIS AGREEMENT. I have received a copy of this document on today's date. Bioanalytical Systems, Inc. -------------------------------------------------- Debtor's Name By:\S\PETER T. KISSINGER Bank One, Lafayette, NA ------------------------------------------------- --------------------------------- Title: President Secured Party's Name -------------------------------------------- By:\S\MURRAY N. MARSHALL ----------------------------------------------- By: ---------------------------------------------- Title: Vice President ----------------------------------------------- Title: ----------------------------------------------
(C) 1986 BANKERS SYSTEMS, INC., ST. CLOUD, MN 56301 SECURITY AGREEMENT FORM SA 11/12/96 -4- EX-10.17 23 SEC. AGMT. DATED 8/22/96 1 EXHIBIT 10.17 Bioanalytical Systems, Inc. Bank One, Lafayette, NA 2701 Kent Avenue 201 Main Street West Lafayette, IN 47906 Lafayette, IN 47901 35-1345024 DEBTOR'S NAME, ADDRESS AND SSN OR TIN SECURED PARTY'S NAME AND ADDRESS ("I" means each Debtor who signs.) ("You" means the Secured Party, its successors and assigns.)
I am entering into this security agreement with you on August 22, 1996 (date). SECURED DEBTS. I agree that this security agreement will secure the payment and performance of the debts, liabilities or obligations described below that (Check one) [ ] I [x] (name) Bioanalytical Systems, Inc. owe(s) to you now or in the future: (Check one below): [ ] SPECIFIC DEBT(S). The debt(s), liability or obligations evidenced by (describe): __________________________________________________________ and all extensions, renewals, refinancings, modifications and replacements of the debt, liability or obligation. [x] ALL DEBT(S). Except in those cases listed in the "LIMITATIONS" paragraph on page 2, each and every debt, liability and obligation of every type and description (whether such debt, liability or obligation now exists or is incurred or created in the future and whether it is or may be direct or indirect, due or to become due, absolute or contingent, primary or secondary, liquidated or unliquidated, or joint, several or joint and several). SECURITY INTEREST. To secure the payment and performance of the above described Secured Debts, liabilities and obligations, I give you a security interest in all of the property described below that I now own and that I may own in the future (including, but not limited to, all parts, accessories, repairs, improvements, and accessions to the property), wherever the property is or may be located, and all proceeds and products from the property. [ ] INVENTORY: All inventory which I hold for ultimate sale or lease, or which has been or will be supplied under contracts of service, or which are raw materials, work in process, or materials used or consumed in my business. [ ] EQUIPMENT: All equipment including, but not limited to, all machinery, vehicles, furniture, fixtures, manufacturing equipment, farm machinery and equipment, shop equipment, office and recordkeeping equipment, and parts and tools. All equipment described in a list or schedule which I give to you will also be included in the secured property, but such a list is not necessary for a valid security interest in my equipment. 2 [ ] FARM PRODUCTS: All farm products including, but not limited to: (a) all poultry and livestock and their young, along with their products, produce and replacements; (b) all crops, annual or perennial, and all products of the crops; and (c) all feed, seed, fertilizer, medicines, and other supplies used or produced in my farming operations. [ ] ACCOUNTS, INSTRUMENTS, DOCUMENTS, CHATTEL PAPER AND OTHER RIGHTS TO PAYMENT: All rights I have now and that I may have in the future to the payment of money including, but not limited to: (a) payment for goods and other property sold or leased or for services rendered, whether or not I have earned such payment by performance; and (b) rights to payment arising out of all present and future debt instruments, chattel paper and loans and obligations receivable. The above include any rights and interests (including all liens and security interests) which I may have by law or agreement against any account debtor or obligor of mine. [ ] GENERAL INTANGIBLES: All general intangibles including, but not limited to, tax refunds, applications for patents, patents, copyrights, trademarks, trade secrets, good will, trade names, customer lists, permits and franchises, and the right to use my name. [ ] GOVERNMENT PAYMENTS AND PROGRAMS: All payments, accounts, general intangibles, or other benefits (including, but not limited to, payments in kind, deficiency payments, letters of entitlement, warehouse receipts, storage payments, emergency assistance payments, diversion payments, and conservation reserve payments) in which I now have and in the future may have any rights or interest and which arise under or as a result of any preexisting, current or future Federal or state governmental program (including, but not limited to, all programs administered by the Commodity Credit Corporation and the ASCS). [x] THE SECURED PROPERTY INCLUDES, BUT IS NOT LIMITED BY, THE FOLLOWING: Please see the attached Exhibit "A" If this agreement covers timber to be cut, minerals (including oil and gas), fixtures or crops growing or to be grown, the legal description is: ____________________________________________________________________________ -2- 3 I am a(n) [ ] individual [ ] partnership AGREE TO THE TERMS SET OUT ON BOTH PAGE 1 AND PAGE 2 OF [ ] corporation ____________ THIS AGREEMENT. I have received a copy of this [ ] If checked, file this agreement in the real document on today's date. estate records. Record Owner (if not me): ___________________ ______________________________________________ ______________________________________________ Bioanalytical Systems, Inc. (Debtor's Name) The property will be used for By: \S\LINA L. REEVES-KERNER [ ] personal [x] business ------------------------ [ ] agricultural [ ] _______ reasons Title: Vice President --------------------- Bank One, Lafayette, NA (Secured Party's Name) By: --------------------- By: \S\MURRAY N. MARSHALL Title: --------------------- --------------------- Title: Vice President ------------------ - 3 - [x] I 4 EXHIBIT "A"
QUANTITY DESCRIPTION 1 TSQ 7000 Basic System 1 APCI/ESI Source 1 TSQ 7000 Extended Warranty 1 Enhanced Alpha Workstation 1 Special as outlined below Second copy of ICIS Software 1 B480-BA Alpha Station 1 RC21-WA VRC21-WA
Bioanalytical Systems, Inc. By: \S\LINA L. REEVES-KERNER ------------------------------------------- Title Date: 8/30/96 ------------------------------------------- EX-10.18 24 MASTER LEASE DATED 11/9/94 1 EXHIBIT 10.18 MASTER LEASE AGREEMENT This MASTER LEASE AGREEMENT is made, entered and dated as of Nov. 9, 1994, by and between: LESSOR: LESSEE: BANC ONE LEASING CORPORATION BIOANALYTICAL SYSTEMS, INC. 2400 Corporate Exchange Drive 2701 Kent Avenue Columbus, Ohio 43231 West Lafayette, Indiana 47906 1. LEASE OF EQUIPMENT: Lessor leases to Lessee, and Lessee leases from Lessor, all the property described in the Lease Schedules which are signed from time to time by Lessor and Lessee. 2. CERTAIN DEFINITIONS: "Schedule" means each Lease Schedule signed by Lessee and Lessor which incorporates the terms of this Master Lease Agreement, together with all exhibits, riders, attachments and addenda thereto. "Equipment" means the property described in each Schedule, together with all attachments, additions, accessions, parts, repairs, improvements, replacements and substitutions thereto. "Lease", "herein", "hereunder", "here" and similar words mean this Master Lease Agreement and all Schedules, together with all exhibits, riders, attachments and addenda to any of the foregoing, as the same may from time to time be amended, modified or supplemented. "Prime Rate" means the prime rate of interest announced from time to time as the prime rate by Bank One, Columbus, NA; provided, that the parties acknowledge that the Prime Rate is not intended to be the lowest rate of interest charged by said bank in connection with extensions of credit. "Lien" means any security interest, lien, mortgage, pledge, encumbrance, judgment, execution, attachment, warrant, writ, levy, other judicial process or claim of any nature whatsoever by or of any person. "Fair Market Value" means the amount which would be paid for an item of Equipment by an informed and willing buyer (other than a used equipment or scrap dealer) and an informed and willing seller neither under a compulsion to buy or sell. "Lessor's Cost" means the invoiced price of any item of Equipment plus any other cost to Lessor of acquiring an item of Equipment. All terms defined in the Lease are equally applicable to both the singular and plural form of such terms. 3. LEASE TERM AND RENT: The term of the lease of the Equipment described in each Schedule ("Lease Term") commences on the date stated in the Schedule and continues for the term stated therein. As rent for the Equipment described in each Schedule, Lessee shall pay Lessor the rent payments and all other amounts stated in such Schedule, payable on the dates specified therein. All payments due under the Lease shall be made in United States dollars at Lessor's office stated in the opening paragraph or as otherwise directed by Lessor in writing. 2 4. ORDERING, DELIVERY, REMOVAL AND INSPECTION OF EQUIPMENT: If an event of default occurs or if for any reason Lessee does not accept, or revokes its acceptance of, equipment covered by a purchase order or purchase contract or if any commitment or agreement of Lessor to lease equipment to Lessee expires, terminates or is otherwise canceled, then automatically upon notice from Lessor, any purchase order or purchase contract and all obligations thereunder shall be assigned to Lessee and Lessee shall pay and perform all obligations thereunder. Lessee agrees to pay, defend, indemnify and hold Lessor harmless from any liabilities, obligations, claims, costs and expenses (including reasonable attorney fees and expenses) of whatever kind imposed on or asserted against Lessor in any way related to any purchase orders or purchase contracts. Lessee shall make all arrangements for, and Lessee shall pay all costs of, transportation, delivery, installation and testing of Equipment. The Equipment shall be delivered to Lessee's premises stated in the applicable Schedule and shall not be removed without Lessor's prior written consent. Lessor has the right upon reasonable notice to Lessee to inspect the Equipment wherever located. Lessor may enter upon any premises where Equipment is located and remove it immediately, without notice or liability to Lessee, upon the expiration or other termination of the Lease Term. 5. MAINTENANCE AND USE: Lessee agrees it will, at its sole expense: (a) repair and maintain the Equipment in good condition and working order and supply and install all replacement parts or other devices when required to so maintain the Equipment or when required by applicable law or regulation, which parts or devices shall automatically become part of the Equipment; (b) use and operate the Equipment in a careful manner in the normal course of its business and only for the purposes for which it was designed in accordance with the manufacturer's warranty requirements, and comply with all laws and regulations relating to the Equipment, and obtain all permits or licenses necessary to install, use or operate the Equipment; and (c) make no alterations, additions, subtractions, upgrades or improvements to the Equipment without Lessor's prior written consent, but any such alterations, additions, upgrades or improvements shall automatically become part of the Equipment. The Equipment will not be used or located outside of the United States. 6. NET LEASE; NO EARLY TERMINATION: The Lease is a net lease. Lessee's obligation to pay all rent and all other amounts payable under the Lease is absolute and unconditional under any and all circumstances and shall not be affected by any circumstances of any character including, without limitation, (a) any setoff, claim, counterclaim, defense or reduction which Lessee may have at any time against Lessor or any other party for any reason, or (b) any defect in the condition, design or operation of, any lack of fitness for use of, any damage to or loss of, or any lack of maintenance or service for any of the Equipment. Each Schedule is a noncancellable lease of the Equipment described therein and Lessee's obligation to pay rent and perform all other obligations thereunder and under the Lease are not subject to cancellation or termination by Lessee for any reason. 7. NO WARRANTIES BY LESSOR. LESSOR LEASES THE EQUIPMENT AS-IS, WHERE-IS, AND WITH ALL FAULTS. LESSOR MAKES NO WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, OF ANY KIND AS TO THE EQUIPMENT INCLUDING, WITHOUT LIMITATION: ITS MERCHANTABILITY; ITS FITNESS FOR ANY PARTICULAR PURPOSE; ITS DESIGN, CONDITION, QUALITY, CAPACITY, DURABILITY, CAPABILITY, SUITABILITY OR WORKMANSHIP; ITS NON-INTERFERENCE WITH OR -2- 3 NON-INFRINGEMENT OF ANY PATENT, TRADEMARK, COPYRIGHT OR OTHER INTELLECTUAL PROPERTY RIGHT; OR ITS COMPLIANCE WITH ANY LAW, RULE, SPECIFICATION, PURCHASE ORDER OR CONTRACT PERTAINING THERETO. Lessor hereby assigns to Lessee the benefit of any assignable manufacturer's or supplier's warranties, but Lessor, at Lessee's written request, will cooperate with Lessee in pursuing any remedies Lessee may have under such warranties. Any action taken with regard to warranty claims against any manufacturer or supplier by Lessee will be at Lessee's sole expense. LESSOR MAKES NO REPRESENTATIONS OR WARRANTIES EXPRESS OR IMPLIED, OF ANY KIND AS TO THE FINANCIAL CONDITION OR FINANCIAL STATEMENTS OF ANY PARTY OR AS TO THE TAX OR ACCOUNTING TREATMENT OR CONSEQUENCES OF THE LEASE, THE EQUIPMENT OR THE RENTAL PAYMENTS. 8. INSURANCE: Lessee at its sole expense shall at all times keep each item of Equipment insured against all risks of loss or damage from every cause whatsoever for an amount not less than the greater of the full replacement value or the Lessor's Cost of such item of Equipment. Lessee at its sole expense shall at all times carry public liability and property damage insurance in amounts satisfactory to Lessor protecting Lessee and Lessor from liabilities for injuries to persons and damage to property of others relating in any way to the Equipment. All insurers shall be reasonably satisfactory to Lessor. Lessee shall deliver to Lessor satisfactory evidence of such coverage. Proceeds of any insurance covering damage or loss of the Equipment shall be payable to Lessor as loss payee and shall, at Lessor's option, be applied toward (a) the replacement, restoration or repair of the Equipment, or (b) payment of the obligations of Lessee under the Lease. Proceeds of any public liability or property insurance shall be payable first to Lessor as additional insured to the extent of its liability, then to Lessee. If an event of default occurs and is continuing, or if Lessee fails to make timely payments due under Section 9 hereof, then Lessee automatically appoints Lessor as Lessee's attorney-in-fact with full power and authority in the place of Lessee and in the name of Lessee or Lessor to make claim for, receive payment of, and sign and endorse all documents, checks or drafts for loss or damage under any such policy. Each insurance policy will require that the insurer give Lessor at least 30 days prior written notice of an y cancellation of such policy and will require that Lessor's interests remain insured regardless of any act, error, omission, neglect or misrepresentation of Lessee. The insurance maintained by Lessee shall be primary without any right of contribution from insurance which may be maintained by Lessor. 9. LOSS AND DAMAGE: (a) Lessee bears the entire risk of loss, theft, damage or destruction of Equipment in whole or in part from any reason whatsoever ("Casualty Loss"). No Casualty Loss to Equipment shall relieve Lessee from the obligation to pay rent or from any other obligation under the Lease. In the event of Casualty Loss to any item of Equipment, Lessee shall immediately notify Lessor of the same and Lessee shall, if so directed by Lessor, immediately repair the same. If Lessor determines that and item of Equipment has suffered a Casualty Loss beyond repair ("Lost Equipment"), then Lessee, at the option of Lessor, shall: (1) Immediately replace the Lost Equipment with similar equipment in good repair, condition and working order free and clear of any Liens and deliver to Lessor a bill of sale covering the replacement equipment, in which event such replacement equipment shall automatically be Equipment under the Lease; or (2) On the rent -3- 4 payment date which is at least 30 but no more than 60 days after the date of the Casualty Loss, pay to Lessor all amounts then due and payable by Lessee under the Lease for the Lost Equipment plus the Stipulated Loss Value for such Lost Equipment as of the date of the Casualty Loss. Upon payment by Lessee of all amounts due under the above clause (2), the lease of the Lost Equipment will terminate and Lessor shall transfer to Lessee all of Lessor's right, title and interest in such Equipment on an "as-is, where-is" basis with all faults, without recourse and without representation or warrant of any kind, express or implied. (b) "Stipulated Loss Value" of any item of equipment during its Lease Term equals the present value discounted in arrears to the applicable date at the applicable SLV Discount Rate of (1) the remaining rents and all other amounts [including, without limitation, any balloon payment and, as to a terminal rental adjustment clause ("TRAC") lease, the TRAC value stated in the Schedule, and any other payments required to be paid by Lessee at the end of the applicable [Lease Term] payable under the Lease for such item on and after such date to the end of the applicable Lease Term and (2) an amount equal to the Economic Value of the Equipment. For any item of Equipment, "Economic Value" means the Fair Market Value of the Equipment at the end of the applicable Lease Term as originally anticipated by Lessor at the Commencement Date of the applicable Schedule; provided, that Lessee agrees that such value shall be determined by the books of Lessor as of the Commencement Date of the applicable Schedule. After the payment of all rent due under the applicable Schedule and the expiration of the Lease Term of any item of Equipment, the Stipulated Loss Value of such item equals the Economic Value of such item. Stipulated Loss Value shall also include any Taxes payable by Lessor in connection with its receipt thereof. For any item of Equipment, "SLV Discount Rate" means an interest rate equal to the Prime Rate in effect on the Commencement Date of the Schedule for such item minus two percentage points. 10. TAX BENEFITS INDEMNITY: (a) The Lease has been entered into on the basis that Lessor shall be entitled to such deductions, credits and other tax benefits as are provided by federal, state and local income tax law to an owner of the Equipment (the "Tax Benefits") including, without limitation: (1) modified accelerated cost recovery deductions on each item of Equipment under Section 168 of the Code (as defined below) in an amount determined commencing with the taxable year in which the Commencement Date of the applicable Schedule occurs, using the maximum allowable depreciation method available under Section 168 of the Code, using a recovery period (as defined in Section 168 of the Code) reasonably determined by Lessor, and using an initial adjusted basis which is equal to the Lessor's Cost of such item; (2) amortization of the expenses paid by Lessor in connection with the Lease on a straight-line basis over the term of the applicable Schedule; and (3) Lessor's federal taxable income will be subject to the maximum rate on corporations in effect under the Code as of the Commencement Date of the applicable Schedule. (b) If on any one or more occasions (1) Lessor shall lose, shall not have or shall lose the right to claim all or any part of the Tax Benefits, (2) there shall be reduced, disallowed, recalculated or recaptured all or any part of the Tax Benefits, or (3) all or any part of the Tax Benefits is reduced by a change in law or regulation (each of the events described in subparagraphs 1, 2 or 3 of this paragraph (b) will be referred to as a "Tax Loss"), then, upon 30 days written notice by Lessor to -4- 5 Lessee that a Tax Loss has occurred, Lessee shall pay Lessor an amount which, in the reasonable opinion of Lessor and after the deduction of all taxes required to be paid by Lessor with respect to the receipt of such amount, will provide Lessor with the same after-tax net economic yield which was originally anticipated by Lessor as of the Commencement Date of the applicable Schedule. (c) A Tax Loss shall occur upon the earliest of: (1) the happening of any event (such as disposition or change in use of an item of Equipment) which may cause such Tax Loss; (2) Lessor's payment to the applicable taxing authority of the tax increase resulting from such Tax Loss; or (3) the adjustment of Lessor's tax return to reflect such Tax Loss. (d) Lessor shall not be entitled to payment under this section for any Tax Loss caused solely by one or more of the following events: (1) a disqualifying sale or disposition of an item of Equipment by Lessor prior to any default by Lessee; (2) Lessor's failure to timely or properly claim the Tax Benefits in Lessor's tax return; (3) a disqualifying change in the nature of Lessor's business or liquidation thereof; (4) a foreclosure by any person holding through Lessor a security interest on an item of Equipment which foreclosure results solely from an act of Lessor; or (5) Lessor's failure to have sufficient taxable income or tax liability to utilize the Tax Benefits. (e) "Code" shall mean the Internal Revenue Code of 1986, as amended. For the purposes of this section 10, the term "Lessor" shall include any affiliate group (within the meaning of section 1504 of the Code) of which Lessor is a member for any year in which a consolidated income tax return is filed for such affiliated group. Lessee's obligations under this section shall survive the expiration, cancellation or termination of the Lease. 11. GENERAL TAX INDEMNITY: Lessee will pay, and will defend, indemnify and hold Lessor harmless on an after-tax basis from, any and all Taxes (as defined below) and related audit and contest expenses on or relating to (a) any of the Equipment, (b) the Lease, (c) purchase, acceptance, ownership, lease, use, operation, transportation, return or other disposition of any of the Equipment, and (d) rentals or earnings relating to any of the Equipment or the "Taxes" means present and future taxes or other governmental charges that are not based on the net income of Lessor, whether they are assessed to or payable by Lessee or Lessor, including, without limitation (i) sales, use, excise, licensing, registration, titling, franchise, business and occupation, gross receipts, stamp and personal property taxes, (ii) levies, imposts, duties, assessments, charges and withholdings, (iii) penalties, fines, and additions to tax and (iv) interest on any of the foregoing. Unless Lessor elects otherwise, Lessor will prepare and file all reports and returns relating to any Taxes and will pay all Taxes to the appropriate taxing authority. Lessee will reimburse Lessor for all such payments promptly on request. On or after any applicable assessment/levy/lien date for any personal property Taxes relating to any Equipment, Lessee agrees that upon Lessor's request Lessee shall pay to Lessor the personal property Taxes which Lessor reasonably anticipates will be due, assessed, levied or otherwise imposed on any Equipment during its Lease Term. If Lessor elects in writing, Lessee will itself prepare and file all such reports and returns, pay all such Taxes directly to the taxing authority, and send Lessor evidence thereof. Lessee's obligations under this section shall survive the expiration, cancellation or termination of the Lease. -5- 6 12. GENERAL INDEMNITY: Lessee assumes all risk and liability for, and shall defend, indemnify and keep Lessor harmless on an after-tax basis from, any and all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs and expenses, including reasonable attorney fees and expenses, of whatsoever kind and nature imposed on, incurred by or asserted against Lessor, in any way relating to or arising out of the manufacture, purchase, acceptance, rejection, ownership, possession, use, selection, delivery, lease, operation, condition, sale, return or other disposition of the Equipment or any part thereof (including, without limitation, any claim for latent or other defects, whether or not discoverable by Lessee or any other person, any claim for negligence, tort or strict liability, any claim under any environmental protection or hazardous waste law and any claim for patent, trademark or copyright infringement. Lessee will not indemnify Lessor under this section for loss or liability arising from events which occur after the Equipment has been returned to Lessor or for loss or liability caused directly and solely by the gross negligence or willful misconduct of Lessor. In this section, "Lessor" also includes any director, officer, employee, agent, successor or assign of Lessor. Lessee's obligations under this section shall survive the expiration, cancellation or termination of the Lease. 13. PERSONAL PROPERTY: Lessee represents and agrees that the Equipment is, and shall at all times remain, separately identifiable personal property. Upon Lessor's request, Lessee shall furnish Lessor a landlord's and/or mortgagee's waiver and consent to remove all Equipment. Lessor may display notice of its interest in the Equipment by any reasonable identification. Lessee shall not alter or deface any such indicia of Lessor's interest. 14. DEFAULT: Each of the following events shall constitute an event of default under the Lease: (a) Lessee fails to pay any rent or other amount due under the Lease within ten days of its due date; or (b) Lessee fails to perform or observe any of its obligations in Sections 8, 18, or 22 hereof; or (c) Lessee fails to perform or observe any of its other obligations in the Lease for more than 30 days after Lessor notifies Lessee of such failure; or (d) Lessee or any Lessee affiliate defaults in the payment, performance or observance of any obligation under any loan, credit agreement or other lease in which Lessor or any subsidiary (direct or indirect) of Banc One Corporation (which is Lessor's ultimate parent corporation) is the creditor or lessor; or (e) any statement, representation or warranty made by Lessee in the Lease, in any Schedule or in any document, certificate or financial statement in connection with the Lease proves at any time to have been untrue or misleading in any material respect as of the time when made; or (f) Lessee becomes insolvent or bankrupt, or Lessee admits its inability to pay its debts as they mature, or Lessee makes an assignment for the benefit of creditors, or Lessee applies for, institutes or consents to the appointment of a receiver, trustee or similar official for Lessee or any substantial part of its property or any such official is appointed without Lessee's consent, or Lessee applies for, institutes or consents to any bankruptcy, insolvency, reorganization, debt moratorium, liquidation, or similar proceeding relating to Lessee or any substantial part of its property under the laws of any jurisdiction or any such proceeding is instituted against Lessee without stay or dismissal for more than 30 days, or Lessee commences any act amounting to a business failure or a winding up of its affairs, or Lessee ceases to do business as a going concern; or (g) with respect to any guaranty, letter of credit, pledge agreement, security agreement, mortgage, deed of trust, debt subordination agreement or other credit enhancement or -6- 7 credit support agreement (whether now existing of hereafter arising) signed or issued by any party in connection with all or any part of Lessee's obligations under the Lease, the party signing or issuing any such agreement defaults in its obligations thereunder or any such agreement shall cease to be in full force and effect or shall be declared to be null, void, invalid or unenforceable by the party signing or issuing it; or (h) there shall occur in Lessor's reasonable opinion any material adverse change in the financial condition, business or operations of Lessee. As used in this section 14, the term "Lessee" also includes any guarantor (whether now existing or hereafter arising) of all or any part of Lessee's obligations under the Lease and/for any issuer of a letter of credit (whether now existing or hereafter arising) relating to all or any part of Lessee's obligations under the Lease, and the term "Lease" also includes any guaranty or letter of credit (whether now existing or hereafter arising) relating to all or any part of Lessee's obligations under the Lease. 15. REMEDIES: If any event of default exists, Lessor may exercise in any order one or more of the remedies described in the lettered subparagraphs of this section, and Lessee shall perform its obligations imposed thereby: (a) Lessor may require Lessee to return any or all Equipment as provided in the Lease. (b) Lessor or its agent may repossess any or all Equipment wherever found, may enter the premises where the Equipment is located and disconnect, render unusable and remove it, and may use such premises without charge to store or show the Equipment for sale. (c) Lessor may sell any or all Equipment at public or private sale, with or without advertisement or publication, may re-lease or otherwise dispose of it or may use, hold or keep it. (d) Lessor may require Lessee to pay to Lessor on a date specified by Lessor, with respect to any or all Equipment (i) all accrued and unpaid rent, late charges and other amounts due under the Lease on or before such date, plus (ii) as liquidated damages for loss of a bargain and not as a penalty, and in lieu of any further payments of rent, the Stipulated Loss Value of the Equipment on such date, plus (iii) interest at the Overdue Rate on the total of the foregoing ("Overdue Rate" means an interest rate per annum equal to the higher of 18% or 2% over the Prime Rate, but not to exceed the highest rate permitted by applicable law). The parties acknowledge that the foregoing money damage calculation reasonably reflects Lessor's anticipated loss with respect to the Equipment and the related Lease resulting from the event of default. If an event of default under section 14 (f) of this Master Lease Agreement exists, then Lessee will be automatically liable to pay Lessor the foregoing amounts as of the next rent payment date unless Lessor otherwise elects in writing. (e) Lessee shall pay all costs, expenses and damages incurred by Lessor because of the event of default or its actions under this section, including, without limitation any collection agency and/or attorney fees and expenses, any costs related to the repossession, safekeeping, storage, repair, reconditioning or disposition of the Equipment and any incidental and consequential damages. -7- 8 (f) Lessor may terminate the Lease and/or any or all Schedules, may sue to enforce Lessee's performance of its obligations under the Lease and/or may exercise any other right or remedy then available to Lessor at law or in equity. Lessor is not required to take any legal process or give Lessee any notice before exercising any of the above remedies. None of the above remedies is exclusive, but each is cumulative and in addition to any other remedy available to Lessor. Lessor's exercise of one or more remedies shall not preclude its exercise of any other remedy. No action taken by Lessor shall release Lessee from any of its obligations to Lessor. No delay or failure on the part of Lessor to exercise any right hereunder shall operate as a waiver thereof, nor as an acquiescence in any default, nor shall any single or partial exercise of any right preclude any other exercise thereof or the exercise of any other right. After any default, Lessor's acceptance of any payment by Lessee under the Lease shall not constitute a waiver by Lessor of such default, regardless of Lessor's knowledge or lack of knowledge at the time of such payment, and shall not constitute a reinstatement of the Lease if the Lease has been declared in default by Lessor, unless Lessor has agreed in writing to reinstate the Lease and to waive the default. If Lessor actually repossesses any Equipment, then it will use commercially reasonable efforts under the then current circumstances to attempt to mitigate its damages; provided, that Lessor shall not be required to sell, re-lease or otherwise dispose of any Equipment prior to Lessor enforcing any of the remedies described above. Lessor may sell or re-lease the Equipment in any manner it chooses, free and clear of any claims or rights of Lessee and without any duty to account to Lessee with respect thereto except as provided below. If Lessor actually sells or re-leases the Equipment, it will credit the net proceeds of any sale of the Equipment, or the net present value (discounted at the then current Prime Rate) of the rents payable under any new lease of the Equipment, against and up to (but not exceeding) the Stipulated Loss Value of the Equipment and any other amounts Lessee owes Lessor, or will reimburse Lessee for and up to (but not exceeding) Lessee's payment thereof. The term "net" as used above shall mean such amount after deducting the costs and expenses described in clause (e) above of this section. If Lessor elects in writing not to sell or re-lease any Equipment, it will similarly credit or reimburse Lessee for Lessor's reasonable estimate of such Equipment's Fair Market Value. 16. LESSOR'S RIGHT TO PERFORM: If Lessee fails to make any payment under the Lease or fails to perform any of its other agreements in the Lease (including, without limitation, its agreement to provide insurance coverage as stated in the Lease), Lessor may itself make such payment or perform such agreement, and the amount of such payment and the amount of the expenses of Lessor incurred in connection with such payment or performance shall be deemed to be additional rent, payable by Lessee on demand. 17. FINANCIAL REPORTS: Lessee agrees to furnish to Lessor: (a) annual financial statements setting forth the financial condition and results of operation of Lessee (financial statements shall include the balance sheet, income statement and changes in financial position and all notes thereto) within 120 days of the end of each fiscal year of Lessee; (b) quarterly financial statements setting forth the financial condition and results of operation of Lessee within 60 days of the end of -8- 9 each of the first three fiscal quarters of Lessee; and (c) such other financial information as Lessor may from time to time reasonably request including, without limitation, financial reports filed by Lessee with federal or state regulatory agencies. All such financial information shall be prepared in accordance with generally accepted accounting principles. If Lessee fails to furnish the annual financial statements to Lessor within 30 days of Lessor's written request, then Lessor may, at its option, charge Lessee a non-performance fee equal to all the rentals due under the Lease for the then current month (unless otherwise prohibited by law) and such fees shall be deemed to be additional rent, payable by Lessee on demand. 18. NO CHANGES IN LESSEE: Lessee shall not: (a) liquidate, dissolve or suspend business; (b) sell, transfer or otherwise dispose of all or a majority of its assets, except that Lessee may sell its inventory in the ordinary course of its business; (c) enter into any merger, consolidation or similar reorganization unless it is the surviving corporation; (d) transfer all or any substantial part of its operations or assets outside of the United States of America; or (e) without 30 days advance written notice to Lessor, change its name or chief place of business. Lessee shall at all times maintain a tangible net worth which is no less than the greater of 75% of its tangible net worth as of the date of the Master Lease Agreement or 75% of its highest tangible net worth thereafter. 19. LATE CHARGES: If any rent or other amount payable under the Lease is not paid when due, then as compensation for the administration and enforcement of Lessee's obligation to make timely payments, Lessee shall pay with respect to each overdue payment on demand an amount equal to the greater of fifteen dollars ($15.00) or five percent (5%) of the each overdue payment (but not to exceed the highest late charge permitted by applicable law) plus any collection agency fees and expenses. 20. NOTICES; POWER OF ATTORNEY: (a) Service of all notices under the Lease shall be sufficient if given personally or cornered or mailed to the party involved at its respective address set forth herein or at such other address as such party may provide in writing from time to time. Any such notice mailed to such address shall be effective three days after deposit in the United States mail with postage prepaid. (b) With respect to any power of attorney covered by the Lease, the powers conferred on Lessor thereby: are powers coupled with an interest; are irrevocable; are solely to protect Lessor's interests under the Lease; and do not impose any duty on Lessor to exercise such powers. Lessor shall be accountable solely for amounts it actually receives as a result of its exercise of such powers. 21. ASSIGNMENT BY LESSOR: Lessor and any assignee of Lessor, with or without notice to or consent of Lessee, may sell, assign, transfer or grant a security interest in all or any part of Lessor's rights, obligations, title or interest in the Equipment, the Lease, any Schedule or the amounts payable under the Lease or any Schedule to any entity ( "transferee"). The transferee shall succeed to all of Lessor's rights in respect to the Lease (including; without limitation, all rights to insurance and indemnity protection described in the Lease). Lessee agrees to sign any acknowledgment and other documents reasonably requested by Lessor or the transferee in connection with any such transfer transaction. Lessee, upon receiving notice of any such transfer transaction, -9- 10 shall comply with the terms and conditions thereof. Lessee agrees that it shall not assert against any transferee any claim, defense, setoff, deduction or counterclaim which Lessee may now or hereafter be entitled to assert against Lessor. Unless otherwise agreed in writing, the transfer transaction shall not relieve Lessor of any of its obligations to Lessee under the Lease and Lessee agrees that the transfer transaction shall not be construed as being an assumption of such obligations by the transferee. 22. NO ASSIGNMENT, SUBLEASE OR LIEN BY LESSEE: LESSEE SHALL NOT, DIRECTLY OR INDIRECTLY, (a) MORTGAGE, ASSIGN, SELL, TRANSFER, OR OTHERWISE DISPOSE OF THE LEASE OR ANY INTEREST THEREIN OR THE EQUIPMENT OR ANY PART THEREOF, OR (b) SUBLEASE, RENT, LEND OR TRANSFER POSSESSION OR USE OF THE EQUIPMENT OR ANY PART THEREFOR TO ANY PARTY, OR (c) CREATE, INCUR, GRANT, ASSUME OR ALLOW TO EXIST ANY LIEN ON THE LEASE, ANY SCHEDULE. THE EQUIPMENT OR ANY PART THEREOF. 23. EXPIRATION OF LEASE TERM: (a) At least 90 days (or earlier if otherwise specified), but no more than 270 days prior to expiration of the Lease Term of each Schedule, Lessee shall give Lessor written notice of its electing one of the following options for all (but not less than all) of the Equipment covered by such Schedule: return the Equipment under clause (b) below; or purchase the Equipment under clause (c) below. The election of an option shall be irrevocable. If Lessee fails to give timely notice of its election, it shall be deemed to have elected to return the Equipment. (b) If Lessee elects or is deemed to have elected to return the Equipment at the expiration of the Lease Term of a Schedule or if Lessee is obligated at any time to return the Equipment, then Lessee shall, at its sole expense and risk, deinstall, disassemble, pack, crate, insure and return the Equipment to Lessor (all in accordance with applicable industry standards) at any location in the continental United States of America selected by Lessor. The Equipment shall be in the same condition as when received by Lessee, reasonable wear, tear and depreciation resulting from normal and proper use excepted (or, if applicable, in the condition set forth in the Lease or the Schedule), shall be in good operating order and maintenance as required by the Lease, shall be certified as being eligible for any available manufacturer's maintenance program, shall be free and clear of any Liens as required by the Lease, shall comply with all applicable laws and regulations and shall include all manuals, specifications, repair and maintenance records and similar documents. Until Equipment is returned as required above, all terms of the Lease shall remain in full force and effect including, without limitation, obligations to pay rent and insure the Equipment; provided, that after the expiration of any Schedule and before Lessee has completed its return of the Equipment or its purchase option (if elected), the term of the lease of the Equipment covered by such Schedule shall be month-to-month or such shorter period as may be specified by Lessor. (c) If Lessee gives Lessor timely notice of its election to purchase Equipment, then on the expiration date of the applicable Schedule Lessee shall purchase all (but not less than all) of the Equipment and shall pay to Lessor the Fair Market Value of the Equipment plus all Taxes (other than -10- 11 income taxes on Lessor's gains on such sale), costs and expenses incurred or paid by Lessor in connection with such sale plus all accrued but unpaid amounts due with respect to the Equipment and/or the Schedule. The Stipulated Loss Value or Economic Value of any item of Equipment shall have no bearing or influence on the determination of Fair Market Value under this clause (c). Upon payment in full of the above amounts, and if no default has occurred and is continuing under the Lease, Lessor shall transfer title to such Equipment to Lessee "as-is, where-is" with all faults and without recourse to Lessor and without any representation or warranty of any kind whatsoever by Lessor, express or implied. (d) For purposes of the purchase option of the Lease, the determination of the Fair Market Value of any Equipment shall be determined (1) without deducting any costs of dismantling or removal from the location of use, (2) on the assumption that the Equipment is in the condition required by the applicable return and maintenance provisions of the Lease and is free and clear of any Liens as required by the Lease, and (3) shall be determined by mutual agreement of Lessee and Lessor or, if Lessor and Lessee are not able to agree on such value, by the Appraisal Procedure. "Appraisal Procedure" means the determination of Fair Market Value by an independent appraiser acceptable to Lessor and Lessee, or, if the parties are unable to agree on an acceptable appraiser, by averaging the valuation (disregarding the one which differs the most from the other two) of three independent appraisers, the first appointed by Lessor, the second appointed by Lessee and the third appointed by the first two appraisers. For purposes of the "Remedies" section of the Lease, the Fair Market Value shall be determined by Lessor in good faith and any such valuation shall be on an "as-is, where is" basis without regard to the first sentence of this clause (d). Lessee, at its sole expense, shall: pay all fees, costs and expenses of the above described appraisers. 24. GOVERNING LAW: THE INTERPRETATION, CONSTRUCTION AND VALIDITY OF THE LEASE SHALL BE GOVERNED BY THE LAWS OF THE STATE OF OHIO. WITH RESPECT TO ANY ACTION BROUGHT BY LESSOR AGAINST LESSEE TO ENFORCE ANY TERM OF THE LEASE, LESSEE HEREBY IRREVOCABLY CONSENTS TO THE JURISDICTION AND VENUE OF ANY STATE OR FEDERAL COURT IN THE FRANKLIN COUNTY, OHIO, WHERE LESSOR HAS ITS PRINCIPAL PLACE OF BUSINESS AND WHERE PAYMENTS ARE TO BE MADE BY LESSEE. 25. MISCELLANEOUS: (a) Subject to the limitations herein, the Lease shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, administrators, successors and assigns. (b) This Master Lease Agreement and each Schedule may be executed in any number of counterparts, which together shall constitute a single instrument. Only one counterpart of each Schedule shall be marked "Lessor's Original" and all other counterparts shall be marked "Duplicate". A security interest in any Schedule may be created through transfer and possession only of the counterpart marked "Lessor's Original". (c) Section and paragraph headings in this Master Lease Agreement and the Schedules are for convenience only and have no independent meaning. (d) The terms of the Lease shall be severable and if any term thereof is declared unconscionable, invalid, illegal or void, in whole or in part, the decision so holding shall not be construed as impairing the other terms of the Lease and the Lease shall continue in full force and effect as if such invalid, illegal, -11- 12 void or unconscionable term were not originally included herein. (e) All indemnity obligations of Lessee under the Lease and all rights, benefits and protections provided to Lessor by warranty disclaimers shall survive the cancellation, expiration or termination of the Lease. (f) Lessor shall not be liable to Lessee for any indirect, consequential or special damages for any reason whatsoever. (g) Each payment made by Lessee shall be applied by Lessor in such manner as Lessor determines in its discretion which may include, without limitation, application as follows: first, to accrued late charges; second, to accrued rent; and third, the balance to any other amounts then due and payable by Lessee under the Lease. (h) If the Lease is signed by more than one Lessee, each of such Lessees shall be jointly and severally liable for payment and performance of all of Lessee's obligations under the Lease. 26. ENTIRE AGREEMENT: THE LEASE REPRESENTS THE FINAL, COMPLETE AND ENTIRE AGREEMENT BETWEEN THE PARTIES HERETO. THERE ARE NO ORAL OR UNWRITTEN AGREEMENTS OR UNDERSTANDINGS AFFECTING THE LEASE OR THE EQUIPMENT. Lessee agrees that Lessor is not the agent of any manufacturer or supplier, that no manufacturer or supplier is an agent of Lessor, and that any representation, warranty or agreement made by a manufacturer, supplier or their employees, sales representatives or agents shall not be binding on Lessor. 27. JURY WAIVER: ALL PARTIES TO THIS MASTER LEASE AGREEMENT WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY ON ANY MATTER WHATSOEVER ARISING OUT OF, IN CONNECTION WITH OR IN ANY WAY RELATED TO THIS MASTER LEASE AGREEMENT. BANC ONE LEASING CORPORATION BIOANALYTICAL SYSTEMS, INC. Lessor Lessee By:\S\ILLEGIBLE By:\S\PETER T. KISSINGER ------------------------- ---------------------------- Title: AVP Title: President ---------------------- ------------------------- Lessee's Witness:\S\E.C. BANNON -------------- -12- 13 Regardless of any prior, present or future oral agreement or course of dealing, no term or condition of the Lease may be amended, modified, waived, discharged, canceled or terminated except by a written instrument signed by the party to be bound; except Lessee authorizes Lessor to complete the Acceptance Date of each Schedule and the serial numbers of any Equipment. BIOANALYTICAL SYSTEMS, INC. By:\S\PETER T. KISSINGER ----------------------------- Title:President -------------------------- -13- EX-10.19 25 FINANCING LEASE DATED 11/9/94 1 EXHIBIT 10.19 FINANCIAL LEASE LEASE SCHEDULE NO. 1000035355 LESSOR: BANC ONE LEASING CORPORATION LESSEE: Bioanalytical Systems, Inc. 1. GENERAL. Reference is made to the Master Lease Agreement dated as of 11/9/94 as amended from time to time ("Master Lease"), between the above Lessee and Lessor. This Lease Schedule is signed and delivered under the Master Lease. Unless otherwise defined herein, capitalized terms defined in the Master Lease will have the same meaning when used in this Schedule. 2. FINANCING. Lessor finances for Lessee, and Lessee finances with Lessor, all of the property ("Equipment") described below:
Quantity: Description (New Unless specified as Used) Amount Financed See Attached Schedule A-1 Equip. Cost 422,250.00 Filing Fee 200.00 TOTAL $ 422,450.00
3. FINANCING TERM AND INSTALLMENT PAYMENTS. The Lease Term for the Equipment begins on the earlier of the Acceptance Date or the Commencement Date and continues for the Number of months after the Commencement Date as stated in the Lease Term box below. The Acceptance Date is the date that Lessor accepts this Schedule as stated below Lessor's signature. The Commencement Date is the [ ] 1st [ ] 15th day of the month in which the Acceptance Date occurs.
Lease Term Number of Payments Installment Payments (excluding taxes) 60 60 8,542.02 Months
PAYMENT DUE DATES: On the Commencement Date and on the same day of each Month thereafter until paid in full. Total Advance Payment of $8,542.02 to be applied as follows: $ Security Deposit $8,542.02 First and Last 0 Payment(s) $ Set-up/Filing/Search Fees $ Other (Specify)
Lessee shall pay to Lessor all amounts stated above on the dates stated above, except that the Total Advance Payment is due on the Commencement Date. There shall be added to each installment payment all applicable Taxes as in effect from time to time. 4. SECURITY INTEREST. This Schedule is not intended to be a true lease, but is intended to be a secured debt financing transaction. As collateral security for payment and performance of all Secured Obligations (as defined in Paragraph A on the reverse side of this Schedule)and to induce Lessor to extend credit from time to time to Lessee (under the Lessor otherwise), Lessee hereby grants to Lessor a first priority security interest in all of Lessee's right, title and interest in the Equipment, whether now existing or hereafter acquired, and in all Proceeds (as defined in Paragraph A on the reserve side of this Schedule). Lessee represents, warrants and agrees that Lessee currently is the lawful owner of the Equipment and that good and marketable title to the Equipment shall remain with Lessee at all times. Lessee represents, warrants and agrees: that Lessee has granted to Lessor a first priority security interest in the Equipment and all Proceeds; and that the Equipment and all Proceeds are, and at all times shall be, free and clear of any Liens other than Lessor's security interest therein. Lessee at its sole expense will protect and defend Lessor's first priority security interest in the Equipment against all claims and demands whatsoever. 5. LESSEE'S ASSURANCES. Lessee irrevocably and unconditionally: (a) reaffirms all of the terms and conditions of the Master Lease and agrees that the Master Lease remains in full force and effect; (b) agrees that the Equipment is and will be used at all times solely for commercial purposes, and not for personal, family or household purposes; and (c) incorporates all of the terms and conditions of the Master Lease as if fully set forth in this Schedule. 6. PURCHASE ORDERS AND ACCEPTANCE OF EQUIPMENT. Lessee agrees that (i) Lessor has not selected, manufactured, sold or supplied any of the Equipment, (ii) Lessee has selected all of the Equipment and its suppliers; and (iii) Lessee has received a copy of, and approved, the purchase orders or purchase contracts for the Equipment. AS BETWEEN LESSEE AND LESSOR, LESSEE AGREES THAT: (A) LESSEE HAS RECEIVED, INSPECTED AND APPROVED ALL OF THE EQUIPMENT; (B) ALL EQUIPMENT IS IN GOOD WORKING ORDER AND COMPLIES WITH ALL PURCHASE ORDERS OR CONTRACTS AND ALL APPLICABLE SPECIFICATIONS; (C) LESSEE IRREVOCABLY ACCEPTS ALL EQUIPMENT FOR PURPOSES OF THE LEASE "AS-IS, WHERE-IS" WITH ALL FAULTS; AND (D) LESSEE UNCONDITIONALLY WAIVES ANY RIGHT THAT IT MAY HAVE TO REVOKE ITS ACCEPTANCE OF THE EQUIPMENT. 7. MISCELLANEOUS:. LESSEE HAS READ AND UNDERSTOOD ALL OF THE TERMS OF THIS SCHEDULE. LESSEE AGREES THAT THERE ARE NO ORAL OR UNWRITTEN AGREEMENTS WITH LESSOR REGARDING THE EQUIPMENT OR THIS SCHEDULE. THIS SCHEDULE IS EXPRESSLY SUBJECT TO THE TERMS AND CONDITIONS ON THE REVERSE SIDE OF THIS SCHEDULE. Accepted by: BIOANALYTICAL SYSTEMS, INC. BANC ONE LEASING CORPORATION (Name of Lessee) By: Illegible By: /s/ PETER T. KISSINGER Title: AVP Title: PRESIDENT Acceptance Date: 11/15/94 Witness Signature: Illegible
2 ADDITIONAL TERMS AND CONDITIONS The following terms and conditions are expressly made a part of and incorporated in the Schedule on the front side hereof. A. CERTAIN DEFINITIONS. "Second Obligations" means (i) all payments and other obligations of Lessee under or in connection with this Schedule, and (ii) all payments and other obligations of Lessee (whether now existing or hereafter incurred) under or in connection with the Master Lease and all present and future Lease Schedules thereto, and (iii) all other leases, indebtedness, liabilities and/or obligations of any kind (whether now existing or hereafter incurred, absolute or continent, direct or indirect) of Lessee to Lessor or to any affiliate of either Lessor or Banc One Corporation. "Proceeds" means all cash and non-cash proceeds of the Equipment including, without limitation, insurance proceeds and warranty proceeds. B. AMENDMENTS TO MASTER LEASE. FOR PURPOSES OF THIS SCHEDULE ONLY, Lessee and Lessor agree to amend the Master Lease as follows: (i) public liability or property insurance as described in the second sentence of Section 8 will not be required; (ii) the definition of "Stipulated Loss Value" in clause (b) of Section 9 is deleted and replaced by Paragraph C below of this Schedule; (iii) the text of Section 10 is deleted in its entirety; (iv) Subsections 23(a) and 23(c) are deleted; (v) Subsection 23(b) and the last sentence of Section 4 will apply only if an event of default occurs; and (vi) all references in the Lease as it relates to this Schedule to "Lessee" and "Lessor" shall be amended to "Borrower" and "Lender" respectively. C. STIPULATED LOSS VALUE. FOR PURPOSES OF THIS SCHEDULE ONLY, the "Stipulated Loss Value" of any item of Equipment during its Lease Term equals the aggregate of the following as of the date specified by Lessor; (i) all accrued and unpaid interest, late charges and other amounts due under this Schedule and the Master Lease to the extent it relates to this Schedule as of such specified date, plus (ii) the remaining principal balance due and payable by Lessee under this Schedule as of such specified date, plus (iii) interest on the total described in the foregoing clauses (i) and (ii) at the Overdue Rate commencing with the specified date; provided, that the foregoing calculation shall not exceed the maximum amount which may be collected by Lessor from Lessee under applicable law in connection with enforcement of Lessor's rights under this Schedule and the Master Lease to the extent it relates to this Schedule. D. CONDITIONS. No lease of Equipment under this Schedule shall be binding on Lessor unless: (a) Lessor has received evidence of all required insurance; (b) in Lessor's sole judgment, there has been no material adverse change in the financial condition or business of Lessee or any guarantor; (c) Lessee has signed and delivered to Lessor this Schedule, which must be satisfactory to Lessor, and Lessor has signed and accepted this Schedule ;(d) Lessor has received, in form and substance satisfactory to Lessor, such other documents and information as Lessor shall reasonably request; and (e) Lessee has satisfied all other reasonable conditions established by Lessor. E. OTHER DOCUMENTS: EXPENSES. Lessee agrees to sign and deliver to Lessor any additional documents deemed desirable by Lessor to effect the terms of the Master Lease or this Schedule including, without limitation, Uniform Commercial Code financing statements which Lessor is authorized to file with the appropriate filing officers. Lessee hereby irrevocably appoints Lessor as Lessee's attorney-in-fact with full power and authority in the place of Lessee and in the name of Lessee to prepare, sign, amend, file or record any Uniform Commercial Code financing statements or other documents deemed desirable by Lessor to perfect, establish or give notice of Lessor's security interest in the Equipment or in any other collateral as to which Lessee has granted Lessor a security interest. Lessee shall pay upon Lessor's written request any actual out-of-pocket costs and expenses paid or incurred by Lessor in connection with the above terms of this section or the funding and closing of this Schedule. F. SECURITY DEPOSIT. As collateral for Lessee's obligations under the Lease, Lessee hereby grants to Lessor a security interest in the sums specified in this Schedule as a "Security Deposit". As its option, Lessor may apply all or any part of said Security Deposit to cure any default of Lessee under the Lease. If upon final termination of this Schedule, Lessee has fulfilled all of the terms and conditions hereof, then Lessor shall pay to Lessee any remaining balance of the Security Deposit for this Schedule, without interest. G. REPRESENTATIONS AND WARRANTIES. Lessee represents and warrants that: (a) Lessee is a corporation, partnership or proprietorship duly organized, validly existing and in good standing under the laws of the state of its organization and is qualified to do business and is in good standing under the laws of each other state in which the Equipment is or will be located; (b) Lessee has full power, authority and legal right to sign, deliver and perform the Master Lease, this Schedule and all related documents and such actions have been duly authorized by all necessary corporate, partnership or proprietorship action; and (c) the Master Lease, this Schedule and each related document has been duly signed and delivered by Lessee and each such document constitutes a legal, valid and binding obligation of Lessee enforceable in accordance with its terms. H. LESSEE TO PAY ALL TAXES. FOR PURPOSES OF THIS SCHEDULE AND ITS EQUIPMENT ONLY: Lessee shall pay any and all Taxes relating to this Schedule and its Equipment directly to the applicable taxing authority; Lessee shall prepare and file all reports or returns concerning any such Taxes as may be required by applicable law or regulation (provided, that Lessor shall not be identified as the owner of the Equipment in such reports or returns); and Lessee shall, upon Lessor's request, send Lessor evidence of payment of such Taxes and copies of any such reports or returns. -2- EX-10.20 26 PURCHASE AGREEMENT 1 EXHIBIT 10.20 PURCHASE AGREEMENT COMMERCIAL-INDUSTRIAL REAL ESTATE 1. PARTIES: Great Lakes Chemical Corporation, a Delaware corporation ("Seller") agrees to sell and convey to Bioanalytical Systems, Inc., an Indiana corporation ("Buyer") and Buyer agrees to buy from Seller the following property for the consideration and upon and subject to the terms, provisions, and conditions hereinafter set forth. 2. PROPERTY: The property commonly known as The Great Lakes Annex Building, 2801 Kent Avenue, is a tract of land situated in the City of West Lafayette, Tippecanoe County, Indiana, together with all the buildings and permanent improvements and fixtures attached thereto (see Exhibit A); and all privileges, and appurtenances pertaining thereto including any right, title and interest of Seller in and to adjacent streets, alleys, or rights-of-way, Seller's interest in and to all leases or rents, and security deposits, Seller's interest in and to all licenses and permits with respect to the Property, Seller's interest in all service, maintenance, management or other contracts relating to the ownership or operation of the Property, and Seller's interest in all warranties or guaranties relating to the Property being sold; all of the above hereinafter collectively called "Property", and whose legal description will be provided upon completion of the Survey. 3. PRICE: The total purchase price shall be One Million Nine Hundred Thousand and 00/100 Dollars ($1,900,000.00) payable in accordance with the terms and conditions stated in this Agreement. 4. EARNEST MONEY: Twenty Thousand and 00/100 Dollars ($20,000.00) is herewith tendered and is to be deposited as Earnest Money with The Shook Agency, Inc. as Escrow Agent, upon execution of the Agreement by both parties. The Escrow Agent shall hold the Earnest Money in an interest-bearing account with interest to be disbursed with the Earnest Money in accordance with this Agreement. If this Agreement is terminated by the Buyer, as provided herein and within the applicable time period, the Earnest Money shall be returned to the Buyer. 5. CONTINGENCIES: In addition to those other conditions addressed herein, closing of this transaction shall be specifically contingent upon satisfaction of the following items: A. Buyer's receipt of Preliminary Plat Approval from the Tippecanoe County Area Plan Commission for the purpose of joining Buyer's property with the Seller's property to form one lot. Buyer shall bear all costs and expenses relating to and arising from the process of obtaining Preliminary Plat Approval. B. Buyer's obtaining a Phase I environmental report, at Buyer's expense, satisfactory to Buyer at Buyer's sole discretion. 2 C. Buyer shall have satisfied itself, in Buyer's sole discretion and without warranty or representation by Seller, with the nature and condition of the Property such that Buyer shall take the Property on the terms specified in Paragraph 8, below. D. Buyer's receipt of a commitment for suitable financing for the acquisition of the Property and modification of the improvements. E. Execution of a lease between Buyer and Seller, on mutually acceptable terms and conditions, for the lease of office space at the Property by Seller. F. Buyer obtaining written approval and authorization of this transaction from its Board of Directors, Bank One, Primus Ventures and Middlewest Ventures, Inc. G. Seller shall make available for one (1) year after the closing of this transaction, on an "as needed" basis, and at Buyer's expense, Seller's maintenance personnel for the purpose of consulting with Buyer on the management and maintenance of the Property's operating systems. H. The Purdue Research Park restrictive covenants grant a right of first refusal to Purdue Research Foundation for all property sold or resold in Phase I of the Park. Accordingly, Seller must obtain from the Purdue Research Foundation in advance of closing a waiver of any and all of their rights under the Park's restrictive covenants. 6. CLOSING. The closing of the sale (the "Closing Date") shall take place at the Title Company who insures this transaction or at the institution providing financing within thirty (30) days after all contingencies and conditions addressed herein are satisfied to the mutual satisfaction of the parties. If the contingencies set forth in this Agreement have not been satisfied within one hundred eight (180) days of execution of this Agreement by both parties, either party may, by written notice to the other, terminate this Agreement in which event the Escrow Agent shall disburse the Earnest Money to the Buyer and the parties shall thereafter have no further obligations hereunder. 7. POSSESSION: Possession of the Property shall be delivered to Buyer at closing subject to tenant's rights, if applicable, in its present condition, ordinary wear and tear expected. Seller agrees to maintain the property and related equipment in good condition until possession is delivered to Buyer. 8. Seller has provided Buyer access to the Property and Buyer acknowledges having had opportunity to make such independent factual, physical and legal examinations and inquiries as Buyer deems necessary or desirable. As a result, Buyer has had adequate opportunity to become fully acquainted with the nature and condition of the Property in all respects and, except as provided in Section 21 below, shall acquire the Property, if at all, AS IS, WHERE IS AND WITH ALL FAULTS. -2- 3 9. TAXES: All taxes assessed for any prior calendar year and remaining unpaid, shall be paid by the Seller, and all taxes assessed for the current calendar year shall be prorated between Seller and Buyer on a calendar-year basis as of the day immediately prior to the Closing Date. If the tax rate for taxes assessed in the current year has not been determined at the closing of the transaction, said rate shall be assumed to be the same as the prior year for the purpose of such proration and credit for due but unpaid taxes. 10. INSURANCE: Insurance shall be canceled as of the date of closing and the Buyer shall provide its own insurance. 11. SURVEY: A staked survey that complies with Minimum Standard Detail Requirements for Indiana Land Title Surveys, and which shall reflect whether the property is located in a designated flood zone area, shall be furnished at Seller's expense. 12. TITLE AND SURVEY APPROVAL: Seller shall deliver to Buyer within fifteen (15) days after completion of the survey a Commitment for Title Insurance (the "Commitment") and, at Buyer's request, legible copies of all recorded instruments affecting the Property and recited as exceptions in the Commitment. If Buyer has an objection to items disclosed in such Commitment or the survey provided for herein, Buyer shall promptly make written objections to Seller after receipt of each such instrument. If Buyer or third party lender makes such objections or if the objections are disclosed in the Commitment, the survey or by the issuer of the Title Policy, Seller shall have thirty (30) days from the date such objections are disclosed to cure the same, and the Closing Date shall be extended, if necessary. Seller agrees to utilize its best efforts and reasonable diligence to cure such objection, if any. If the objections are not satisfied within such time period, Buyer may either terminate this Agreement or waive the unsatisfied objections and close the transaction. 13. SALES EXPENSES: Seller and Buyer agree that all sales expenses are to be paid in cash prior to or at the closing. A. Seller's Expenses: Seller agrees to pay all costs of releasing existing loans and recording the releases; Owner's Title Policy; survey; 1/2 of any closing fee, preparation of Deed and Vendor's Affidavit; and other expenses stipulated to be paid by Seller under other provisions of this Agreement. B. Buyer's Expenses: Buyer agrees to pay all expenses incident to any loan (e.g., loan commitment fees, preparation of note, mortgage, and other loan documents, recording fees, Mortgagee's Title Policy, prepayable interest, credit reports); 1/2 of any closing fee; and expenses stipulated to be paid by Buyer under other provisions of this Agreement. -3- 4 14. DEFAULT: If Buyer breaches this Agreement and is in default, Seller may seek specific performance or any other remedy provided by law or equity; or Seller may treat this Agreement as being terminated and receive the Earnest Money as liquidated damages. If Seller breaches this Agreement and is in default, then the Earnest Money shall be returned to Buyer. In addition, if Seller is in default, the Buyer may seek specific performance or any other remedy provided by law or equity against the Seller. 15. ESCROW: The Earnest Money is deposited with Escrow Agent with the understanding that Escrow Agent is not a party to this Agreement and does not assume or have any liability for performance or non-performance of any party. Before the Escrow Agent has any obligation to disburse the Earnest Money in the event of dispute, he has the right to require from all signatories a written release of liability of the Escrow Agent, written notification of Agreement termination and written authorization to disburse the Earnest Money. At closing, Earnest Money shall be applied to the Purchase Price. 16. DUTIES OF BUYER AND SELLER AT CLOSING: A. At the closing, Seller shall deliver to Buyer, at Seller's sole cost and expense, the following: (1) duly executed and acknowledged Corporate Deed conveying good and indefeasible title in fee simple to all of the property, free and clear of any and all liens, encumbrances, conditions, easements, assessments, reservations and restrictions, except as permitted herein, and/or approved by Buyer in writing and execute a Vendor's Affidavit; (2) A binder for an Owner's Policy of Title Insurance issued by a reputable insurance company chosen by the Seller in the full amount of the Sales Price dated as of closing, insuring Buyer's fee simple title to the property to be good and indefeasible subject only to those title exceptions permitted herein, or as may be approved by Buyer in writing, and the standard printed exceptions contained in the usual form of the Title Policy. (3) Furnish evidence of its capacity and authority for the closing of this transaction. (4) Execute all other necessary documents to close this transaction. B. At the closing, Buyer shall perform the following: (1) Pay the cash portion of the Sales Price in the form of a certified or cashier's check; -4- 5 (2) Execute the note(s) and mortgage(s) provided for herein and cause the funds to be made available to the closing officer for disbursement; (3) Furnish evidence of its capacity and authority for the closing of this transaction; (4) Furnish to Seller and/or Third Party Lender, at Buyer's expense, a mortgagee's policy issued by Title Company for the benefit of the holder(s) of the mortgage(s) provided for herein; (5) Execute all other necessary documents to close this transaction. 17. CONDEMNATION: If prior to Closing Date condemnation proceedings are commenced against any portion of the property, Buyer may, at its option, terminate this Agreement by written notice to Seller within thirty (30) days after Buyer is advised of the commencement of condemnation proceedings, or Buyer shall have the right to appear and defend in such condemnation proceedings, and any award in condemnation shall, at the Buyer's election, become the property of Seller and reduce the purchase price by the same amount or shall become the property of Buyer and the purchase price not be reduced. 18. CASUALTY LOSS: Risk of loss by damage or destruction to the Property prior to the closing shall be borne by Seller. In the event any such damage or destruction is not fully repaired prior to closing, Buyer, at its option, may either terminate this Agreement or elect to close the transaction, in which event Seller's right to all insurance proceeds resulting from such damage or destruction shall be assigned in writing by Seller to Buyer. 19. RESPONSIBLE PROPERTY TRANSFER LAW: The Seller believes it is not required to provide Purchaser with a Disclosure Statement pursuant to Indiana's Responsible Party Transfer Law (I.C. Section 13-7-22.5-1 et seq.) because (1) the Property does not contain any hazardous chemical or material; (2) the Property does not contain any underground storage tanks which are or have been utilized to hold petroleum or other regulated substances; (3) the Property is not listed on the Comprehensive Environmental Response, Compensation and Liability Information System; (4) and/or Property is exempt from the provisions of said law. However, if after execution of this Agreement, Seller learns that the Property comes within the terms of the Responsible Property Transfer Law, then Seller agrees to provide Buyer with the required Disclosure Document and comply with all other parts of this Law. 20. ENVIRONMENTAL ASSESSMENT: A. Buyer, or its representative, may, at Buyer's sole cost and expense, conduct environmental assessments of the Property as the Buyer in its sole discretion may deem appropriate. In the event such assessments are conducts, Buyer agrees to notify Seller -5- 6 immediately of any findings of suspected environmental problems. Buyer shall provide Seller with duplicate originals of any reports date summaries or test results generated as a result of Buyer's investigations, but in no event shall Buyer, or its representatives, agents or contractors, provide any such materials to any governmental authority or other party or entity prior to closing, unless disclosure of such materials is required under Section 20 hereof or any other applicable State and/or Federal environmental law. B. Seller shall cooperate fully with Buyer or its representatives during any investigation or other activities conducted pursuant to this Section 21. C. Seller, at its cost, may correct any and all such deficiencies disclosed by said assessment. D. If Seller fails or refuses to correct such deficiencies on or before the Closing Date, Buyer may, at its sole option, terminate this Agreement. 21. MISCELLANEOUS A. Any notice required or permitted to be delivered hereunder, shall be deemed received when personally delivered or sent by United States mail, postage prepaid, certified and return receipt requested, addressed to Seller or Buyer, as the case may be, at the address set forth below the signature of such party hereto. B. This Agreement shall be construed under and in accordance with the laws of the State of Indiana. C. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, executors, administrators, legal representatives, successors, and permitted assigns. This Agreement may not be assigned by Buyer without written consent of the Seller. D. In case any one or more of the provisions contained in this Agreement shall for any reason be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision hereof, and this Agreement shall be construed as if such invalid, illegal, or unenforceable provision had never been contained herein. E. This Agreement constitutes the sole and only agreement of the Parties hereto and supersedes any prior understandings or written or oral agreements between the parties respecting the transaction and cannot be changed except by their written consent. F. Time is of the essence of this Agreement. -6- 7 G. Words of any gender used in this Agreement shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural, and vice versa, unless the context requires otherwise. H. All rights, duties and obligations of the signatories hereto shall survive the passing of title to, or an interest in, the property. I. Buyer shall not record or attempt to record this Agreement. J. Wavier. Each party hereto may waive any breach by the other party of any of the provisions contained in this Agreement or any default by such other party in the observance or performance of any covenant or condition required to be observed or performed by it contained herein; provided, however, that such waiver or waivers shall be in writing, shall not be construed as a continuing waiver, and shall not extend to or be taken in any manner whatsoever to affect any subsequent breach, act or omission or default or affect each party's rights resulting therefrom. No waiver will be implied from any delay or failure by either party to take action on account of any default by the other party. No extension of time for performance of any obligations or acts shall be deemed an extension of the time for performance of any other obligations or acts. K. Further Assurances. Each party hereto shall do such further acts and execute and deliver such further agreements and assurances as the other party may reasonably require to give full effect and meaning to this Agreement. L. Brokerage Commissions. Buyer hereby represents and warrants to Seller that Buyer has not incurred, and shall not have incurred as of the Closing Date, any liability for the payment of any brokerage fee or commission in connection with the transaction contemplated in this Agreement. Seller hereby represents and warrants to Buyer that Seller has not incurred, and shall not have incurred as of the Closing Date, any liability for the payment of any brokerage fee or commission in connection with the transaction contemplated in this Agreement, except for the commission due to the Shook Agency (for which Seller shall be solely responsible). Seller and Buyer hereby agree to defend, indemnify and hold harmless the other from and against any and all claims of any other person claiming a brokerage fee or commission through such party. 22. Expiration of Agreement. This Agreement shall expire unless accepted and executed by Buyer and delivered to Seller by 5:00 PM, EST, January 12, 1996. If this Agreement is not timely accepted by Seller, it shall be null and void and all parties hereto shall stand relieved and released of any and all liability or obligations hereunder. -7- 8 EXECUTED by Seller this _______ day of ___________________, 1997. By:__________________________________ By:_______________________________________ __________________________________ _______________________________________ (Printed) (Printed) Seller's Address for Notice Purposes: ACCEPTANCE OF PURCHASE AGREEMENT EXECUTED by Buyer this _______ day of ___________________, 1997. By:__________________________________ By:_______________________________________ __________________________________ _______________________________________ (Printed) (Printed) Buyer's Address for Notice Purposes:_______________________________________________
-8- EX-11.1 27 STATEMENT REGARDING EPS 1 EXHIBIT 11.1 Exhibit 11--Statement Re: Computation of Per share Earnings
Nine Months Ended Year Ended September 30 June 30 ----------------------- ----------------- 1994 1995 1996 1996 1997 -------- ------- ------- ------- ------- (In Thousands, except per share data) (unaudited) Primary Average Common shares outstanding 2,097 2,159 2,185 2,185 2,212 Net effect of dilutive stock options--based on the treasury stock method using average market price 199 155 152 152 110 Assumed conversion of preferred shares 752 752 752 752 752 ------ ------ ------ ------ ------ Total 3,048 3,066 3,089 3,089 3,074 ====== ====== ====== ====== ====== Net income available to common shareholders $ 495 $ 497 $ 346 $ 136 $ 644 ====== ====== ====== ====== ====== Per share amount $ 0.16 $ 0.16 $ 0.11 $ .04 $ .21 ====== ====== ====== ====== ====== Fully Diluted Average Common shares outstanding 2,097 2,159 2,185 2,185 2,212 Net effect of dilutive stock options--based on the treasury stock method using the period-end market price, if higher than average market price 199 155 152 152 110 Assumed conversion of preferred shares 752 752 752 752 752 ------ ------ ------ ------ ------ Total 3,048 3,066 3,089 3,089 3,074 ====== ====== ====== ====== ====== Net income available to common shareholders $ 495 $ 497 $ 347 $ 136 $ 644 ====== ====== ====== ====== ====== Per share amount $ 0.16 $ 0.16 $ 0.11 $ .04 $ .21 ====== ====== ====== ====== ======
EX-21.1 28 LIST OF SUBSIDIARIES 1 EXHIBIT 21.1 List of Subsidiaries NAME JURISDICTION OF ORGANIZATION ---- ---------------------------- 1. BAS Technicol, Ltd United Kingdom 2. IMI Acquisition Corporation Indiana EX-23.2 29 CONSENT OF ERNST & YOUNG 1 EXHIBIT 23.2 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the captions "Experts" and "Selected Consolidated Financial Data" and to the use of our report dated November 8, 1996 (except for Note 10, as to which the date is ________) in the Registration Statement (Form S-1) and related Prospectus of Bioanalytical Systems, Inc. for the registration of 1,500,000 of its common shares. Indianapolis, Indiana The foregoing consent is in the form that will be signed upon the effective date of the share split described in Note 10 to the financial statements. /s/ Ernst & Young LLP Indianapolis, Indiana September 25, 1997 EX-27.1 30 FDS
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BIOANALYTICAL SYSTEMS, INC. CONSOLIDATED FINANCIAL STATEMENTS CONTAINED IN THE COMPANY'S REGISTRATION STATEMENT ON FORM S-1 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS YEAR SEP-30-1997 SEP-30-1996 OCT-01-1996 OCT-01-1995 JUN-30-1997 SEP-30-1996 241 595 0 0 2,550 1,652 0 0 2,088 1,932 5,092 4,382 11,410 8,812 2,777 2,333 14,423 11,374 1,730 1,323 0 0 0 298 1,231 1,231 498 484 5,143 4,472 14,423 11,374 7,347 9,113 11,038 12,794 2,268 3,227 4,425 5,368 5,414 6,725 0 0 69 81 1,141 683 470 283 671 400 0 0 0 0 0 0 644 347 .21 .11 .21 .11
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