-----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, VAqvR5BMPvLqKiODRDQQo+oMSUrdatuqpdQw+gzj9xUbszAojw8yL4fA2q5tbjx+ c+AS4HQQojkYSYjGY7+KEg== 0001170918-05-000656.txt : 20051007 0001170918-05-000656.hdr.sgml : 20051007 20051007160434 ACCESSION NUMBER: 0001170918-05-000656 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 20051003 ITEM INFORMATION: Completion of Acquisition or Disposition of Assets ITEM INFORMATION: Unregistered Sales of Equity Securities ITEM INFORMATION: Material Modifications to Rights of Security Holders ITEM INFORMATION: Changes in Control of Registrant ITEM INFORMATION: Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers ITEM INFORMATION: Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20051007 DATE AS OF CHANGE: 20051007 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALPHA INNOTECH CORP CENTRAL INDEX KEY: 0000830736 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 581729436 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-14257 FILM NUMBER: 051129746 BUSINESS ADDRESS: STREET 1: 2401 MERCED ST. CITY: SAN LEANDRO STATE: CA ZIP: 94577 BUSINESS PHONE: 5104839620 MAIL ADDRESS: STREET 1: 2401 MERCED ST. CITY: SAN LEANDRO STATE: CA ZIP: 94577 FORMER COMPANY: FORMER CONFORMED NAME: XTRANA INC DATE OF NAME CHANGE: 20010702 FORMER COMPANY: FORMER CONFORMED NAME: BIOPOOL INTERNATIONAL INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: CYTRX BIOPOOL LTD DATE OF NAME CHANGE: 19890716 8-K 1 fm8k-100705.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): OCTOBER 3, 2005 ALPHA INNOTECH CORP. (Exact name of registrant as specified in its charter) DELAWARE 1-14257 58-1729436 (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 2401 MERCED STREET, SAN LEANDRO, CALIFORNIA 94577 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (510) 483-9620 XTRANA, INC. P.O. BOX 668, SEDALIA, COLORADO 80135 (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (SEE General Instruction A.2. below): |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |_| Pre-commencement communications pursuant to Rule 13e-4(c)) under the Exchange Act (17 CFR 240.13e-4c)) SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Information included in this Form 8-K may contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). This information may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words "may," "will," "should," "expect," "anticipate," "estimate," "believe," "intend" or "project" or the negative of these words or other variations on these words or comparable terminology. Forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that any projections or other expectations included in any forward-looking statements will come to pass. Our actual results could differ materially from those expressed or implied by the forward-looking statements as a result of various factors. Except as required by applicable laws, we undertake no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future. SECTION 2 - FINANCIAL INFORMATION ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS. On December 14, 2004, Alpha Innotech Corp. (formerly Xtrana, Inc.) (the "Registrant") entered into the previously disclosed Agreement and Plan of Merger (as amended on each of April 6, 2005, July 6, 2005 and August 25, 2005, the "Merger Agreement") with Alpha Innotech Corporation, a California corporation ("Alpha CA"), and AIC Merger Corporation, our wholly-owned subsidiary ("Merger Sub"). The closing of the transactions contemplated under the Merger Agreement occurred on October 3, 2005. At the closing, pursuant to the terms of the Merger Agreement, Merger Sub was merged with and into Alpha CA, with Alpha CA continuing after the merger as the surviving corporation and our wholly-owned subsidiary (such transactions are referred to as the "Merger"). In exchange for all the issued and outstanding equity securities of Alpha CA, we issued to the former shareholders of Alpha CA an aggregate of 8,072,484 shares of our common stock (taking into account the reverse stock split described below in this report). As a result of the Merger, the former Alpha CA shareholders hold approximately 83% of our issued and outstanding common stock and stockholders who held our common stock immediately prior to the Merger hold approximately 17% of our issued and outstanding common stock (excluding options and warrants). Pursuant to the Merger Agreement, of the total Merger consideration, 500,000 shares of common stock have been deposited in escrow to satisfy Alpha CA's potential indemnification obligations under the Merger. An additional 500,000 treasury shares of our common stock have been deposited in escrow to satisfy our potential indemnification obligations under the Merger Agreement. These shares will be released from escrow in the event that no indemnification claims are brought by the respective parties on or prior to March 31, 2006. Pursuant to the Merger Agreement, we assumed all outstanding Alpha CA options and warrants on substantially identical terms, with proportionate adjustments of the number of underlying shares and exercise price of the options and warrants based on the applicable exchange ratio. 2 There are no material relationships between us and Alpha CA, other than in respect of the Merger Agreement and related documents. Merger Sub was a wholly-owned subsidiary of Xtrana, Inc., formed solely for the purpose of effecting the Merger. Concurrently with the closing of the Merger, we changed our corporate name from Xtrana, Inc. to Alpha Innotech Corp. Immediately prior to the closing of the Merger, we effected a reverse stock split pursuant to which each ten shares of our outstanding common stock was exchanged for one new share of common stock, as described in further detail below in this report. A copy of the press release, issued on October 4, 2005, announcing the closing of the Merger is filed with this report as Exhibit 99.1 and incorporated hereby by reference. A copy of the Merger Agreement and the Amendments to the Merger Agreement are filed with this report as Exhibits 2.1, 2.1.1, 2.1.2 and 2.1.3. ALPHA CA BUSINESS AND FINANCIAL INFORMATION INTRODUCTION-FORWARD LOOKING STATEMENTS Except for statements of historical fact, the statements herein are forward-looking and are subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made. These include, among others, uncertainty associated with progress in research and development programs, timely development, launch and acceptance of new products, establishment of new corporate alliances and other factors described below under the headings "Market Opportunity", " Technology", "Products", "Customers" and "Distribution". In addition, such risks and uncertainties also include the matters discussed under Management's Discussion and Analysis of Financial Condition and Results of Operations below. OVERVIEW Alpha CA develops, manufactures and markets digital imaging and detection systems for the life science research and drug discovery markets. Alpha CA's goal is to combine instruments, reagents and bioinformatics software to offer integrated modular technology platforms for the electrophoresis, functional genomics, proteomics and cell analysis markets. Alpha CA was incorporated in California in 1992. Alpha CA maintains its corporate offices at 2401 Merced Street, San Leandro, California 94577 and its telephone number is (510) 483-9620. Alpha CA's corporate web site is located at www.alphainnotech.com. MARKET OPPORTUNITY Alpha CA believes that international trade in scientific instruments in general, and the research and development budgets of customers in certain pharmaceutical and biotechnology companies in particular, have risen since 2002 and will continue to rise this year. Alpha CA intends to capture a share of this rise with its product mix comprising instruments, software and reagents for the gel imaging, microarray, and array of arrays markets. Alpha CA represents a small segment of a life science research tool market. This market includes a wide range of technologies such as various types of instruments, reagents, consumables and software. Given the complexities and focus of these tools for specific applications, Alpha CA is not aware of any objective and accurate third party reports on various 3 life science market segments that can be used to determine Alpha CA's market share in this market. While Alpha CA does not have an accurate third party quantitative measure of market size for its specific products, Alpha CA management estimates the target market for Alpha CA's products is approximately $675 million with a projected growth rate of over 20% annually. Alpha CA believes the human genome project, genome studies of other organisms, and large scale gene expression studies have identified and will continue to identify many target genes. Alpha CA believes there is and will be an increasing need for efficient tools and methods to further study this multitude of target genes. Many genomic and some proteomics studies are currently conducted using the microarray (slide) format. Alpha CA believes multiplexed arrays or "array of arrays" (microtitre well) format will increasingly be adopted by the life science research and drug discovery markets for proteomics and cell analysis studies. The Alpha CA NovaRay array reader was developed for and useful in both microarray and array of arrays formats. TECHNOLOGY Alpha CA patent portfolio consists of three issued U.S. patents and five U.S. patent applications relating to its proprietary NovaRay(R) and Gel Imaging technology. These patents expire in 2018, 2022 and 2024. One of the five applications has been allowed and the fourth patent will be granted upon payment of the issue fee and application fee. Under the terms of an agreement between Digital Optical Imaging Corporation ("DigiOpt") and Alpha CA, Alpha CA received certain exclusive license rights to make and sell products incorporating the inventions disclosed in four of DigiOpt's United States patents. These patents describe the use of micro-optical-electrical-mechanical components such as digital micro mirror devices for controlling both excitation and emission light in ways that can improve the performance of instruments like the NovaRay(R). The agreement remains in effect until the last underlying patent or patent application has expired or is abandoned. The latest to expire patent covered by this agreement is scheduled to expire in 2021. Alpha CA committed to pay certain patent prosecution fees and costs; to date these costs have been minimal. Alpha CA committed to pay DigiOpt guaranteed minimum royalties of the aggregate of $40,000 over the five-year period following the earlier of the first commercial sale of a product incorporating the technology or August 2006. Alpha CA has not made any royalty payments to date. DigiOpt may convert the exclusive license rights to non-exclusive if Alpha CA does not make a first commercial sale by August 2006, or terminate them outright if Alpha CA does not make a first commercial sale by February 2007. Alpha CA's proprietary instrument designs and software are also protected under state and federal trade secret and copyright law. PRODUCTS Alpha CA sells instruments, software and consumables used in life science research laboratories for the study of nucleic acids (DNA and RNA) and proteins used to discover and develop new pharmaceuticals. Alpha CA's products address two segments of the life science research market: Gel Documentation and Microarray/Multiplexed Arrays. GEL DOCUMENTATION. Alpha CA's digital imaging systems for Gel Documentation are used to detect, archive, and analyze fluorescent, chemiluminescent and visible signals from biological samples such as DNA, proteins and bacterial colonies. For example, in a common laboratory procedure called electrophoresis, DNA molecules being analyzed are loaded into one 4 end of a "gel" and driven toward the other end by an electric charge. Molecules of different lengths and electrical charges travel at different speeds through the gel. After electrophoresis, comparing the location of an unknown DNA molecule with the location of known standardized DNA samples such as AlphaQuant(TM) molecular ladders will provide important information to the researcher about the size of unknown sample DNA molecules. However, the DNA samples are usually invisible to the naked eye. To determine their locations, a chemical such as ethidium bromide is added. The ethidium bromide binds to double stranded DNA and "fluoresces", that is, it absorbs light energy of one wavelength ("excitation") and emits a different wavelength ("emission"). The researcher may then place the sample gel into any of Alpha CA's gel imaging instruments (the FluorChem(TM), AlphaImager(R), or AlphaDigiDoc(TM)) which bathes the sample in excitation light energy (in this example, ultraviolet radiation) and captures the emission light energy with a scientific grade CCD camera. The researcher may then use the analysis features of AlphaEase(R) software for image capture and analysis to determine the size of the unknown DNA sample molecule. The researcher may also determine the quantity of the unknown molecules with AlphaEase(TM) by comparing signal intensities of the unknown with the standard. Other Alpha CA products in the Gel Documentation group include software for analysis of "2-D" protein gels (Alpha GelFox(TM) software for 2D gel analysis), reagents for use in chemiluminescent applications (ChemiGlow(TM) chemiluminescent substrate), and software packages for electronic document security (Alpha PART 11 Ease(TM) software for 21 C.F.R. Part 11 compliance). MICROARRAY/MULTIPLEXED ARRAYS. Alpha CA's other major product group is for the Microarray/Multiplexed Arrays market, in which researchers analyze slides or multi-well microplates "printed" with genomic or proteomic information, and in some cases, live cell cultures. The NovaRay(R) includes a patented combination of a broad source lamp with multiple filter sets to provide researchers maximum flexibility in their choice of fluorescent labels when analyzing biochips such as microarrays. The NovaRay(R) reader provides additional flexibility to the researcher by accommodating both the microplate and the slide formats. The researcher can then analyze the emissions from the samples using ArrayEase(R) analysis software. The NovaRay(R) has been placed with select early-access customers. The NovaRay(R) is scheduled for broader market launch in the fourth quarter of 2005. PRODUCTS UNDER DEVELOPMENT. Alpha CA intends to introduce in the fourth quarter of 2005, a laser-based microarray reader targeted at customers who use the single slide format. Alpha CA intends also to offer as early as the fourth quarter of 2005 other array analysis software. CUSTOMERS Alpha CA's customers include pharmaceutical and biotechnology companies, universities, medical centers, government research institutes and agencies worldwide. DISTRIBUTION In the United States Alpha CA's products are sold through a network of direct sales representative and independent manufactures representatives. Internationally, Alpha CA's products are sold through a network of 41 independent distributors in 43 countries worldwide. No distributor accounts for more than 6.5% of Alpha CA's revenues. Alpha CA's independent distributors generally have exclusive distribution rights for their respective territories and perform sales, marketing and technical support functions for their local customers. 5 EMPLOYEES As of September 30, 2005, Alpha CA had 49 full-time employees. Alpha CA considers its relations with employees to be satisfactory. None of Alpha CA employees is covered by a collective bargaining agreement. FACILITIES Headquarters, manufacturing, and research and development are housed in 35,000 feet of leased space in San Leandro, California. This lease expires in December 2011. LEGAL PROCEEDINGS Alpha CA is not involved in any legal proceedings that would have a material adverse impact on our business, financial condition or results of operations. RISK FACTORS You should carefully consider the following risk factors and all other information contained in this report. An investment in Alpha CA involves a high degree of risk. If any of the following events or outcomes actually occurs, our business, operating results, and financial condition would likely suffer. ALPHA CA HAS A HISTORY OF OPERATING LOSSES AND MAY INCUR FUTURE LOSSES. Alpha CA has not been profitable since 1999. Alpha CA's losses were $3.3 million, $2.0 million and $2.6 million for fiscal years 2004, 2003 and 2002, respectively and Alpha CA had an accumulated deficit of $14.2 million as of December 31, 2004 and $16.5 million as of June 30, 2005. Alpha CA's losses have resulted principally from costs incurred in research and development, manufacturing and from selling, general and administrative costs associated with its operations. Alpha CA's ability to generate significant revenues and maintain profitability is dependent in large part on its ability to expand its customer base, increase sales of its current products to existing customers, manage its expense growth, and enter into additional supply, license and collaborative arrangements as well as on its ability to successfully manufacture and commercialize products incorporating its technologies in new applications and in new markets. ADDITIONAL FINANCING WILL BE REQUIRED FOR ALPHA CA'S FUTURE BUSINESS AND OPERATIONS. Alpha CA will require additional capital resources in order to conduct its operations and develop its products. While Alpha CA estimates that upon completion of the Merger, its capital resources will be sufficient to fund its current level of operations over the near term, it cannot guarantee that this will be the case. Additional funds will be required to implement Alpha CA's business plan over the longer term. Alpha CA may not be successful in raising such additional capital on favorable terms or at all. 6 ALPHA CA'S BUSINESS DEPENDS ON RESEARCH AND DEVELOPMENT SPENDING LEVELS FOR PHARMACEUTICAL AND BIOTECHNOLOGY COMPANIES AND ACADEMIC AND GOVERNMENTAL RESEARCH INSTITUTIONS. Alpha CA expects that its revenues in the foreseeable future will be derived primarily from products and services provided to pharmaceutical and biotechnology companies and academic, governmental and other research institutions. Alpha CA's success will depend upon their demand for and use of its products and services. Alpha CA's operating results may fluctuate substantially due to reductions and delays in research and development expenditures by these customers. For example, reductions in capital expenditures by these customers may result in lower than expected instrumentation sales. These reductions and delays may result from factors that are not within Alpha CA's control, such as: o changes in economic conditions; o changes in government programs that provide funding to companies and research institutions; o changes in the regulatory environment affecting life sciences companies and life sciences research; o market-driven pressures on companies to consolidate and reduce costs; and o other factors affecting research and development spending. ALPHA CA MUST SPEND A SIGNIFICANT AMOUNT OF TIME AND RESOURCES TO DEVELOP PRODUCTS, AND IF THESE PRODUCTS DO NOT ACHIEVE COMMERCIAL ACCEPTANCE, ITS OPERATING RESULTS MAY SUFFER. Alpha CA expects to spend a significant amount of time and resources to develop new products and refine existing products. In light of the long product development cycles inherent in its industry, these expenditures will be made well in advance of the prospect of deriving revenues from the sale of new products. Alpha CA's ability to commercially introduce and successfully market new products is subject to a wide variety of challenges during this development cycle that could delay introduction of these products. If it does not achieve market acceptance of new products, its operating results will suffer. ALPHA CA DEPENDS ON A LIMITED NUMBER OF SUPPLIERS AND IT WILL FACE DELAYS IN MANUFACTURING OF ITS PRODUCTS IF SHIPMENTS FROM THESE SUPPLIERS ARE DELAYED OR INTERRUPTED. Alpha CA depends on its vendors to provide components of its products in required volumes, at appropriate quality and reliability levels, and in compliance with regulatory requirements. If supplies from these vendors were delayed or interrupted for any reason, Alpha CA would not be able to produce or sell products in a timely fashion or in sufficient quantities or under acceptable terms. ALPHA CA'S DEPENDENCE ON CONTRACT MANUFACTURING AND OUTSOURCING OTHER PORTIONS OF ITS SUPPLY CHAIN MAY ADVERSELY AFFECT ITS ABILITY TO BRING PRODUCTS TO MARKET. As part of Alpha CA's efforts to streamline operations and to cut costs, it has been outsourcing and will continue to evaluate additional outsourcing of certain operations. If Alpha CA's contract manufacturers or other outsourcers fail to perform their obligations in a timely 7 manner or at satisfactory quality levels, Alpha CA's ability to timely bring products to market could suffer. IF ALPHA CA IS UNABLE TO MAINTAIN ITS RELATIONSHIPS WITH COLLABORATIVE PARTNERS, IT MAY HAVE DIFFICULTY DEVELOPING AND SELLING ITS PRODUCTS AND SERVICES. Alpha CA believes that its success in penetrating its target markets depends in part on its ability to develop and maintain collaborative relationships with key companies as well as with key academic researchers. Alpha CA considers DigiOpt to be one such key collaborative relationship. Relying on these or other collaborative relationships is risky to its future success because: o its partners may develop technologies or components competitive with its products; o some of its agreements may terminate prematurely due to disagreements between it and its partners; o its partners may not devote sufficient resources to the development and sale of its products; o its partners may be unable to provide the resources required for it to progress in the collaboration on a timely basis; o its collaborations may be unsuccessful; or o it may not be able to negotiate future collaborative arrangements on acceptable terms. IF ALPHA CA IS UNABLE TO MAINTAIN ITS RELATIONSHIPS WITH, AND FULFILL ITS CONTRACTUAL OBLIGATIONS TO, ITS SELLING AND DISTRIBUTION PARTNERS, ITS GROWTH AND FINANCIAL RESULTS MAY BE ADVERSELY AFFECTED. As a small company, Alpha CA must continue to nurture current and future distribution partners in order to continue to grow. Any issue that materially affects its ability to deliver and support products with any of its current or future distribution partners could significantly impact financial results. ALPHA CA'S CURRENT SALES, MARKETING AND TECHNICAL SUPPORT ORGANIZATION MAY LIMIT ITS ABILITY TO SELL ITS NEWER PRODUCTS. Alpha CA believes that the market for microplate format arrays and their readers is still evolving, and that initial sales for these readers will require significant support from its in-house applications scientists. Alpha CA may not have sufficient in-house resources to support worldwide sales of these products. ALPHA CA FACES INTENSE COMPETITION FROM OTHER COMPANIES. Alpha CA's products face competition from other companies, including Bio Rad, Kodak, Fuji, UVP, Perkin Elmer, Molecular Devices and Tecan, that have more financial resources, technical staff and manufacturing and marketing capabilities than it does. It may be difficult for Alpha CA to compete with larger companies investing greater resources in development, marketing and distribution of their products. 8 DUE TO THE INTERNATIONAL NATURE OF ALPHA CA'S BUSINESS, POLITICAL OR ECONOMIC CHANGES OR OTHER FACTORS COULD HARM ITS BUSINESS. 38% of Alpha CA's revenue is currently generated from sales outside the United States. Though such transactions are denominated in U.S. dollars, Alpha CA's future revenue, gross margin, expenses and financial condition are still affected by such factors as changes in foreign currency exchange rates, unexpected changes in, or impositions of, legislative or regulatory requirements, including export and trade barriers and taxes; longer payment cycles and greater difficulty in accounts receivable collection. Alpha CA is also subject to general geopolitical risks in connection with international operations, such as political, social and economic instability, potential hostilities and changes in diplomatic and trade relationships. Alpha CA cannot assure investors that one or more of the foregoing factors will not have a material adverse effect on its business, financial condition and operating results or require it to modify its current business practices. THIRD PARTIES MAY CLAIM THAT ALPHA CA IS INFRINGING THEIR INTELLECTUAL PROPERTY, AND IT COULD SUFFER SIGNIFICANT LITIGATION OR LICENSING EXPENSES OR BE PREVENTED FROM SELLING PRODUCTS. While Alpha CA does not believe that any of its products infringe the valid intellectual property rights of third parties, it may be unaware of intellectual property rights of others that may cover some of its technology, products or services. Any litigation regarding patents or other intellectual property could be costly and time-consuming and could divert its management and key personnel from its business operations. The complexity of the technology involved and the uncertainty of intellectual property litigation increase these risks. Claims of intellectual property infringement might also require it to enter into costly license agreements. However, it may not be able to obtain license agreements on terms acceptable to it, or at all. Alpha CA also may be subject to significant damages or injunctions against development and sale of certain of its products. THIRD PARTIES MAY INFRINGE ALPHA CA'S INTELLECTUAL PROPERTY, AND IT MAY EXPEND SIGNIFICANT RESOURCES ENFORCING ITS RIGHTS OR SUFFER COMPETITIVE INJURY. Alpha CA's success depends in large part on its proprietary technology. Alpha CA relies on a combination of patents, copyrights, trademarks, trade secrets, confidentiality provisions and licensing arrangements to establish and protect its proprietary rights. If it fails to successfully enforce its intellectual property rights, its competitive position could suffer, which could harm its operating results. Alpha CA's pending patent and trademark registration applications may not be allowed, or competitors may challenge the validity or scope of its patents, copyrights or trademarks. In addition, its patents may not provide us a significant competitive advantage. Alpha CA may be required to spend significant resources to monitor and police its intellectual property rights. It may not be able to detect infringement and its competitive position may be harmed before it does so. In addition, competitors may design around its technology or develop competing technologies. Intellectual property rights and Alpha CA's ability to enforce them may also be unavailable or limited in some foreign countries, which could make it easier for competitors to capture market share and result in lost revenues. IF ALPHA CA LOSES ITS KEY PERSONNEL OR IS UNABLE TO ATTRACT AND RETAIN ADDITIONAL SKILLED PERSONNEL, ITS BUSINESS MAY SUFFER. 9 Alpha CA depends substantially on the principal members of its management, including Haseeb Chaudhry, Chief Executive Officer and Darryl Ray, Chief Operating Officer and President. Any officer or employee can terminate his or her relationship with Alpha CA at any time and work for one of our competitors. Alpha CA's ability to operate successfully and manage its potential future growth depends significantly upon retaining key research, technical, sales, marketing, managerial and financial personnel, and attracting and retaining additional highly qualified personnel in these areas. Alpha CA faces intense competition for such personnel from numerous companies in the highly competitive northern California business area. The inability to attract and retain these personnel could result in delays in the research, development and commercialization of its potential products. TO ATTRACT AND RETAIN QUALIFIED PERSONNEL, ALPHA CA MAY NEED TO GRANT LARGE STOCK-BASED INCENTIVES THAT COULD BE DILUTIVE TO ITS SHAREHOLDERS AND IT MAY BE REQUIRED TO OFFER HIGHLY COMPETITIVE SALARIES WHICH WOULD INCREASE FUTURE OPERATING COSTS. To attract and retain skilled personnel, Alpha CA may be required to issue large stock option grants or other equity incentives which may be significantly dilutive to existing shareholders. Due to application of SFAS 123(R), such equity incentives would require the Company to record compensation expenses that would adversely impact earnings. If Alpha CA is required to pay highly competitive base salaries and cash bonuses to attract and retain skilled personnel, its operating results would also suffer. INTEGRATING ACQUIRED TECHNOLOGIES MAY BE COSTLY AND MAY NOT RESULT IN TECHNOLOGICAL ADVANCES. Alpha CA has licensed in certain technologies and is working with collaborators to integrate those technologies into future products. However, market advances resulting from the integration of technologies may not be achieved as successfully or rapidly as anticipated, if at all. IF ALPHA CA LOSES SOME OR ALL RIGHTS TO THE DIGITAL OPTICAL IMAGING PATENTS, ITS BUSINESS MAY SUFFER. Under the terms of an agreement between Digital Optical Imaging Corporation ("DigiOpt") and Alpha CA, Alpha CA received certain exclusive rights to make and sell products incorporating the inventions disclosed in four United States patents. Alpha CA is working with strategic partners to incorporate these technologies into future products. Under the terms of the agreement, Alpha CA is obligated to pay certain patent prosecution costs and maintenance fees. Failure to pay these costs and fees as they arise may lead to abandonment of the rights. Furthermore, under the terms of the agreement, DigiOpt may convert the exclusive license to non-exclusive if Alpha CA does not make its first commercial sale of a product incorporating the licensed technology by August 4, 2006, and may terminate the license if Alpha CA does not make its first commercial sale of a product incorporating the licensed technology by February 4, 2007. Loss of these exclusive rights by abandonment, conversion, or termination would impair Alpha CA's ability to develop and market new products. IF ALPHA CA SUFFERS LOSS TO ITS FACTORIES, FACILITIES OR DISTRIBUTION SYSTEM DUE TO CATASTROPHE, ITS OPERATIONS COULD BE SERIOUSLY HARMED. Alpha CA's factories, facilities and distribution system are subject to catastrophic loss due to fire, flood, terrorism or other natural or man-made disasters. In particular, its production facilities and headquarters in California could be subject to a catastrophic loss caused by earthquake. If these facilities were to experience a catastrophic loss, it could disrupt Alpha CA's 10 operations, delay production, shipments and revenue and result in large expenses to repair or replace the facility. Although Alpha CA carries insurance for property damage and business interruption, we do not carry insurance or financial reserves for interruptions or potential losses arising from earthquakes. CHANGES IN ACCOUNTING AND FINANCIAL REPORTING RULES AND REGULATIONS, INCLUDING COMPLIANCE WITH THE SARBANES-OXLEY ACT OF 2002, COULD MATERIALLY AFFECT ALPHA CA'S FINANCIAL RESULTS. The generally accepted accounting principles (GAAP) with which Alpha CA's financial statements comply are subject to interpretation by the Securities and Exchange Commission and various other regulatory and advisory bodies. A change in the interpretation or application of these principles could significantly affect Alpha CA's financial results and may even retroactively affect previously reported financial statements. The Sarbanes-Oxley Act of 2002 requires changes in Alpha CA's corporate governance and compliance practices. In particular, compliance with Section 404 of the Sarbanes-Oxley Act will increase financial and legal costs by an as yet undetermined amount and therefore the impact on future financial results cannot be quantified. The increased liability exposure stipulated by the Sarbanes-Oxley Act may also make it difficult to attract and retain qualified members of Alpha CA's board of directors and executive officers. 11 ALPHA CA FINANCIAL INFORMATION The Audited Consolidated Financial Statements of Alpha CA as of and for the years ended December 31, 2004 and 2003 and related Management's Discussion and Analysis of financial Condition for the Years 2003 and 2004, are incorporated herein by reference to Appendix C of the Xtrana, Inc. Definitive Proxy Statement on Schedule 14A as filed with Securities and Exchange Commission on August 12, 2005. Certain unaudited financial information for the six months ended June 30, 2005 and 2004, is attached to this Form 8-K as EXHIBIT 99.2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION FOR SIX MONTHS ENDED JUNE 30, 2005 The following Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words "anticipate," "believe," "estimate," "expect," "intend," "plan," and similar expressions identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this Form 8-K. Alpha Innotech does not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this filing. CRITICAL ACCOUNTING POLICIES Alpha CA's financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires it to make estimates and judgments that affect the reported amounts of its assets, liabilities, revenue and expenses. Alpha CA bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Alpha CA's critical accounting policies are set forth below. REVENUE RECOGNITION Alpha CA's revenue is derived from the sale of digital imaging systems, net of returns and allowances and is recognized when a contract is executed, all delivery obligations have been met, the fee is fixed and determinable, and collectibility is probable. All products are sold with a 1-year standard warranty agreement and Alpha CA records an associated reserve for estimated warranty costs. For products sold where software is deemed to be more than incidental, Alpha CA follows Statement of Position ("SOP") 97-2, "Software Revenue Recognition," as amended. Revenue earned on software arrangements involving multiple elements is allocated to each element based on vendor-specific objective evidence, which is based on the price charged when the same element is sold separately. When a digital imaging system is sold, the multiple elements are software and maintenance and support. Revenue allocated to software is recognized when a 12 contract is executed, all delivery obligations have been met, the fee is fixed and determinable, and collection is probable. Revenue allocated to maintenance and support is recorded as deferred revenue when a contract is executed, all delivery obligations have been met, the fee is fixed and determinable, and collection is probable. Deferred revenue for maintenance and support is recognized ratably over the maintenance term (typically for a period of one year, beginning when a digital imaging system is considered sold or an extended maintenance and support contract is signed). Revenue is recorded net of estimated returns. Alpha CA's management makes estimates of potential future product returns related to current period revenue. Alpha CA analyzes historical returns, current economic trends and changes in its customer demand and acceptance of its product when evaluating the adequacy of its allowance for sales returns and other allowances, such as allowance for bad debts, in any accounting period. As of June 30, 2005 and December 31, 2004, Alpha CA's allowance for sales returns was $75,000 and $35,000, respectively, and its allowance for doubtful accounts was $17,000 and $47,000, respectively. INVENTORY Alpha CA records inventories at the lower of cost or market value, with cost generally determined on a first-in, first-out basis. Alpha CA performs periodic valuation assessments based on projected sales forecasts and analyzing upcoming changes in future configurations of its products and record inventory write-downs for excess and obsolete inventory. Although Alpha CA strives to ensure the accuracy of its forecasts, it periodically is faced with uncertainties. As of June 30, 2005 and December 31, 2004, Alpha CA's allowance for excess and obsolete inventory was $114,000 and $81,000, respectively. DEFERRED TAXES VALUATION ALLOWANCE Alpha CA believes that significant uncertainties exist regarding the future realization of deferred tax assets, and, accordingly a full valuation allowance is required which amounted to $4,533,000 at December 31, 2004. In subsequent periods when Alpha CA generates pre-tax income, a tax expense will not be recorded to the extent that the remaining valuation allowance can be used to offset that expense. Once a consistent pattern of pre-tax income is established or other events occur that indicate that the deferred tax assets will be realized, additional portions or all of the remaining valuation allowance will be reversed back to income. Should Alpha CA generate pre-tax losses in subsequent periods, a tax benefit will not be recorded and the valuation allowance will be increased. Despite the valuation allowance, Alpha CA retains the ability to utilize the benefits of net operating loss carryforwards and research and development credits. The following Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with Alpha CA's financial statements and the related notes thereto. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, such as Alpha CA's plans, objectives, expectations and intentions. Alpha CA's actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors. 13 COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 2005 AND 2004 REVENUES Alpha CA's revenues are primarily derived from sale of instruments, software, consumables, and service contracts. Revenues for the six months ended June 30, 2005 increased $208,000 or 4.3%, to $5,018,000, from $4,810,000 for the six months ended June 30, 2004. There was not any material growth in the mix of revenue between software, consumables, or service contracts, in the number of units sold, or sales prices. However, the number of units sold for instrument sales increased, with no material change in price, due to improvements in the gel imaging product line. Revenues outside of the United States represented 38% of Alpha CA's total revenues for the six months ended June 30, 2005 and 32% of Alpha CA's total revenues for the six months ended June 30, 2004. The increase in international revenues is due primarily to increasing sales to emerging markets, particularly Asia. Alpha CA anticipates its international revenue to account for an increasing percentage of the total revenue in the immediate future. COST OF GOODS SOLD Cost of goods sold includes direct material, labor and manufacturing overhead. Cost of goods sold for the six months ended June 30, 2005 increased $247,000 or 9.8%, to $2,773,000, from $2,526,000 for the six months ended June 30, 2004 due primarily to increased material costs from product upgrades. GROSS PROFIT Gross profit for the six months ended June 30, 2005 decreased $39,000 or 1.7%, to $2,245,000, from $2,284,000 for six months ended June 30, 2004. The gross profit as a percent of revenues declined from 47.5% for the six months ended June 30, 2004 to 44.7% for the six months ended June 30, 2005. There were no significant changes in labor or overhead rates, but material costs did increase due to the upgrading of some products. SALES AND MARKETING EXPENSES Sales and marketing expenses for the six months ended June 30, 2005 increased $489,000 or 25.2%, to $2,428,000, from $1,939,000 for the six months ended June 30, 2004. The sales and marketing expenses as a percentage of revenues increased from 40.3% for the six months ended June 30, 2004 to 48.4% for the six months ended June 30, 2005. The increase in sales and marketing expenses was primarily due to expenses associated with increasing international revenues, investments in business development, and higher sales and marketing personnel expenses. RESEARCH AND DEVELOPMENT EXPENSES Research and development expenses for the six months ended June 30, 2005 decreased $231,000 or 22.3%, to $807,000 from $1,038,000 for the six months ended June 30, 2004. The research and development expenses as a percentage of revenues decreased from 21.6% for the six months ended June 30, 2004 to 16.1% for the six months ended June 30, 2005. The decrease is a result of significant investment in the development of the gel imaging product line in 2004 as the product was introduced in the second half of 2004. 14 GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses for six months ended June 30, 2005 decreased $19,000 or 2.9%, to $643,000 from $662,000 for the six months ended June 30, 2004 due to reduction in management personnel cost and decrease in bad debt reserve, which was offset by increase in the merger costs. The general and administrative expenses as a percentage of revenues decreased from 13.8% for the six months ended June 30, 2004 to 12.8% for the six months ended June 30, 2005. LIQUIDITY AND CAPITAL RESOURCES To date, Alpha CA has funded its operations primarily through private sales of equity securities and borrowings. As of June 30, 2005, Alpha CA had raised a total of $1,978,000 in convertibles notes that were converted into redeemable convertible preferred stock in 2004, a total of $7,743,000, net of offering costs, from the issuance of redeemable convertible preferred stock, and a total of $122,000, net of offering costs, from the issuance of common stock. As of June 30, 2005, Alpha CA's had $566,000 in cash and a working capital deficit of $ 2,662,000. At June 30, 2005, Alpha CA had the following available to it: BFI Business Finance Line of Credit - In connection with funding of operations and development of new products on March 9, 2004, Alpha CA established a line of credit with BFI Business Finance ("BFI"), in which BFI uses Alpha CA's accounts receivable as collateral to obtain advances from BFI up to 80% of Alpha CA's accounts receivable balance at the time of the borrowing, but with principal advances not to exceed $1,000,000. The interest rate of the line of credit is variable, and bears interest at a rate of 3% over prime. The interest rate as of June 30, 2005 was 9% plus a 0.50% per month administrative fee based on the average daily outstanding balance. Xtrana Term Loan Agreement - On December 14, 2004, Alpha CA and Xtrana entered into a merger agreement, pursuant to which a wholly-owned subsidiary of Xtrana will be merged with and into Alpha CA, with Alpha CA continuing after the merger as the surviving corporation and a wholly-own subsidiary of Xtrana. Pursuant to the terms of the merger agreement, Xtrana made a loan to Alpha CA in the amount of $500,000 on December 16, 2004. The obligations under the loan are secured by a second priority lien and security interest in substantially all assets of Alpha CA. The loan bears interest at the rate of 6% per annum. This loan and the security interest terminated upon closing of the Merger. Loan From Alexandria - On April 8, 2005, Alpha CA secured a loan in the amount of $1,500,000. The loan bears interest at the rate of 12.5% per annum and the outstanding principal amount of the loan is due and payable in 30 equal monthly installments beginning on November 1, 2005. The obligations under the loan are secured by a second priority lien and security interest in substantially all assets of Alpha CA. Cash used in operating activities was $460,000 and $210,000 for the six months ended June 30, 2005 and 2004, respectively. For the six months ended June 30, 2005 Alpha CA was able to offset cash used to fund its operating losses by aggressively reducing accounts receivable despite a 4.3% increase in revenues and by deferring cash payments to its vendors. For the six 15 months ended June 30, 2005 cash flows from gross margin were inadequate to cover expenditures for sales and marketing, research and development, and general and administrative expenses. Cash provided by financing activities was $1,126,000 and $395,000 for the six months ended June 30, 2005 and 2004, respectively, with borrowing partially offset by repayments. In the six months ended June 30, 2005, $1,500,000 million was provided from issuance of debt obligations and offset by $375,000 of repayments of debt obligation. In the six months ended June 30, 2004, $800,000 was provided from issuance of debt obligations and $337,000 from issuance of convertible notes, offset by $742,000 of repayments of debt obligation. Cash used in investing activities was $140,000 and $149,000 for the six months ended June 30, 2005 and 2004, respectively, to purchase property and equipment needed to support our operations. Alpha CA rents its office facilities under an operating lease, which expires on December 2011. The following presents our prospective future lease payments under this agreement: Year ending December 31: 2005 $ 441,000 2006 450,000 2007 459,000 2008 468,000 2009 478,000 Thereafter 945,000 ----------- Total minimum lease obligation $ 3,241,000 =========== Alpha CA believes that subsequent to the reverse merger it will have sufficient cash and available borrowings to meet its operating and capital requirements for the near term. Long-term, Alpha CA will require additional funds to support our working capital requirements or for other purposes and may seek to raise additional funds through public or private equity or debt financing or from other sources. Alpha CA cannot be assured that such additional financing will be available on acceptable terms, or at all. If adequate funds are not available to satisfy either short- or long-term capital requirements, Alpha CA might be required to limit its operations significantly and its business might fail. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Alpha CA does not use derivative financial instruments in its investment portfolio and has no foreign exchange contracts. Its financial instruments consist of cash and cash equivalents, trade accounts receivable, accounts payable and long-term obligations. Alpha CA considers investments in highly liquid instruments purchased with a remaining maturity of 90 days or less at the date of purchase to be cash equivalents. Alpha CA's exposure to market risk for changes in interest rates relates primarily to its short-term investments and short-term obligations; thus, fluctuations in interest rates would not have a material impact on the fair value of these securities. 16 At June 30, 2005, Alpha CA had $566,000 in cash and cash equivalents. A hypothetical 10% increase or decrease in interest rates would not have a material impact on its earnings or loss, or the fair market value or cash flow of these instruments. EFFECTS OF RECENT ACCOUNT PRONOUNCEMENTS In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-based Payment ("SFAS 123(R)"). This is a revision of SFAS No. 123, Accounting for Stock-based Compensation, and supercedes APB No. 25, Accounting for Stock Issued to Employees ("APB 25"). As noted in Alpha CA's stock based compensation accounting policy described above, Alpha CA generally does not record compensation expense for employee stock options. Under SFAS 123(R), Alpha CA will be required to measure the cost of employee services received in exchange for stock compensation, based on the grant date fair value (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award (usually the vesting period). The fair value for stock options will be estimated using an option-pricing model. Excess tax benefits, as defined in SFAS 123(R), will be recognized as an addition to paid-in capital. Under SFAS 123(R), measurement and recognition of compensation expense related to Alpha CA's restricted stock will be the same as APB 25. On April 14, 2005, the Securities and Exchange Commission ("SEC") announced the adoption of a rule that defers the required effective date of SFAS 123(R). The SEC rule provides that SFAS 123(R) is now effective for registrants as of the beginning of the first fiscal year beginning after June 15, 2005, instead of at the beginning of the first quarter after June 15, 2005. Therefore, the required effective date of SFAS 123(R) for calendar year-end public companies is January 1, 2006. Alpha CA is currently evaluating the impact of this statement on its consolidated financial statements. In November 2004, FASB issued SFAS 151, Inventory Cost. This statement amends Accounting Research Bulletin No. 43, Chapter 4, Inventory Pricing, to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs and wasted material (spoilage). The provision of the statement is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. Alpha CA is currently evaluating the impact of this statement on its consolidated financial statements. In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"), Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51. FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 is effective immediately for all new variable interest entities created or acquired after January 31, 2003. For variable interest entities created or acquired prior to February 1, 2003, the provisions of FIN 46 must be applied for the first interim or annual period beginning after June 15, 2003. Alpha CA does not have any ownership in any variable interest entities as of December 31, 2003. Alpha CA will apply the consolidation requirement of FIN 46 in future periods if it should own any interest in a variable interest entity. In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. SFAS No. 150 establishes standards for how an issuer classifies and measures financial instruments with characteristics of both debt and equity and requires an issuer to classify the following instruments as liabilities in its balance sheet: (1) a financial instrument issued in the form of shares that is mandatorily redeemable and embodies an unconditional obligation that requires the issuer to redeem it by transferring its assets at a specific or determined date or upon an event that is certain to occur; (2) 17 a financial instrument, other than an outstanding share, that embodies an obligation to replace the issuer's equity shares, or is indexed to such obligation, and requires the issuer to settle the obligation by transferring assets; and (3) a financial instrument that embodies an unconditional obligation that the issuer must settle by issuing a variable number of equity shares if the monetary value of the obligation is based solely or predominantly on (a) a fixed monetary amount, (b) variations in something other than fair value of the issuer's equity shares, or (c) variations inversely related to changes in the fair value of the issuer's equity shares. In November 2003, the FASB issued FASB Staff Position No. 150-3, which deferred the effective dates of applying certain provisions of SFAS No. 150 related to mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable noncontrolling interests for public and nonpublic entities. For public entities, SFAS No. 150 is effective for mandatorily redeemable financial instruments entered into or modified after May 31, 2003 and is effective for all other financial instruments as of the first interim period beginning after June 15, 2003. For mandatorily redeemable noncontrolling interests that would not have to be classified as liabilities by a subsidiary under the exception in paragraph 9 of SFAS No. 150, but would be classified as liabilities by the parent, the classification and measurement provisions of SFAS No. 150 are deferred indefinitely. For other mandatorily redeemable noncontrolling interests that were issued before November 5, 2003, the measurement provisions of SFAS No. 150 are deferred indefinitely. For those instruments, the measurement guidance for redeemable shares and noncontrolling interests in other literature shall apply during the deferral period. The adoption of SFAS No. 150 did not have any impact on Alpha CA's consolidated financial statements. 18 MANAGEMENT OF ALPHA INNOTECH CORP. DIRECTORS AND EXECUTIVE OFFICERS The following table sets forth information, as of June 30, 2005, regarding those individuals who will serve as directors and executive officers of the surviving corporation after the Merger. NAME AGE POSITION ---- --- -------- Michael D. Bick, Ph.D. 60 Director James H. Chamberlain 57 Director Nagesh Mhatre, Ph.D. 72 Director Haseeb Chaudhry 39 Chief Executive Officer and Director Darryl Ray, Ph.D. 53 President, acting Chief Financial Officer, Chief Operating Officer and Director William Snider 35 Director MICHAEL D. BICK, PH.D., previously has served as Chairman of Board of Xtrana from July 1993 until the closing of the Merger. Dr. Bick also served as Chief Executive Officer from August 1991 until August 2000 and President from January 1996 until August 2000. In 1988, Dr. Bick founded Xtrana's former subsidiary, MeDiTech, and was President and Chief Executive Officer thereof until it was acquired by Biopool in January 1992. Prior to that date, he was co-founder and president of a privately held medical device firm for ten years. Dr. Bick received a Ph.D. in molecular biology from the University of Southern California in 1971 and was affiliated with the Harvard Medical School and Children's Hospital Medical Center in Boston carrying out research in human genetics from 1971 to 1974. Dr. Bick was a staff member of the Roche Institute of Molecular Biology from 1974 to 1978. Dr. Bick has served on the Board of Counselors of the School of Pharmacy, University of Southern California, is a Charter Member of the Keiretsu Forum of Southern California and a Director of VCBio. JAMES H. CHAMBERLAIN was appointed as the interim Chief Executive Officer and Chief Financial Officer of Xtrana in March 2004 and served in that position until the closing of the Merger. Since November 2000, Mr. Chamberlain has served as a director of the West Virginia University Foundation. Mr. Chamberlain founded BioSource International, Inc., a Nasdaq National Market System company dedicated to the research, development, manufacturing, and marketing of biomedical products to the diagnostic and research markets, in 1989. Mr. Chamberlain retired as a director of BioSource and as its Chairman, President, and Chief Executive Officer in 2000. Prior to BioSource, Mr. Chamberlain was the Manager of Business Development for Amgen, Inc. Mr. Chamberlain also serves on the Boards of Directors of Marligen and Cerionx, both private companies in the biotechnology industry. Mr. Chamberlain received a B.S. degree in biology and chemistry from West Virginia University in 1969 and completed an M.B.A. Executive Program at Pepperdine University in 1981. HASEEB CHAUDHRY, co-founded Alpha CA and became its director and Chief Executive Officer in 1992. Mr. Chaudhry has over 14 years of experience in strategic planning, business development, sales and marketing and managing technology and application development. Prior to founding Alpha CA, Mr. Chaudhry was involved with a start-up biotech company, American 19 Synthesis, where he sold and marketed customized oligonucleotides, reagents, chemicals and scientific instruments. Mr. Chaudhry has participated in various start-up ventures in retail, industrial services and international training. He holds a B.A. degree in Genetics from the University of California, Berkeley. DARRYL RAY, PH.D., co-founded Alpha CA and became its director, President and Chief Operations Officer in 1992 and Acting Chief Accounting Officer in 2005. Prior to founding Alpha CA, Dr. Ray was Director of Technical Affairs at American Synthesis, overseeing Quality Assurance of the oligonucleotides manufacturing facility and actively leading the development of a variety of new instruments for Life Science research. Prior to American Synthesis, Dr. Ray was involved in the development of diagnostic, R&D, and research instruments at American Bionetics (ABN) and Hoefer Scientific Instruments (now Harvard Bioscience). Dr. Ray received his B. S. degree in biology from California State Polytechnic University, Pomona and his Ph.D. degree in Cell Biology from the University of California, Santa Barbara. NAGESH S. MHATRE, PH.D. has been a director of Alpha CA and the Executive Chairman since 2001. Dr. Mhatre is currently an executive chairman of BioImagene. Dr. Mhatre has over 40 years of senior management experience in international medical technology companies, including Miles Laboratories (Bayer, AG.) and Becton Dickinson & Company. While at Becton Dickinson, he served for 13 years as corporate vice president and president of its Immunocytometry Systems Division. Prior to this, he was for three years President of Becton Dickinson Laboratory Products, Europe, in Grenoble, France. At Miles Laboratories, he served for four years as managing director, Miles-Yeda, in Rehovot, Israel, a joint venture with the Weizmann Institute of Science. Dr. Mhatre has been a member of the Boards of Governors of Silicon Valley Capital Club, Heidelberg International Club, San Francisco, CA. and Friends of Weizmann Institute of Science. He serves as a Trustee on the Board of World Affairs Council, San Francisco. Dr. Mhatre is a charter member and membership chair (1998-9) of The Indus Entrepreneur-TiE Silicon Valley. Dr. Mhatre received his B.S. degree from Bombay University, India, an M.S. degree from Oregon State University and a Ph.D. degree in biochemistry/microbiology from Rutgers University. WILLIAM SNIDER, CFA has been a member of Alpha CA's board of directors since 2002. Mr. Snider is a general partner and co-founder of Emerging Technology Partners, LLC. Prior to ETP he was a mutual fund portfolio manager at T. Rowe Price. Mr. Snider joined T. Rowe Price in 1991 after attending the Wharton School. Shortly thereafter he became the youngest vice president and portfolio manager in the firm's 60+ year history. His responsibilities included managing $2 billion of mutual fund and institutional client portfolios. BOARD OF DIRECTORS AND COMMITTEES The board of directors will consist of six members immediately following the consummation of the Merger. The board of directors has an audit committee, consisting of Michael Bick and William Snider. The audit committee will oversee the work of the surviving corporation's auditors with respect to financial and accounting matters. 20 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth information regarding ownership of the Common Stock as of October 4, 2005 by (a) each person known to Alpha CA to own more than 5% of the outstanding shares of the Common Stock based on the 9,725,811 shares outstanding on October 4, 2005, (b) each continuing director of Alpha CA, (c) Alpha CA's Chief Executive Officer and each other executive officer named in the compensation tables appearing later in this document and (d) all directors and executive officers as a group. The information in this table is based solely on statements in filings with the Securities and Exchange Commission (the "SEC") or other reliable information. AMOUNT AND NATURE OF PERCENT NAME AND ADDRESS OF BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP(2) OF CLASS - -------------------------------------- ----------------------- -------- 5% SHAREHOLDERS Biotechnology Development Fund II 1,839,717 18.92% c/o BioAsia Management Investment 575 High Street, Suite 201 Palo Alto, CA 94301 ETP/FBR Venture Capital, LLC 1,379,788 14.19% 1901 Research Blvd., Suite 350 Rockville, MD 20850 E-Health Holdings Limited 976,380 9.18% 15/F, Suite 1502, Chinachem Golden Plaza, 77 Mody Rd., Tsimshatsui East Kowloon, Hong Kong OFFICERS AND DIRECTORS Haseeb Chaudhry(3) 1,338,115 13.49% Darryl Ray 1,338,115 13.49% Nagesh S. Mhatre 164,650 1.67% Michael D. Bick 109,295 1.11% James H. Chamberlain 17,400 * William Snider 5,715 * Lewis Chapman 4,286 * All Directors and Executive Officers as a group (5 people) 2,977,575 28.75% *Less than 1%. (1) Unless otherwise indicated, the address of each of the named individuals is c/o Alpha Innotech Corp., 2401 Merced Street, San Leandro, California 94577. (2) Beneficial ownership of shares is determined in accordance with the rules of the SEC and generally includes any shares over which a person exercises sole or shared voting or investment power, or of which a person has the right to acquire ownership within 60 days after October 4, 2005. Except as otherwise noted, each person or entity has sole voting and investment power with respect to the shares shown. (3) Held by Haseeb and Chloe Chaudhry Family Revocable Trust. 21 EXECUTIVE COMPENSATION The following tables and descriptive materials set forth information concerning compensation earned for services rendered to Alpha CA by the Chief Executive Officer (the "CEO") and Alpha CA's next two most highly compensated executive officers for fiscal year 2004 whose salary and bonus for the fiscal year 2004 exceeded $100,000. Collectively, together with the CEO, these are the "Named Executive Officers". SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION SECURITIES ---------------------------------- UNDERLYING NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OTHER OPTIONS - ---------------------------- ---- ----------- ------- ---------- ------- Haseeb Chaudhry, Chief Executive Officer 2004 $100,000.08 535,473(2) 2003 $101,282.20 $175.00 2002 $138,461.70 Darryl Ray, President 2004 $100,000.08 535,473(2) 2003 $101,282.20 $175.00 2002 $138,461.70 Lewis Chapman,VP - Sales and Marketing (1) 2004 $114,333.20 $22,036.90
(1) Includes $22,036.90 in commissions. Mr. Chapman joined Alpha CA on April 15, 2004. (2) Each Mr. Ray and Mr. Chaudhry received a warrant to purchase 535,473 (or 61,120 post-merger) shares of common stock with a purchase price of $0.01 (or $0.087 post-merger) per share. OPTIONS/EXECUTIVE OFFICERS No stock options were granted to the Named Executive Officers during fiscal year 2004. AGGREGATED OPTION EXERCISES AND OPTION VALUES TABLE The following table shows information concerning the exercise of stock options by each of the Named Executive Officers during fiscal 2004, and the value of all remaining exercisable and unexercisable options at December 31, 2004, on a pre-tax basis. 22 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED SHARES OPTIONS AT IN-THE-MONEY OPTIONS ACQUIRED ON VALUE 12/31/04 AT 12/31/04 (1) NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - ------------------------- ----------- -------- ----------- ------------- ----------- ------------- Haseeb Chaudhry, Chief Executive Officer 0 0 42,005 18,001 0 0 ----------- -------- ----------- ------------- ----------- ------------- Darryl Ray, President 0 0 42,005 18,001 0 0 ----------- -------- ----------- ------------- ----------- ------------- Lewis Chapman,VP - Sales and Marketing 0 0 0 0 0 0
- ---------- (1) Based on the closing price of the common stock as reported on the OTC Bulletin Board at October 4, 2005, less the exercise price, multiplied by the number of shares underlying the option (the number of shares reflect the 10 to 1 stock split and the merger exchange conversion ratio of 0.1142909). EMPLOYMENT AGREEMENTS An Employment Agreement was executed between Alpha CA and Haseeb Chaudhry dated May 11, 2001 and amended March 28, 2005 which provides for an annual base salary of $100,000, participation in the management bonus plan based on the company's achievement of certain revenue milestones for each of the fiscal years 2005, 2006 and 2007. In the event of termination without cause, death, disability or voluntary resignation within six months of a significant reduction in the level of duties, responsibilities or job description, the company is required to pay Mr. Chaudhry a severance payment equal to his annual base salary. An Employment Agreement was executed between the Alpha CA and Darryl Ray dated May 11, 2001 and amended March 28, 2005 which provides for an annual base salary of $100,000, participation in the management bonus plan based on the company's achievement of certain revenue milestones for each of the fiscal years 2005, 2006 and 2007. In the event of termination without cause, death, disability or voluntary resignation within six months of a significant reduction in the level of duties, responsibilities or job description, the company is required to pay Mr. Ray a severance payment equal to his annual base salary. SECTION 3 - SECURITIES AND TRADING MARKETS ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES. Reference is made to the disclosure set forth under Item 2.01 of this Current Report on Form 8-K, which disclosure is incorporated herein by reference. The issuance of our securities to the former securityholders of Alpha CA in the Merger was exempt from registration under the Securities Act pursuant to Section 4(2) of the Securities Act and/or Rule 506 promulgated thereunder. We made this determination based on the representations of the Alpha CA shareholders which included, in pertinent part, that such shareholders were acquiring the securities for investment purposes for their own respective accounts and not as nominees or agents, and not with a view to the resale or distribution thereof, and that each member understood that the securities may not be sold or otherwise disposed of without registration under the Securities Act or an applicable exemption therefrom. There were a total of 32 shareholders of Alpha CA that received shares of our common stock in the Merger. In 23 addition, 15 of such shareholders represented to us that they were "accredited investors" within the meaning of Rule 501 of Regulation D promulgated under the Securities Act. We provided all such shareholders, including those shareholders who may not qualify as accredited investors, the information required to be furnished under Rule 502(b) of the Securities Act and received confirmation from such shareholders that they had received and been given an opportunity to review such information. ITEM 3.03 MATERIAL MODIFICATION TO RIGHTS OF SECURITY HOLDERS. Reference is made to the disclosure set forth under Items 2.10 and 5.03 of this Current Report on Form 8-K, which disclosure is incorporated herein by reference. As a result of the closing of the Merger, the former shareholders of Alpha CA own 83% of the total outstanding shares of our capital stock and 83% total voting power of all our outstanding voting securities. On October 3, 2005, we amended our certificate of incorporation to effect a reverse stock split pursuant to which each ten outstanding shares of our common stock was exchanged for one new share our common stock. We also changed our corporate name from Xtrana, Inc. to Alpha Innotech Corp. The reverse stock split and name change were effective on the OTC Bulletin Board as of October 6, 2005, and our common stock is now quoted on the OTC Bulletin Board under the symbol "APNO." Our Certificate of Incorporation, as amended, is filed with this report as Exhibits 3.1 and 3.1.1. SECTION 5 - CORPORATE GOVERNANCE AND MANAGEMENT ITEM 5.01 CHANGES IN CONTROL OF REGISTRANT. Reference is made to the disclosure set forth under Item 2.01 of this Current Report on Form 8-K, which disclosure is incorporated herein by reference. As a result of the closing of the Merger, the former shareholders of Alpha CA own 83% of the total outstanding shares of our capital stock and 83% total voting power of all our outstanding voting securities. ITEM 5.02 DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF PRINCIPAL OFFICERS. In connection with the closing of the Merger (as described in Item 2.01 of this Current Report on Form 8-K), as of October 3, 2005, James H. Chamberlain resigned as our Chief Executive Officer and Chief Financial Officer and Douglas L. Ayer, John C. Gerdes, James B. Mahony and N. Price Paschall resigned as members of our Board of Directors. On October 3, 2005, in connection with the closing of the Merger, Haseeb Chaudhry was appointed as our Chief Executive Officer, Darryl Ray, Ph.D., was appointed as our President, Chief Operating Officer and Acting Chief Financial Officer. On October 3, 2005, in connection with the closing of the Merger, the following persons were appointed as members of our Board of Directors: Haseeb Chaudhry, Darryl Ray, Ph.D., Nagesh Mahtre, PhD, and William Snider. 24 For certain biographical and other information regarding the newly appointed officers and directors, see the disclosure under Item 2.01 of this Current Report on 8-K, which disclosure is incorporated herein by reference. ITEM 5.03 AMENDMENTS TO ARTICLES OF INCORPORATION OR BYLAWS; CHANGE IN FISCAL YEAR. On October 3, 2005, we amended our certificate of incorporation to: o change our corporate name from Xtrana, Inc. to Alpha Innotech Corp.; and o effect a reverse stock split pursuant to which each ten outstanding shares of our common stock was exchanged for one new share our common stock. The corporate name change and reverse stock split were effective on the OTC Bulletin Board as of October 6, 2005, and our common stock is now quoted on the OTC Bulletin Board under the symbol "APNO." Our Certificate of Incorporation, as amended, is filed with this report as Exhibits 3.1 and 3.1.1. SECTION 9 - FINANCIAL STATEMENTS AND EXHIBITS ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS. (a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED. The Audited Consolidated Financial Statements of Alpha CA as of and for the years ended December 31, 2004 and 2003, are incorporated herein by reference to Appendix C of the Xtrana, Inc. Definitive Proxy Statement on Schedule 14A as filed with Securities and Exchange Commission on August 12, 2005. The unaudited consolidated interim financial statements of Alpha CA as of and for the six months ended June 30, 2005 are attached to this report as Exhibit 99.2 and incorporated herein by reference. (b) PRO FORMA FINANCIAL INFORMATION. UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION The following unaudited pro forma consolidated financial statements give effect to the reverse acquisition of Alpha CA by Xtrana and are based on the estimates and assumptions set forth herein and in the notes to such statements. On December 14, 2004, Xtrana and Alpha CA entered into the Merger Agreement. The closing of the transactions contemplated under the Merger Agreement occurred on October 3, 2005. The following has occurred: o Immediately prior to the completion of the proposed reverse acquisition, Xtrana effected a reverse stock split pursuant to which ten shares of Xtrana's outstanding common stock were exchanged for one new share of common stock resulting in approximately 1,653,000 shares being outstanding. 25 o Each share of Alpha CA common and preferred stock issued and outstanding at the closing of the merger was converted into shares of the newly issued Xtrana common stock (approximately 8,073,000 shares). o Xtrana's wholly-owned subsidiary AIC Merger Corporation merged with and into Alpha CA. o Alpha CA is the surviving corporation. o The separate existence of Xtrana and AIC Merger Corporation ended. o Xtrana changed its name to Alpha Innotech Corp. The transaction has been accounted for as a reverse acquisition and a recapitalization. Alpha CA is the acquirer for accounting purposes. The following unaudited pro forma consolidated financial information gives effect to the above. The unaudited pro forma financial information was prepared from (1) Xtrana's audited historical financial statements included in Xtrana's Form 10-KSB for the year ended December 31, 2004, (2) Xtrana's unaudited historical financial statement included in Xtrana's 10-QSB for the period ended June 30, 2005, (3) Alpha CA's audited historical financial statements for the year ended December 31, 2004 included in Appendix C of Xtrana's Definitive Proxy Statement on Schedule 14A, and (4) Alpha CA's unaudited historical financial statements as of and for the period ended June 30, 2005. The unaudited pro forma consolidated balance sheet at June 30, 2005 assumes the effects of the above took place as of June 30, 2005. The unaudited pro forma consolidated statement of operations combines the historical statement of operations of Xtrana and Alpha CA for the twelve months ended December 31, 2004. The unaudited pro forma consolidated statement of operations combines the historical statement of operations of Xtrana and Alpha CA for the period ended June 30, 2005. The unaudited pro forma consolidated statements of operations assume that the effects of the above took place as of January 1, 2004. The unaudited pro forma consolidated financial information is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the transaction had been consummated at the dates indicated, nor is it necessarily indicative of the future operating results of financial position of the consolidated companies. 26 UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET As of June 30, 2005 (in thousands)
Historical Pro Forma -------------------- -------------------------------------------------- Alpha Conversion Innotech Xtrana Of Restate Corporation Inc. Preferred Merger Capital Consolidated -------- -------- -------- -------- -------- -------- ASSETS Current assets: Cash and cash equivalents .......... $ 566 $ 2,124 $ -- $ -- $ -- $ 2,690 Accounts receivable, net ........... 1,261 -- -- -- -- 1,261 Inventory, net ..................... 799 -- -- -- -- 799 Prepaid expenses and other current assets .................. 110 39 -- -- -- 149 -------- -------- -------- -------- -------- -------- Total current assets ........... 2,736 2,163 -- -- -- 4,899 Property and equipment, net ............. 1,243 -- -- -- -- 1,243 Other assets ............................ 75 -- -- -- -- 75 -------- -------- -------- -------- -------- -------- Total assets ....................... $ 4,054 $ 2,163 $ -- $ -- $ -- $ 6,217 ======== ======== ======== ======== ======== ======== LIABILTIIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable ................... $ 1,918 $ 14 $ -- $ -- $ -- $ 1,932 Accrued liabilities ................ 1,092 98 -- -- -- 1,190 Debt ............................... 1,635 -- -- (2) (500) -- 1,135 Deferred revenue ................... 586 -- -- -- -- 586 Other liabilities .................. 167 -- -- -- -- 167 -------- -------- -------- -------- -------- -------- Total current liabilities ...... 5,398 112 -- (500) -- 5,010 -------- -------- -------- -------- -------- -------- Debt, less current portion .............. 1,100 -- -- -- -- 1,100 Commitments and contingencies ........... -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- Redeemable convertible preferred stock: Series A preferred stock ........... 10,610 -- (1) (10,610) -- -- -- Series A-1 preferred stock ......... 2,272 -- (1) (2,272) -- -- -- -------- -------- -------- -------- -------- -------- Total redeemable convertible preferred stock ............. 12,882 -- (12,882) -- -- -- -------- -------- -------- -------- -------- -------- Shareholders' equity: Common stock ....................... 1,148 165 (1) 12,882 (2) (165)(3) (13,933) 97 Additional paid-in capital ......... -- 19,446 -- (2) (16,895)(3) 13,933 16,484 Accumulated deficit ................ (16,474) (18,574) -- (2) 18,574 -- (16,474) Retained earnings during development stage ........................... -- 1,014 -- (2) (1,014) -- -- -------- -------- -------- -------- -------- -------- Total shareholders' equity ..... (15,326) 2,051 12,882 500 -- 107 -------- -------- -------- -------- -------- -------- Total liabilities, redeemable convertible preferred stock and shareholders' equity .. $ 4,054 $ 2,163 $ -- $ -- $ -- $ 6,217 ======== ======== ======== ======== ======== ========
27 UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS For the Six Months Ended June 30, 2005 (in thousands)
Historical Pro Forma -------------------- -------------------------------------------------- Alpha Conversion Innotech Xtrana Of Restate Corporation Inc. Preferred Merger Capital Consolidated -------- -------- -------- -------- -------- -------- Revenue: Products ........................... $ 5,018 $ -- $ -- $ -- $ -- $ 5,018 -------- -------- -------- -------- -------- -------- Total revenues ................. 5,018 -- -- -- -- 5,018 Cost of sales: Products ........................... 2,773 -- -- -- -- 2,773 -------- -------- -------- -------- -------- -------- Total cost of sales ............ 2,773 -- -- -- -- 2,773 -------- -------- -------- -------- -------- -------- Gross profit .............. 2,245 -- -- -- -- 2,245 -------- -------- -------- -------- -------- -------- Operating expenses: Sales and marketing ................ 2,428 -- -- -- -- 2,428 Research and development ........... 807 -- -- -- -- 807 General and administrative ......... 643 264 -- (2) (264) -- 643 -------- -------- -------- -------- -------- -------- Total operating expenses ....... 3,878 264 -- (264) -- 3,878 -------- -------- -------- -------- -------- -------- Loss from operations ...... (1,633) (264) -- 264 -- (1,633) Other income (expense): Interest expense ................... (159) -- -- -- -- (159) Other income (expense), net ........ (5) 22 -- (2) (22) -- (5) -------- -------- -------- -------- -------- -------- Total other income (expense) ... (164) 22 -- (22) -- (164) -------- -------- -------- -------- -------- -------- Net Loss .................. (1,797) (242) -- 242 -- (1,797) Accretions on preferred stock ........... (428) -- (1) 428 -- -- -- -------- -------- -------- -------- -------- -------- Net loss applicable to common stockholders .................... $ (2,225) $ (242) $ 428 $ 242 $ -- $ (1,797) ======== ======== ======== ======== ======== ======== Basic and diluted net loss per share .... $ (0.28) $ (0.15) -- -- -- $ (0.18) ======== ======== ======== ======== ======== ======== Number of shares used in computing basic and diluted net loss per share . 8,073 1,653 -- -- -- 9,726 ======== ======== ======== ======== ======== ========
28 UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS For the Year ended December 31, 2004 (in thousands)
Historical Pro Forma -------------------- -------------------------------------------------- Alpha Conversion Innotech Xtrana Of Restate Corporation Inc. Preferred Merger Capital Consolidated -------- -------- -------- -------- -------- -------- Revenue: Products ............................ $ 10,511 $ -- $ -- $ -- $ -- $ 10,511 Grants .............................. -- 102 -- (2) (102) -- -- -------- -------- -------- -------- -------- -------- Total revenues .................. 10,511 102 -- (102) -- 10,511 Cost of sales: Products ............................ 5,378 -- -- -- -- 5,378 Grants .............................. -- 79 -- (2) (79) -- -- -------- -------- -------- -------- -------- -------- Total cost of sales ............. 5,378 79 -- (79) -- 5,378 -------- -------- -------- -------- -------- -------- Gross profit ............... 5,133 23 -- (23) -- 5,133 -------- -------- -------- -------- -------- -------- Operating expenses: Sales and marketing ................. 3,925 -- -- -- -- 3,925 Research and development ............ 1,963 99 -- (2) (99) -- 1,963 General and administrative .......... 1,968 1,492 -- (2) (1,492) -- 1,968 -------- -------- -------- -------- -------- -------- Total operating expenses ........ 7,856 1,591 -- (1,591) -- 7,856 -------- -------- -------- -------- -------- -------- Loss from operations ....... (2,723) (1,568) -- 1,568 -- (2,723) Other income (expense): Interest expense .................... (574) -- -- -- -- (574) Other income (expense), net ......... (1) 16 -- (2) (16) -- (1) Reserve for loss on note receivable . -- (500) -- (2) 500 -- -- Gain on sale of intellectual property -- 3,310 -- (2) (3,310) -- -- -------- -------- -------- -------- -------- -------- Total other income (expense) .... (575) 2,826 -- (2,826) -- (575) -------- -------- -------- -------- -------- -------- Net Loss ................... (3,298) 1,258 -- (1,258) -- (3,298) Accretions on preferred stock ............ (704) -- (1) 704 -- -- -- -------- -------- -------- -------- -------- -------- Net loss applicable to common stockholders ..................... $ (4,002) $ 1,258 $ 704 $ (1,258) $ -- $ (3,298) ======== ======== ======== ======== ======== ======== Basic and diluted net loss per share ..... $ (0.50) $ (0.76) -- -- -- $ (0.34) ======== ======== ======== ======== ======== ======== Number of shares used in computing basic and diluted net loss per share ........ 8,072 1,653 -- -- -- 9,725 ======== ======== ======== ======== ======== ========
29 NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION 1. Accounting treatment applied as a result of the merger The transaction is being accounted for as a reverse acquisition and recapitalization. Alpha CA is the acquirer for accounting purposes. Xtrana is the issuer. The historical financial statements for the periods prior to the acquisition become those of the acquirer. In a recapitalization, historical stockholders' equity of the acquirer prior to the merger is retroactively restated for the equivalent number of shares received in the merger after giving effect to any difference in par value of the issuer's and acquirer's stock with an offset to additional paid-in capital. Accumulated deficit of the acquirer is carried forward after the acquisition. Operations prior to the merger are those of the accounting acquirer. Earnings per share for the periods prior to the merger are restated to reflect the equivalent number of shares outstanding. 2. Shares issued and outstanding prior to the merger, as of June 30, 2005, were as follows: Xtrana: Common Stock 16,533,269 Alpha CA: Series A Redeemable Convertible Preferred Stock 10,533,334 Series A-1 Redeemable Convertible Preferred Stock 7,343,418 Common Stock 23,180,587 3. The following is a reconciliation of the shares used in calculating the per share information as of June 30, 2005: Type Original Number Of Shares Conversion Of Entity Stock Outstanding Factor Shares - --------------- ---------- ----------- ---------- ----------- Xtrana Common 16,533,269 .10 1,653,327 ----------- Alpha CA Series A 10,533,334 .3033634 3,195,428 Alpha CA Series A-1 7,343,418 .3033634 2,227,724 Alpha CA Common 23,180,587 .1142909 2,649,330 ----------- Alpha CA 8,072,482 ----------- Total 9,725,809 =========== 30 4. The following is a reconciliation of the shares used in calculating the per share information as of December 31, 2004: Type Original Number Of Shares Conversion Of Entity Stock Outstanding Factor Shares - --------------- ----------- ----------- ---------- ------------ Xtrana Common 16,533,269 .10 1,653,327 ----------- Alpha CA Series A 10,533,334 .3033634 3,195,428 Alpha CA Series A-1 7,343,418 .3033634 2,227,724 Alpha CA Common 23,177,526 .1142909 2,648,980 ----------- Alpha CA 8,072,132 ----------- Total 9,725,459 =========== 5. Adjustments to the unaudited pro forma consolidated balance sheet The adjustments to the unaudited pro forma consolidated balance sheet as of June 30, 2005 have been calculated as if the reverse acquisition occurred on that date and are as follows: (1) To reflect the conversion of Alpha CA's preferred stock into Xtrana's common stock. (2) To reflect the conversion of Alpha CA's common stock into Xtrana's common stock, the elimination of intercompany transactions, and the reverse acquisition. (3) To reflect the revised amounts for common stock and additional paid-in capital subsequent to the reverse acquisition. 6. Adjustments to the unaudited pro forma consolidated statement of operations The adjustments to the unaudited pro forma consolidated statements of operations for the periods ended December 31, 2004 and June 30, 2005 have been calculated as if the merger occurred as of January 1, 2004 and are as follows: (1) To eliminate accretion on preferred stock. (2) To eliminate the operations of Xtrana, which will not be supported after the reverse acquisition. (c) EXHIBITS. See the Exhibit Index following the signature page of this Current Report on Form 8-K for a list of the exhibits filed herewith. 31 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. XTRANA, INC. Date: October 7, 2005 By: /S/ HASEEB CHAUDHRY --------------------------------- Haseeb Chaudhry Chief Executive Officer 32 EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION - ------- ------------------------------------------------------------------ 2.1 Agreement and Plan of Merger dated as of December 14, 2004, by and among Xtrana, Inc., AIC Merger Corp. and Alpha Innotech Corporation. (Incorporated by reference to the Registrant's Current Report Form 8-K filed on December 17, 2004) 2.1.1 Amendment No. 1 to Agreement and Plan of Merger dated as of December 14, 2004, by and among Xtrana, Inc., AIC Merger Corp. and Alpha Innotech Corporation. (Incorporated by reference to the Registrant's Current Report Form 8-K filed on April 12, 2005) 2.1.2 Amendment No. 2 to Agreement and Plan of Merger dated as of December 14, 2004, by and among Xtrana, Inc., AIC Merger Corp. and Alpha Innotech Corporation. (Incorporated by reference to the Registrant's Current Report Form 8-K filed on July 11, 2005) 2.1.3 Amendment No. 3 to Agreement and Plan of Merger dated as of December 14, 2004, by and among Xtrana, Inc., AIC Merger Corp. and Alpha Innotech Corporation. (Incorporated by reference to the Registrant's Current Report Form 8-K filed on August 26, 2005) 3.1 Certificate of Incorporation 3.1.1 Certificate of Amendment to Certificate of Incorporation 10.1* Alpha Innotech Corporation 1999 Stock Option Plan 10.2* Alpha Innotech Corporation 2001 Management Incentive Plan 10.3* Employment Agreement between Alpha Innotech Corporation and Mr. Chaudhry dated as of May 11, 2001. 10.4* Amendment to Employment Agreement between Alpha Innotech Corporation and Mr. Chaudhry dated as of April 6, 2005. 10.5* Employment Agreement between Alpha Innotech Corporation and Mr. Ray dated as of May 11, 2001. 10.6* Amendment to Employment Agreement between Alpha Innotech Corporation and Mr. Ray dated as of April 6, 2005 10.7 Secured Promissory Note issued to Alexandria Finance, LLC dated April 8, 2005 10.8 Loan and Security Agreement with BFI Business Finance dated March 9, 2004 21.1 Subsidiaries. 99.1 Press Release dated October 4, 2005 announcing closing of the Merger. 99.2 Unaudited consolidated interim financial statements of Alpha Innotech Corporation as of and for the three and six months ended June 30, 2005. *Management contract. 33 EX-3.(I) 2 ex3-1.txt EX-3.1 EXHIBIT 3.1 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF BIOPOOL INTERNATIONAL, INC. Pursuant to the General Corporation Law of the State of Delaware, the undersigned, being an authorized officer of Biopool International, Inc., a Delaware corporation, hereby adopts the following Amended and Restated Certificate of Incorproation. FIRST: The original name of this corporation is Cytrx Biopool, Ltd., and the date of filing of the original Certificate of Incorporation of the corporation with the Secretary of State of the State of Delaware is January 7, 1987. SECOND: Pursuant to Section 242 and 245 of the Delaware General Corporation Law, this Amended and Restated Certificate of Incorporation restates and integrates and further amends the provisions of the corporation's original Certificate of Incorporation as follows: I. The name of this Corporation is Xtrana, Inc. (the "Corporation"). II. The Corporation's registered office is located at 2711 Centerville Road, Suite 400, in the City of Wilmington, in the County of New Castle, in the State of Delaware 19808. The name of the registered agent at that address is The Prentice-Hall Corporation System, Inc. III. The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware (the "GCL"). IV. The total number of shares of stock which the Corporation is authorized to issue is Fifty Million (50,000,000), all of which shall be Common Stock, par value $0.01 per share. V. The Bylaws of the Corporation may be made, altered, amended, changed, added to or repealed by the Board of Directors without the assent or vote of the stockholders. Elections of directors need not be by ballot unless the Bylaws so provide. VI. The personal liability of the directors of the Corporation is hereby eliminated to the fullest extent permitted by paragraph (7) of subsection (b) of Section 102 of the GCL, as the same may be amended and supplemented. VII. The Corporation shall, to the fullest extent permitted by Section 145 of the GCL, as amended from time to time, indemnify all persons whom it may indemnify pursuant thereto. VIII. The Corporation reserves the right to amend, alter, change, or repeal any provision contained in this certificate in the manner now or hereafter prescribed by law, and all rights and powers conferred herein on stockholders, directors and officers are subject to this reserved power. THIRD: That the Amended and Restated Certificate of Incorporation has been duly adopted by the Corporation's Board of Directors and a majority of its voting stockholders in accordance with the applicable provisions of Sections 242 and 245 of the GCL. FOURTH: This Amended and Restated Certificate of Incorporation shall be effective on the date filed with the Secretary of State of Delaware. IN WITNESS WHEREOF, said corporation has caused this certificate to be signed by the Chief Operating Officer of the Corporation on this June 21, 2001. /S/ TIMOTHY J. DAHLTORP -------------------------------------------- Timothy J. Dahltorp, Chief Operating Officer 2 EX-3.(I) 3 ex3-1_1.txt EX-3.1.1 EXHIBIT 3.1.1 CERTIFICATE OF AMENDMENT OF AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF XTRANA, INC. The undersigned, James H. Chamberlain, Chief Executive Officer of Xtrana, Inc. (the "Corporation"), a corporation organized and existing by virtue of the General Corporation Law (the "GCL") of the State of Delaware, does hereby certify pursuant to Section 103 of the GCL as to the following: 1. The name of the Corporation is Xtrana, Inc. The original name of the Corporation is Cytrx Biopool, Ltd., and the original Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on January 7, 1987. 2. The terms and provisions of this Certificate of Amendment (i) have been approved by the Board of Directors of the Corporation in a resolution setting forth and declaring advisable the amendment contained herein and (ii) have been duly approved by the required number of shares of outstanding stock of the Corporation, in each case pursuant to and in accordance with Section 242 of the General Corporation Law of the State of Delaware. 3. Article I of the Corporation's Amended and Restated Certificate of Incorporation is hereby amended and restated as follows: "The name of this corporation is Alpha Innotech Corp. (the "CORPORATION")." 4. Article IV of the Corporation's Amended and Restated Certificate of Incorporation is hereby amended and restated as follows: "The total number of shares of stock which the Corporation is authorized to issue is Fifty Million (50,000,000), all of which shall be Common Stock, par value $0.01 per shares. Simultaneously with the effective date of the filing of this amendment to the Amended and Restated Certificate of Incorporation (the "Effective Date"), each share of Common Stock of the Corporation issued and outstanding or held as treasury shares immediately prior to the Effective Date (the "Old Common Stock") shall automatically be reclassified and continued (the "Reverse Split"), without any action on the part of the holder thereof, as one-tenth on one share (0.1) of Common Stock. The Corporation shall not issue fractional shares on account of the Reverse Split. Holders of Old Common Stock who would otherwise be entitled to a fraction of a share on account of the Reverse Split shall receive, upon surrender of the stock certificates formerly representing shares of the Old Common Stock, in lieu of such fractional share, one whole share of Common Stock. The Corporation's authorized shares of Common Stock, each having a par value of $0.01 per share, shall not be changed. The Corporation's stated capital shall be reduced by an amount equal to the aggregate par value of the shares of Common Stock issued prior to the effectiveness of this Certificate of Amendment which, as a result of the Reverse Split provided for herein, are no longer issued shares of Common Stock." IN WITNESS WHEREOF, the undersigned has executed this Certificate of Amendment of Amended and Restated Certificate of Incorporation as of the 3rd day of October, 2005. /S/ JAMES H. CHAMBERLAIN ------------------------------------- James H. Chamberlain, Chief Executive Officer 2 EX-10 4 ex10-1.txt EX-10.1 EXHIBIT 10.1 AMENDED AND RESTATED 1999 STOCK OPTION PLAN OF ALPHA INNOTECH CORPORATION 1. PURPOSES OF THE PLAN The purposes of the Amended and Restated 1999 Stock Option Plan (the "PLAN") of Alpha Innotech Corporation, a California corporation (the "COMPANY"), are to: (a) Encourage selected employees, directors and consultants to improve operations and increase profits of the Company; (b) Encourage selected employees, directors and consultants to accept or continue employment or association with the Company or its Affiliates; and (c) Increase the interest of selected employees, directors and consultants in the Company's welfare through participation in the growth in value of the common stock (the "COMMON STOCK") of Xtrana, Inc. ("XTRANA"), which acquired the Company on October 3, 2005. Options granted under this Plan ("OPTIONS") may be "incentive stock options" ("ISOS") intended to satisfy the requirements of Section 422 of the Internal Revenue Code of 1986, as amended (the "CODE"), or "nonqualified options" ("NQOS"). 2. ELIGIBLE PERSONS Every person who at the date of grant of an Option is an employee of the Company or of any Affiliate (as defined below) of the Company is eligible to receive NQOs or ISOs under this Plan. Every person who at the date of grant is a consultant to, or nonemployee director of, the Company or any Affiliate (as defined below) of the Company is eligible to receive NQOs under this Plan. The term "AFFILIATE" as used in the Plan means a parent or subsidiary corporation as defined in the applicable provisions (currently Sections 424(e) and (f), respectively) of the Code. The term "EMPLOYEE" includes an officer or director who is an employee of the Company. The term "CONSULTANT" includes persons employed by, or otherwise affiliated with, a consulting firm. 3. STOCK SUBJECT TO THIS PLAN Subject to the provisions of Section 6.1.1 of the Plan, the total number of shares of stock which may be issued under options granted pursuant to this Plan and the total number of shares provided for issuance under this Plan shall be 3,800,000 shares of Common Stock. The shares covered by the portion of any grant under the Plan which expires unexercised shall become available again for grants under the Plan. Any shares of Common Stock which are retained by Xtrana upon exercise of an Option to satisfy the exercise price of an Option or any withholding taxes due with respect to such exercise shall continue to be available for future issuance under the Plan. 4. ADMINISTRATION 4.1 GENERAL. This Plan shall be administered by the Board of Directors of Xtrana(the "BOARD") or, either in its entirety or only insofar as required pursuant to Section 4.2 hereof, by a committee (the "COMMITTEE") of at least two Board members to which administration of the Plan, or of part of the Plan, is delegated (in either case, the "ADMINISTRATOR"). 4.2 PUBLIC COMPANY. From and after such time as Xtrana registers a class of equity securities under Section 12 of the Securities Exchange Act of 1934 (the "EXCHANGE ACT") and to the extent permitted by any and all laws of whatever jurisdiction, within or without the United States, and the rules of any stock exchange or quotation system on which the Common Stock is listed or quoted ("APPLICABLE LAWS"), the Committee shall consist of Board members who are "Non-Employee Directors" as defined under Rule 16b-3 promulgated by the Securities and Exchange Commission or any successor rule thereto ("RULE 16B-3"). 4.3 AUTHORITY OF ADMINISTRATOR. Subject to the other provisions of this Plan, the Administrator shall have the authority, in its discretion: (i) to grant Options; (ii) to determine the fair market value of the Common Stock subject to Options; (iii) to determine the exercise price of Options granted; (iv) to determine the persons (each an "OPTIONEE") to whom, and the time or times at which, Options shall be granted, and the number of shares subject to each Option; (v) to interpret this Plan; (vi) to prescribe, amend, and rescind rules and regulations relating to this Plan; (vii) to determine the terms and provisions of each Option granted (which need not be identical), including but not limited to, the time or times at which Options shall be exercisable; (viii) with the consent of the Optionee, to modify or amend any Option; (ix) to accelerate or to defer (with the consent of the Optionee) the exercise date of any Option; (x) to authorize any person to execute on behalf of the Company any instrument evidencing the grant of an Option; and (xi) to make all other determinations deemed necessary or advisable for the administration of this Plan. To the extent permitted by Applicable Laws, the Administrator may delegate 2 nondiscretionary administrative duties to such employees of Xtrana or the Company as it deems proper. 4.4 INTERPRETATION BY ADMINISTRATOR. All questions of interpretation, implementation, and application of this Plan shall be determined by the Administrator. Such determinations shall be final and binding on all persons. 4.5 RULE 16B-3. With respect to persons subject to Section 16 of the Exchange Act, if any, transactions under this Plan are intended to comply with the applicable conditions of Rule 16b-3, or any successor rule thereto. To the extent any provision of this Plan or action by the Administrator fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Administrator. Notwithstanding the above, it shall be the responsibility of such persons, not of the Company or the Administrator, to comply with the requirements of Section 16 of the Exchange Act; and neither the Company nor the Administrator shall be liable if this Plan or any transaction under this Plan fails to comply with the applicable conditions of Rule 16b-3 or any successor rule thereto, or if any such person incurs any liability under Section 16 of the Exchange Act. 5. GRANTING OF OPTIONS; OPTION AGREEMENT 5.1 TERMINATION OF PLAN. No options shall be granted under this Plan after ten years from the date of adoption of this Plan by the Board. 5.2 STOCK OPTION AGREEMENT. Each Option shall be evidenced by a written stock option agreement (the "OPTION AGREEMENT"), in form satisfactory to the Company, executed by the Company and the person to whom such Option is granted; provided, however, that the failure by the Company, the Optionee, or both, to execute the Option Agreement shall not invalidate the granting of an Option, although the exercise of each option shall be subject to Section 6.1.3. 5.3 TYPE OF OPTION. The Option Agreement shall specify whether each Option it evidences is an NQO or an ISO. 5.4 EARLY APPROVAL OF GRANTS. Subject to Section 6.3.3 with respect to ISOs, the Administrator may approve the grant of Options under this Plan to persons who are expected to become employees, directors or consultants of the Company, but are not employees, directors or consultants at the date of approval, with such grant to specify whether it is effective immediately or effective only on such person becoming an employee, director or consultant. 3 6. TERMS AND CONDITIONS OF OPTIONS Each Option granted under this Plan shall be subject to the terms and conditions set forth in Section 6.1. NQOs shall be also subject to the terms and conditions set forth in Section 6.2, but not those set forth in Section 6.3. ISOs shall also be subject to the terms and conditions set forth in Section 6.3, but not those set forth in Section 6.2. 6.1 TERMS AND CONDITIONS TO WHICH ALL OPTIONS ARE SUBJECT. Options granted under this Plan shall be subject to the following terms and conditions: 6.1.1 CHANGES IN CAPITAL STRUCTURE. Subject to Section 6.1.2, if the stock of the Company is changed by reason of a stock split, reverse stock split, stock dividend, or recapitalization, combination or reclassification, appropriate adjustments shall be made by the Board in (a) the number and class of shares of stock subject to this Plan and each Option outstanding under this Plan, and (b) the exercise price of each outstanding Option; provided, however, that the Company shall not be required to issue fractional shares as a result of any such adjustments. Each such adjustment shall be subject to approval by the Board in its absolute discretion. 6.1.2 CORPORATE TRANSACTIONS. (a) DISSOLUTION OR LIQUIDATION. In the event of the proposed dissolution or liquidation of the Company, the Administrator shall notify each Optionee at least 30 days prior to such proposed action. To the extent not previously exercised, all Options will terminate immediately prior to the consummation of such proposed action. (b) MERGER OR ASSET SALE. In the event of (i) a sale or other disposition of all or substantially all of the assets of the Company, or (ii) a merger, consolidation, reorganization, sale or similar transaction or series of related transactions in which the holders of the Company's outstanding shares immediately before such transaction or series of transactions do not, immediately after such transaction or series of transactions, retain stock representing a majority of the voting power of the surviving entity (any such event being referred to as "CHANGE OF CONTROL"): (i) OPTIONS. Each Option shall be assumed or an equivalent option substituted by the successor entity (including as a "successor" any purchaser of substantially all of the assets of the Company) or a parent or subsidiary of the successor entity. In the event that the successor does not assume or substitute for the Option, the Optionee shall have the right to exercise the Option as to 100% of the shares of Common Stock covered by the Option, including shares as to which it would not otherwise be exercisable. If an Option is exercisable in lieu of assumption or substitution 4 in the event of a merger, sale of assets or other transaction, the Administrator shall notify the Optionee that the Option shall be fully exercisable for a period of at least 15 days from the date of such notice, and the Option shall terminate upon the expiration of such period. For the purposes of this paragraph, the Option shall be considered assumed if, following the merger, sale of assets, or other transaction, the Option confers the right to purchase or receive, for each share of Common Stock subject to the Option immediately prior to the merger, sale of assets, or other transaction, the consideration (whether stock, cash, or other securities or property) received in such transaction by holders of Common Stock for each share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares); provided, however, that if such consideration received was not solely common stock of the successor entity or its parent entity, the Option shall also be deemed assumed if the Administrator, with the consent of the successor corporation, provides for the consideration to be received upon the exercise of the Option, for each share of Common Stock subject to the Option, to be solely common stock of the successor entity or its parent entity equal in fair market value to the per share consideration received by holders of Common Stock in the merger, sale of assets or other transaction. (ii) SHARES SUBJECT TO RIGHT OF REPURCHASE. Any Options or shares subject to a right of repurchase of the Company shall be exchanged for the consideration (whether stock, cash, or other securities or property) received in the merger, asset sale or other transaction by the holders of the Company's Common Stock for each share held on the effective date of the transaction, as described in the preceding paragraph; provided, however, that if the consideration received is not solely common stock, and the Administrator provides, pursuant to the foregoing paragraph, that holders of Options shall receive common stock of the successor entity or its parent entity upon exercise of the Options, then any shares subject to a right of repurchase shall also be exchanged for common stock of the successor or its parent. If in such exchange the Optionee receives shares of stock of the successor or a parent or subsidiary of such successor entity, and if the successor entity has agreed to assume or substitute for Options as provided in the preceding paragraph, such exchanged shares shall continue to be subject to a right of repurchase as provided in the Optionee's Stock Option Plan stock purchase agreement. If, as provided in the preceding paragraph, the Optionee shall have the right to exercise an Option as to all of the shares of Common Stock covered thereby, all shares that are subject to a right of repurchase of the Company shall be released from such right of repurchase and shall be fully vested. If upon a Change in Control, the Optionee receives shares of stock of the successor entity or a parent or subsidiary of the successor entity, and such exchanged shares continue to be subject to a Right of Repurchase, and if within six (6) months following such Change in Control an Optionee's status as an employee terminates as a result of an Involuntary 5 Termination other than for Cause, then all Shares subject to a Right of Repurchase shall be released from such Right of Repurchase and shall be fully vested. 6.1.3 TIME OF OPTION EXERCISE. Subject to Section 5 and Section 6.3.4, Options granted under this Plan shall be exercisable (a) immediately as of the effective date of the Option Agreement granting the Option, or (b) in accordance with a schedule related to the date of the grant of the Option, the date of first employment or service, or such other date as may be set by the Administrator (in any case, the "VESTING BASE DATE") and specified in the Option Agreement relating to such Option; provided, however, that with respect to Options granted to employees who are not officers or directors, the right to exercise an Option must vest at the rate of at least 20% per year over five years from the date the Option was granted. Options granted to officers, directors or consultants may become fully exercisable, subject to reasonable conditions such as continued employment or service, at any time or during any period established by the Board or the Administrator in accordance with this Plan. In any case, no Option shall be exercisable until a written Option Agreement in form satisfactory to the Company is executed by the Company and the Optionee. 6.1.4 OPTION GRANT DATE. Except in the case of grants contingent on the beginning of employment or other service, as described in Section 5.4, the date of grant of an Option under this Plan shall be the date as of which the Administrator approves the grant. 6.1.5 NONASSIGNABILITY OF OPTION RIGHTS. Except as otherwise determined by the Administrator and expressly set forth in the Option Agreement, no Option granted under this Plan shall be assignable or otherwise transferable by the Optionee except by will or by the laws of descent and distribution. During the life of the Optionee, except as otherwise determined by the Administrator and expressly set forth in the Option Agreement, an Option shall be exercisable only by the Optionee. Notwithstanding the foregoing, if permitted in the Option Agreement or otherwise determined by the Administrator, NQOs may be transferred by instrument to an inter vivos or testamentary trust in which the NQOs are to be passed to beneficiaries upon the death of the trustor (settlor) or by gift or pursuant to domestic relations orders to "Immediate Family Members" (as defined below) of the Optionee. "IMMEDIATE FAMILY" means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law (including adoptive relationships), a trust in which these persons have more than fifty percent of the beneficial interest, a foundation in which these persons (or the Optionee) control the management of assets, and any other entity in which these persons (or the Optionee) own more than fifty percent of the voting interests. 6 6.1.6 PAYMENT. Except as provided below, payment in full, in cash, shall be made for all stock purchased at the time written notice of exercise of an Option is given to the Company, and proceeds of any payment shall constitute general funds of the Company. At the time an Option is granted or exercised, the Administrator, in the exercise of its absolute discretion after considering any tax or accounting consequences, may authorize any one or more of the following additional methods of payment: (a) Acceptance of the Optionee's full recourse promissory note for all or part of the Option price, payable on such terms and bearing such interest rate as determined by the Administrator (but in no event less than the minimum interest rate specified under the Code at which no additional interest would be imputed and in no event more than the maximum interest rate allowed under applicable usury laws), which promissory note may be either secured or unsecured in such manner as the Administrator shall approve (including, without limitation, by a security interest in the shares of the Company); (b) Other shares of Common Stock, or the designation of other shares of Common Stock, which (A) if required to avoid the Xtrana's incurring adverse accounting charges, in the case of Common Stock acquired upon exercise of an option (whether or not under this Plan) are "mature" shares for purposes of avoiding variable accounting treatment under generally accepted accounting principals (generally, mature shares are those that have been owned by the Optionee for more than six months on the date of surrender), and (B) have a fair market value (determined as set forth in Section 6.1.11) on the date of surrender equal to the exercise price of the Common Stock as to which the Option is being exercised; (c) Provided that a public market exists for the Common Stock, through a "same day sale" commitment from the Optionee and a broker-dealer that is a member of the National Association of Securities Dealers (an "NASD Dealer") under which the Optionee irrevocably elects to exercise the Option and the NASD Dealer irrevocably commits to forward an amount equal to the Option Price plus any applicable withholding taxes, directly to the Company (a "CASHLESS EXERCISE"); and (d) Such other form or method of payment as determined by the Administrator and to the extent permitted by Applicable Law. 6.1.7 TERMINATION OF EMPLOYMENT. (a) If, for any reason other than death, disability or termination for "cause" (as defined below), an Optionee ceases to be employed by the Company or any of its Affiliates (such event being called a "TERMINATION"), Options held at the date of Termination (to the extent then exercisable) may be exercised in whole or in part at any time within 60 days of the date of such Termination, or such other period of 7 not less than 30 days after the date of such Termination as is specified in the Option Agreement (but in no event after the Expiration Date). (b) If an Optionee dies while employed by the Company or an Affiliate or within the period that the Option remains exercisable after Termination, Options then held (to the extent then exercisable) may be exercised, in whole or in part, by the Optionee, by the Optionee's personal representative, or by the person to whom the Option is transferred by devise or the laws of descent and distribution, at any time within twelve months after the death of the Optionee, or such other period of not less than six months from the date of Termination as is specified in the Option Agreement (but in no event after the Expiration Date). (c) If an Optionee ceases to be employed by the Company or an Affiliate as a result of his or her disability, the Optionee may, but only within six months after the date of Termination (and in no event after the Expiration Date), exercise the Option to the extent otherwise entitled to exercise it at the date of Termination; provided, however, that if such disability is not a "disability" as such term is defined in Section 22(e)(3) of the Code, in the case of an ISO such ISO shall automatically convert to an NQO on the day three months and one day following such Termination. (d) If an Optionee is terminated for "CAUSE" all Options then held by such Optionee shall terminate and no longer be exercisable as of the date of Termination. For purposes of this Section 6.1.7, "CAUSE" shall mean Termination (i) by reason of Optionee's commission of a felony, misdemeanor or other illegal conduct involving dishonesty, fraud or other matters of moral turpitude, (ii) by reason of Optionee's dishonesty towards, fraud upon, or deliberate injury or attempted injury to the Company or any of its Affiliates, or (iii) by reason of Optionee's willfully engaging in misconduct which is materially and demonstrably injurious to the Company or any of its Affiliates. (e) To the extent that the Optionee was not entitled to exercise the Option at the date of Termination or if the Optionee does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate, and the shares covered by such Option shall revert to the Plan. (f) For purposes of this Section 6.1.7, "EMPLOYMENT" includes service as an employee, a director or a consultant. For purposes of this Section 6.1.7, an Optionee's employment shall not be deemed to terminate by reason of sick leave, military leave or other leave of absence approved by the Administrator, if the period of any such leave does not exceed three months or, if longer, if the Optionee's right to reemployment by the Company or any Affiliate is guaranteed either contractually or by statute. The Administrator shall have the discretion to determine whether and to what extent the vesting of Options shall be tolled during any unpaid leave of absence; 8 provided, however, that in the absence of such determination, vesting of Options shall be tolled during any leave that is not a leave required to be provided to the Optionee under Applicable Law. In the event of military leave, vesting shall toll during any unpaid portion of such leave, provided that, upon an Optionee's returning from military leave (under conditions that would entitle him or her to protection upon such return under the Uniform Services Employment and Reemployment Rights Act), Optionee shall be given vesting credit with respect to Options to the same extent as would have applied had the Optionee continued to provide services to the Company or Affiliate throughout the leave on the same terms as he or she was providing services immediately prior to such leave. 6.1.8 REPURCHASE OF STOCK. (a) At the option of the Administrator, the stock to be delivered pursuant to the exercise of any Option granted to an employee, director or consultant under this Plan may be subject to a right of repurchase in favor of the Company with respect to any employee, or director or consultant whose employment, or director or consulting relationship with the Company is terminated. With respect to shares issued to employees who are not officers or directors, such right of repurchase shall be exercisable on the following terms, as the Administrator may determine in the grant of the Option: (i) at the Option exercise price and (i) shall lapse at the rate of at least 20% per year over five years from the date the Option is granted (without regard to the date it was exercised or becomes exercisable), and must be exercised for cash or cancellation of purchase money indebtedness within three months of such termination and (ii) if the right is assignable by the Company, the assignee must pay the Company upon assignment of the right (unless the assignee is a 100% owned subsidiary of the Company or is an Affiliate) cash equal to the difference between the Option exercise price and the value (determined as set forth in Section 6.1.11) of the stock to be purchased if the Option exercise price is less than such value; and/or (ii) at the higher of the Option exercise price or the value (determined as set forth in Section 6.1.11) of the stock being purchased on the date of termination, and must be exercised for cash or cancellation of purchase money indebtedness within three months of termination of employment (or in the case of securities issued upon exercise of options after the date of termination, within three months after the date of exercise), and such right shall terminate when the Company's securities become publicly traded. (b) Any shares which are issued to an officer, director or consultant of the Company or an affiliate of the Company may be subject to a right of repurchase on the terms set forth above, or on any other terms determined by the 9 Administrator, including terms containing additional or greater restrictions, in the absolute discretion of the Administrator. (c) Determination of the number of shares subject to any such right of repurchase shall be made as of the date the employee's employment by, director's director relationship with, or consultant's consulting relationship with, the Company terminates, not as of the date that any Option granted to such employee, director or consultant is thereafter exercised. 6.1.9 WITHHOLDING AND EMPLOYMENT TAXES. At the time of exercise of an Option or at such other time or times as the amount of such obligations becomes determinable (the "TAX DATE"), the Optionee shall remit to the Company in cash all applicable federal and state withholding and employment taxes due by reason of the exercise of an Option, the disposition of Common Stock acquired through exercise of an Option, or the lapse of rights to repurchase Common Stock. The Administrator may, in its absolute discretion after considering any tax or accounting consequences, permit an Optionee to (i) deliver a full recourse promissory note on such terms as the Administrator deems appropriate, (ii) tender to the Company previously owned shares of Stock or other securities of the Company, or (iii) have shares of Common Stock which are acquired upon exercise of the Option withheld by the Company to pay some or all of the amount of tax that is required by law to be withheld by the Company as a result of the exercise of such Option, the disposition of Common Stock acquired through exercise of an Option, or the lapse of rights to repurchase Common Stock, subject to the following limitations. Any securities tendered or withheld in accordance with this Section 6.1.9 shall be valued by the Company as of the Tax Date. 6.1.10 OTHER PROVISIONS. Each Option granted under this Plan may contain such other terms, provisions, and conditions not inconsistent with this Plan as may be determined by the Administrator, and each ISO granted under this Plan shall include such provisions and conditions as are necessary to qualify the Option as an "incentive stock option" within the meaning of Section 422 of the Code. 6.1.11 DETERMINATION OF VALUE. For purposes of the Plan, the value of Common Stock or other securities of Xtrana shall be determined as follows: (a) If the stock of Xtranais listed on any established stock exchange or a national market system, including without limitation the Nasdaq Stock Market, its fair market value shall be the closing sales price for such stock or the closing bid if no sales were reported, as quoted on such system or exchange for the date the value is to be determined (or if there are no sales for such date, then for the last preceding business day on which there were sales), as reported in the WALL STREET JOURNAL or similar publication. 10 (b) If the stock of Xtrana is regularly quoted by a recognized securities dealer but selling prices are not reported, its fair market value shall be the mean between the high bid and low asked prices for the stock on the date the value is to be determined (or if there are no quoted prices for the date of grant, then for the last preceding business day on which there were quoted prices). (c) In the absence of an established market for the stock of Xtrana, the fair market value thereof shall be determined in good faith by the Administrator, by consideration of such factors as the Administrator in its discretion deems appropriate among the recent issue price of other securities of Xtrana, Xtrana's net worth, prospective earning power, dividend-paying capacity, and other relevant factors, including the goodwill of Xtrana, the economic outlook in Xtrana's industry, Xtrana's position in the industry and its management, and the values of stock of other corporations in the same or a similar line of business. 6.1.12 OPTION TERM. Subject to Section 6.3.5, no Option shall be exercisable more than ten years after the date of grant, or such lesser period of time as is set forth in the Option Agreement (the end of the maximum exercise period stated in the stock option agreement is referred to in this Plan as the "EXPIRATION DATE"). 6.1.13 EXERCISE PRICE. The exercise price of any Option granted to any person who owns, directly or by attribution under Section 424(d) of the Code, stock possessing more than ten percent of the total combined voting power of all classes of stock of the Company or of any Affiliate (a "TEN PERCENT STOCKHOLDER") shall in no event be less than 110% of the fair market value (determined in accordance with Section 6.1.11) of the stock covered by the Option at the time the Option is granted. 6.2 EXERCISE PRICE OF NQOS. Except as set forth in Section 6.1.13, the exercise price of any NQO granted under this Plan shall be not less than 85% of the fair market value (determined in accordance with Section 6.1.11) of the stock subject to the Option on the date of grant. 6.3 TERMS AND CONDITIONS TO WHICH ONLY ISOS ARE SUBJECT. Options granted under this Plan which are designated as ISOs shall be subject to the following terms and conditions: 6.3.1 EXERCISE PRICE. Except as set forth in Section 6.1.13, the exercise price of an ISO shall be determined in accordance with the applicable provisions of the Code and shall in no event be less than the fair market value (determined in accordance with Section 6.1.11) of the stock covered by the Option at the time the Option is granted or deemed granted under Section 6.3.3. 11 6.3.2 DISQUALIFYING DISPOSITIONS. If stock acquired by exercise of an ISO granted pursuant to this Plan is disposed of in a "disqualifying disposition" within the meaning of Section 422 of the Code, the holder of the stock immediately before the disposition shall promptly notify the Company in writing of the date and terms of the disposition and shall provide such other information regarding the Option as the Company may reasonably require. 6.3.3 GRANT DATE. If an ISO is granted in anticipation of employment as provided in Section 5.4, the Option shall be deemed granted, without further approval, on the date the grantee assumes the employment relationship forming the basis for such grant, and, in addition, satisfies all requirements of this Plan for Options granted on that date. 6.3.4 VESTING. Notwithstanding any other provision of this Plan, ISOs granted under all incentive stock option plans of the Company and its subsidiaries may not "vest" for more than $100,000 in fair market value of stock (measured on the grant dates(s)) in any calendar year. For purposes of the preceding sentence, an option "vests" when it first becomes exercisable. If, by their terms, such ISOs taken together would vest to a greater extent in a calendar year, and unless otherwise provided by the Administrator, the vesting limitation described above shall be applied by deferring the exercisability of those ISOs or portions of ISOs which have the highest per share exercise prices; but in no event shall more than $100,000 in fair market value of stock (measured on the grant date(s)) vest in any calendar year. The ISOs or portions of ISOs whose exercisability is so deferred shall become exercisable on the first day of the first subsequent calendar year during which they may be exercised, as determined by applying these same principles and all other provisions of this Plan including those relating to the expiration and termination of ISOs. In no event, however, will the operation of this Section 6.3.4 cause an ISO to vest before its terms or, having vested, cease to be vested. 6.3.5 TERM. Notwithstanding Section 6.1.12, no ISO granted to any Ten Percent Stockholder shall be exercisable more than five years after the date of grant. 7. MANNER OF EXERCISE 7.1 WRITTEN NOTICE; PAYMENT. An Optionee wishing to exercise an Option shall give written notice to the Company at its principal executive office, to the attention of the officer of the Company designated by the Administrator, accompanied by payment of the exercise price as provided in Section 6.1.6. The date the Company receives written notice of an exercise hereunder accompanied by payment of the exercise price will be considered as the date such Option was exercised. 7.2 DELIVERY OF STOCK. Promptly after receipt of written notice of exercise of an Option, the Company shall, without stock issue or stock transfer taxes to 12 the Optionee or other person entitled to exercise the Option, deliver to the Optionee or such other person a certificate or certificates for the requisite number of shares of stock or register such Optionee as a stockholder by book entry. An Optionee or permitted transferee of an Optionee shall not have any privileges as a stockholder with respect to any shares of stock covered by the Option until the date of issuance (as evidenced by the appropriate entry on the books of the Company or a duly authorized transfer agent) of such shares. 8. EMPLOYMENT OR CONSULTING RELATIONSHIP Nothing in this Plan or any Option granted thereunder shall interfere with or limit in any way the right of the Company or of any of its Affiliates to terminate any Optionee's employment or consulting relationship at any time, nor confer upon any Optionee any right to continue in the employ of, or consult with, the Company or any of its Affiliates, nor interfere in any way with provisions in the Company's charter documents or applicable law relating to the election, appointment, terms of office, and removal of members of the Board. 9. FINANCIAL INFORMATION The Company shall provide to each Optionee during the period such Optionee holds an outstanding Option, and to each holder of Common Stock acquired upon exercise of Options granted under the Plan for so long as such person is a holder of such Common Stock, annual financial statements of the Company as prepared either by the Company or independent certified public accountants of the Company. Such financial statements shall include, at a minimum, a balance sheet and an income statement, and shall be delivered as soon as practicable following the end of the Company's fiscal year. The provisions of this Section 9 shall not apply with respect to Optionees who are key employees of the Company whose duties in connection with the Company assures them access to information equivalent to the information provided in the financial statements. 10. CONDITIONS UPON ISSUANCE OF SHARES Shares of Common Stock shall not be issued pursuant to the exercise of an Option unless the exercise of such Option and the issuance and delivery of such shares pursuant thereto shall comply with all relevant provisions of Applicable Law, including, without limitation, the Securities Act of 1933, as amended (the "SECURITIES ACT"). The inability of Xtrana or the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by Xtrana's or the Company's counsel to be necessary to the lawful grant of Options and issuance and sale of any Common Stock hereunder, shall relieve Xtrana and the Company of any liability in respect of the failure to grant such Options or issue or sell such Common Stock as to which such requisite authority shall not have been obtained. 13 11. NONEXCLUSIVITY OF THE PLAN The adoption of the Plan shall not be construed as creating any limitations on the power of the Company to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of stock options other than under the Plan. 12. AMENDMENTS TO PLAN The Board may at any time amend, alter, suspend or discontinue this Plan. Without the consent of an Optionee, no amendment, alteration, suspension or discontinuance may adversely affect outstanding Options except to conform this Plan and ISOs granted under this Plan to the requirements of federal or other tax laws relating to incentive stock options. No amendment, alteration, suspension or discontinuance shall require stockholder approval unless (a) stockholder approval is required to preserve incentive stock option treatment for federal income tax purposes, or (b) shareholder approval is required to preserve option grants as "qualified performance-based compensation" under Section 162(m) of the Code. 13. EFFECTIVE DATE OF PLAN This Plan shall become effective upon adoption by the Board provided, however, that no Option shall be exercisable unless and until written consent of the stockholders of the Company, or approval of stockholders of the Company voting at a validly called stockholders' meeting, is obtained within 12 months after adoption by the Board. If such stockholder approval is not obtained within such time, Options granted hereunder shall terminate and be of no force and effect from and after expiration of such 12-month period. Options may be granted and exercised under this Plan only after there has been compliance with all applicable federal and state securities laws. Plan adopted by the Board of Directors on: December 21, 1999. Plan approved by Stockholders on: December 21, 1999. Plan amended to increase the number of shares available for issuance under the Plan to 3,800,000 shares approved by the Board of Directors and by the Shareholders on April 24, 2001. Plan amended by the Board of Directors on October 3, 2005 in connection with acquisition of the Company by Xtrana. 14 EX-10 5 ex10-2.txt EX-10.2 EXHIBIT 10.2 2001 MILESTONE STOCK OPTION PLAN OF ALPHA INNOTECH, CORPORATION. 1. PURPOSES OF THE PLAN The purposes of the 2001 Milestone Stock Option Plan (the "PLAN") of Alpha Innotech Corporation, a California corporation (the "COMPANY"), are to: (a) Encourage selected employees, directors and consultants to improve operations and increase profits of the Company; (b) Encourage selected employees, directors and consultants to accept or continue employment or association with the Company or its "Affiliates" (as defined below); and (c) Increase the interest of selected employees, directors and consultants in the Company's welfare through participation in the growth in value of the common stock of the Company (the "COMMON STOCK"). Options granted under this Plan ("OPTIONS") may be "incentive stock options" ("ISOS") intended to satisfy the requirements of Section 422 of the Internal Revenue Code of 1986, as amended (the "CODE"), or "nonqualified options" ("NQOS"). 2. ELIGIBLE PERSONS Every person who at the date of grant of an Option is an employee of the Company or of any Affiliate of the Company is eligible to receive NQOs or ISOs under this Plan. Every person who at the date of grant is a consultant to, or nonemployee director of, the Company or any Affiliate of the Company is eligible to receive NQOs under this Plan. The term "AFFILIATE" as used in the Plan means a parent or subsidiary corporation as defined in the applicable provisions (currently Sections 424(e) and (f), respectively) of the Code. The term "EMPLOYEE" includes an officer or director who is an employee of the Company. The term "CONSULTANT" includes persons employed by, or otherwise affiliated with, a consultant to the Company. 3. STOCK SUBJECT TO THIS PLAN Subject to the provisions of Section 6.1.1 of the Plan, the total number of shares of stock which may be issued under options granted pursuant to this Plan and the total number of shares provided for issuance under this Plan shall be 5,000,000 shares of Common Stock and shall at no time exceed the applicable percentage as calculated in accordance with Section 260.140.45 of Chapter 3 of Title 10 of the California Code of Regulations. The shares covered by the portion of any grant under the Plan which expires unexercised shall become available again for grants under the Plan. 4. ADMINISTRATION 4.1 GENERAL. This Plan shall be administered by the Board of Directors of the Company (the "BOARD") or, either in its entirety or only insofar as required pursuant to Section 4.2 hereof, by a committee (the "Committee") of at least two Board members to which administration of the Plan, or of part of the Plan, is delegated (in either case, the "ADMINISTRATOR"). 4.2 PUBLIC COMPANY. From and after such time as the Company registers a class of equity securities under Section 12 of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), it is intended that this Plan shall be administered in accordance with the disinterested administration requirements of Rule 16b-3 promulgated by the Securities and Exchange Commission ("RULE 16B-3"), or any successor rule thereto. 4.3 AUTHORITY OF ADMINISTRATOR. Subject to the other provisions of this Plan, the Administrator shall have the authority, in its discretion: (i) to grant Options; (ii) to determine the fair market value of the Common Stock subject to Options; (iii) to determine the exercise price of Options granted; (iv) to determine the persons (each an "OPTIONEE") to whom, and the time or times at which, Options shall be granted, and the number of shares subject to each Option; (v) to interpret this Plan; (vi) to prescribe, amend, and rescind rules and regulations relating to this Plan; (vii) to determine the terms and provisions of each Option granted (which need not be identical), including but not limited to, the time or times at which Options shall be exercisable; (viii) with the consent of the Optionee, to modify or amend any Option; (ix) to defer (with the consent of the Optionee) the exercise date of any Option; (x) to authorize any person to execute on behalf of the Company any instrument evidencing the grant of an Option; and (xi) to make all other determinations deemed necessary or advisable for the administration of this Plan. The Administrator may delegate nondiscretionary administrative duties to such employees of the Company as it deems proper. 4.4 INTERPRETATION BY ADMINISTRATOR. All questions of interpretation, implementation, and application of this Plan shall be determined in its absolute discretion by the Administrator. Such determinations shall be final and binding on all persons. 4.5 RULE 16b-3. With respect to persons subject to Section 16 of the Exchange Act, if any, transactions under this Plan are intended to comply with the applicable conditions of Rule 16b-3, or any successor rule thereto. To the extent any provision of this Plan or action by the Administrator fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Administrator. Notwithstanding the above, it shall be the responsibility of such persons, not of the Company or the Administrator, to comply with the requirements of Section 16 of the Exchange Act; and neither the Company nor the Administrator shall be liable if this Plan or any transaction under this Plan fails to comply with the applicable conditions of Rule 16b-3 or any successor rule thereto, or if any such person incurs any liability under Section 16 of the Exchange Act. 2 5. GRANTING OF OPTIONS; OPTION AGREEMENT 5.1 TERMINATION OF PLAN. No Options shall be granted under this Plan after 10 years from the date of adoption of this Plan by the Board. 5.2 STOCK OPTION AGREEMENT. Each Option shall be evidenced by a written stock option agreement (the "OPTION AGREEMENT"), in form satisfactory to the Company, executed by the Company and the person to whom such Option is granted; provided, however, that the failure by the Company, the Optionee, or both, to execute an Option Agreement shall not invalidate the granting of an Option, although the exercise of each Option shall be subject to Section 6.1.3. 5.3 TYPE OF OPTION. The Option Agreement shall specify whether each Option it evidences is an NQO or an ISO. 5.4 EARLY APPROVAL OF GRANTS. Subject to Section 6.3.3 with respect to ISOs, the Administrator may approve the grant of Options under this Plan to persons who are expected to become employees, directors or consultants of the Company, but are not employees, directors or consultants at the date of approval, with such grant to specify whether it is effective immediately or effective only on such person becoming an employee, director or consultant. 6. TERMS AND CONDITIONS OF OPTIONS Each Option granted under this Plan shall be subject to the terms and conditions set forth in Section 6.1. NQOs shall be also subject to the terms and conditions set forth in Section 6.2, but not those set forth in Section 6.3. ISOs shall also be subject to the terms and conditions set forth in Section 6.3, but not those set forth in Section 6.2. 6.1 TERMS AND CONDITIONS TO WHICH ALL OPTIONS ARE SUBJECT. All Options granted under this Plan shall be subject to the following terms and conditions: 6.1.1 CHANGES IN CAPITAL STRUCTURE. Subject to Section 6.1.2, if the stock of the Company is changed by reason of a stock split, reverse stock split, stock dividend, or recapitalization, combination or reclassification, appropriate adjustments shall be made by the Board in (a) the number and class of shares of stock subject to this Plan and each Option outstanding under this Plan, and (b) the exercise price of each outstanding Option; provided, however, that the Company shall not be required to issue fractional shares as a result of any such adjustments. Each such adjustment shall be subject to approval by the Board in its absolute discretion. 6.1.2 CORPORATE TRANSACTIONS. (a) DISSOLUTION OR LIQUIDATION. In the event of the proposed dissolution or liquidation of the Company, the Administrator shall notify each Optionee at least 30 days prior to such proposed action. To the extent not previously exercised, all Options will terminate immediately prior to the consummation of such proposed action. 3 (b) MERGER OR ASSET SALE. In the event of a merger of the Company with or into another corporation, or the sale of substantially all of the assets of the Company, in addition to any rights provided in the Option Agreement: (i) OPTIONS. Each Option shall be assumed or an equivalent option substituted by the successor corporation (including as a "successor" any purchaser of substantially all of the assets of the Company) or a parent or subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for the Option, the Optionee shall have the right to exercise the Option as to all of the shares of Common Stock covered by the Option, including shares as to which it would not otherwise be exercisable. If an Option is exercisable in lieu of assumption or substitution in the event of a merger or sale of assets, the Administrator shall notify the Optionee that the Option shall be fully exercisable for a period of 15 days from the date of such notice, and the Option shall terminate upon the expiration of such period. For the purposes of this paragraph, the Option shall be considered assumed if, following the merger or sale of assets, the Option confers the right to purchase or receive, for each share of Common Stock subject to the Option immediately prior to the merger or sale of assets, the consideration (whether stock, cash, or other securities or property) received in the merger or sale of assets by holders of Common Stock for each share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares); provided, however, that if such consideration received in the merger or sale of assets was not solely common stock of the successor corporation or its parent entity, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Option, for each share of Common Stock subject to the Option, to be solely common stock of the successor corporation or its parent entity equal in fair market value to the per share consideration received by holders of Common Stock in the merger or sale of assets. (ii) SHARES SUBJECT TO RIGHT OF REPURCHASE. Any Options or shares subject to a right of repurchase of the Company shall be exchanged for the consideration (whether stock, cash, or other securities or property) received in the merger or asset sale by the holders of Common Stock for each share held on the effective date of the transaction, as described in the preceding paragraph; provided, however, that if the consideration received is not solely common stock, and the Administrator provides, pursuant to the foregoing paragraph, that holders of Options shall receive common stock of the successor entity or its parent entity upon exercise of the Options, then any shares subject to a right of repurchase shall also be exchanged for common stock of the successor or its parent. If in such exchange the Optionee receives shares of stock of the successor corporation or a parent or subsidiary of such successor corporation, and if the successor corporation has agreed to assume or substitute for Options as provided in the preceding paragraph, such exchanged shares shall continue to be subject to a right of repurchase as provided in the Optionee's Stock Option Plan stock purchase agreement. If, as provided in the preceding paragraph, the Optionee shall have the right to exercise an Option as to all of the shares of Common Stock covered thereby, all shares that are subject to a right of repurchase of the Company shall be released from such right of repurchase and shall be fully vested. 4 6.1.3 TIME OF OPTION EXERCISE. Subject to Section 5 and Section 6.3.4, Options granted under this Plan shall be exercisable (a) immediately as of the effective date of the Option Agreement granting the Option, or (b) in accordance with a schedule related to the date of the grant of the Option, the date of first employment or service, or such other date as may be set by the Administrator (in any case, the "VESTING BASE DATE") and specified in the Option Agreement relating to such Option; provided, however, that with respect to Options granted to employees who are not officers or directors, the right to exercise an Option must vest at the rate of at least 20% per year over five years from the date the Option was granted. Options granted to officers, directors or consultants may become fully exercisable, subject to reasonable conditions such as continued employment or service, at any time or during any period established by the Board of the Administrator in accordance with this Plan. In any case, no Option shall be exercisable until a written Option Agreement in form satisfactory to the Company is executed by the Company and the Optionee, and the person exercising the Option executes an appropriate stock purchase agreement with the Company and, if the stock to be delivered pursuant to exercise of such Option is subject to a right of repurchase as set forth in Section 6.1.8, such person delivers to the Company an Acknowledgment and Statement of Decision Regarding Election Pursuant to Section 83(b) of the Internal Revenue Code. 6.1.4 OPTION GRANT DATE. Except in the case of grants contingent on the beginning of employment or other service, as described in Section 5.4, the date of grant of an Option under this Plan shall be the date as of which the Administrator approves the grant. 6.1.5 NONASSIGNABILITY OF OPTION RIGHTS. Except as otherwise determined by the Administrator and expressly set forth in the Option Agreement, no Option granted under this Plan shall be assignable or otherwise transferable by the Optionee except by will or by the laws of descent and distribution. During the life of the Optionee, except as otherwise determined by the Administrator and expressly set forth in the Option Agreement, an Option shall be exercisable only by the Optionee. 6.1.6 PAYMENT. Except as provided below, payment in full, in cash, shall be made for all stock purchased at the time written notice of exercise of an Option is given to the Company, and proceeds of any payment shall constitute general funds of the Company. At the time an Option is granted or exercised, the Administrator, in the exercise of its absolute discretion after considering any tax or accounting consequences, may authorize any one or more of the following additional methods of payment: (a) Acceptance of the Optionee's full recourse promissory note for all or part of the Option price, payable on such terms and bearing such interest rate as determined by the Administrator (but in no event less than the minimum interest rate specified under the Code at which no additional interest would be imputed and in no event more than the maximum interest rate allowed under applicable usury laws), which promissory note may be either secured or unsecured in such manner as the Administrator shall approve (including, without limitation, by a security interest in the shares of the Company); and (b) Other shares of Common Stock, or the designation of other shares of Common Stock, which (A) if required to avoid the Xtrana's incurring adverse 5 accounting charges, in the case of Common Stock acquired upon exercise of an option (whether or not under this Plan) are "mature" shares for purposes of avoiding variable accounting treatment under generally accepted accounting principals (generally, mature shares are those that have been owned by the Optionee for more than six months on the date of surrender), and (B) have a fair market value (determined as set forth in Section 6.1.11) on the date of surrender equal to the exercise price of the Common Stock as to which the Option is being exercised; (c) Provided that a public market exists for the Common Stock, through a "same day sale" commitment from the Optionee and a broker-dealer that is a member of the National Association of Securities Dealers (an "NASD Dealer") under which the Optionee irrevocably elects to exercise the Option and the NASD Dealer irrevocably commits to forward an amount equal to the Option Price plus any applicable withholding taxes, directly to the Company (a "CASHLESS EXERCISE"); and (d) Such other form or method of payment as determined by the Administrator and to the extent permitted by Applicable Law. 6.1.7 TERMINATION OF EMPLOYMENT. (a) If for any reason other than death, disability or termination for "cause" (as defined below), an Optionee ceases to be employed by the Company or any of its Affiliates (such event being called a "TERMINATION"), Options held at the date of Termination (to the extent then exercisable) may be exercised in whole or in part at any time within three months of the date of such Termination, or such other period of not less than 30 days after the date of such Termination as is specified in the Option Agreement (but in no event after the Expiration Date); provided, however, that if such exercise of the Option would result in liability for the Optionee under Section 16(b) of the Exchange Act, then such three-month period automatically shall be extended until the tenth day following the last date upon which Optionee has any liability under Section 16(b) (but in no event after the Expiration Date, as defined below). (b) If an Optionee dies while employed by the Company or an Affiliate or within the period that the Option remains exercisable after Termination, Options then held (to the extent then exercisable) may be exercised, in whole or in part, by the Optionee, by the Optionee's personal representative, or by the person to whom the Option is transferred by devise or the laws of descent and distribution, at any time within 12 months after the death of the Optionee, or such other period of not less than six months from the date of Termination as is specified in the Option Agreement (but in no event after the Expiration Date). (c) If an Optionee ceases to be employed by the Company as a result of his or her disability, the Optionee may, but only within six months after the date of Termination, or such longer period as is specified in the Option Agreement (but in no event after the Expiration Date), exercise the Option to the extent otherwise entitled to exercise it at the date of Termination; provided, however, that if such disability is not a "disability" as such term is 6 defined in Section 22(e)(3) of the Code, in the case of an ISO such ISO shall automatically convert to an NQO on the day three months and one day following such Termination. (d) If an Optionee is terminated for "cause," all Options then held by such Optionee shall terminate and no longer be exercisable as of the date of Termination. For purposes of this Section 6.1.7, "CAUSE" shall mean Termination (i) by reason of Optionee's commission of a felony, misdemeanor or other illegal conduct involving dishonesty, fraud or other matters of moral turpitude, (ii) by reason of Optionee's dishonesty towards, fraud upon, or deliberate injury or attempted injury to the Company or any of its Affiliates, or (iii) by reason of Optionee's willfully engaging in misconduct which is materially and demonstrably injurious to the Company or any of its Affiliates. (e) To the extent that the Optionee was not entitled to exercise the Option at the date of Termination or if the Optionee does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate, and the shares covered by such Option shall revert to the Plan. (f) For purposes of this Section 6.1.7, "EMPLOYMENT" includes service as an employee, a director or a consultant. For purposes of this Section 6.1.7, an Optionee's employment shall not be deemed to terminate by reason of sick leave, military leave or other leave of absence approved by the Administrator, if the period of any such leave does not exceed three months or, if longer, if the Optionee's right to reemployment by the Company or any Affiliate is guaranteed either contractually or by statute. 6.1.8 REPURCHASE OF STOCK. At the option of the Administrator, the stock to be delivered pursuant to the exercise of any Option granted to an employee, director or consultant under this Plan may be subject to a right of repurchase in favor of the Company with respect to any employee, or director or consultant whose employment, or director or consulting relationship with the Company is terminated. Such right of repurchase shall be exercisable as the Administrator may determine in the grant of option: (a) at the Option exercise price and (i) shall lapse at the rate of at least 20% per year over five years from the date the Option is granted (without regard to the date it was exercised or becomes exercisable), (ii) must be exercised for cash or cancellation of purchase money indebtedness within 90 days after such Termination (or in the case of securities issued upon exercise of options after the date of Termination, within 90 days after the date of exercise), and (iii) if the right is assignable by the Company, the assignee must pay the Company upon assignment of the right (unless the assignee is a 100% owned subsidiary of the Company or is an Affiliate) cash equal to the difference between the Option exercise price and the value (determined as set forth in Section 6.1.11) of the stock to be purchased if the Option exercise price is less than such value; or (b) at the higher of the Option exercise price or the value (determined as set forth in Section 6.1.11) of the stock being repurchased on the date of Termination, and must be exercised for cash or cancellation of purchase money indebtedness within 90 days of Termination (or in the case of securities issued upon exercise of options after 7 the date of Termination, within 90 days after the date of exercise), and such right shall terminate when the Company's securities become publicly traded. In addition to the restrictions set forth in subparagraphs (a) and (b) above, the shares held by an officer, director or consultant of the issuer or by an Affiliate of the issuer may be subject to additional or greater restrictions, in the absolute discretion of the Administrator. Determination of the number of shares subject to any such right of repurchase shall be made as of the date the employee's employment by, director's director relationship with, or consultant's consulting relationship with, the Company terminates, not as of the date that any Option granted to such employee, director or consultant is thereafter exercised. 6.1.9 WITHHOLDING AND EMPLOYMENT TAXES. At the time of exercise of an Option or at such other time or times as the amount of such obligations become determinable (the "TAX DATE"), the Optionee shall remit to the Company in cash all applicable federal and state withholding and employment taxes due by reason of the exercise of an Option, the disposition of Common Stock acquired through exercise of an Option, or the lapse of rights to repurchase Common Stock. The Administrator may, in its absolute discretion after considering any tax or accounting consequences, permit an Optionee to (i) deliver a full recourse promissory note on such terms as the Administrator deems appropriate, (ii) tender to the Company previously owned shares of Stock or other securities of the Company, or (iii) have shares of Common Stock which are acquired upon exercise of the Option withheld by the Company to pay some or all of the amount of tax that is required by law to be withheld by the Company as a result of the exercise of such Option, the disposition of Common Stock acquired through exercise of an Option, or the lapse of rights to repurchase Common Stock, subject to the following limitations: (a) Any election pursuant to clause (ii) above, where the Optionee is tendering Common Stock issued pursuant to the exercise of an Option, shall require that such shares be held at least six months prior to the Tax Date. (b) Any of the foregoing limitations may be waived (or additional limitations may be imposed) by the Administrator, in its absolute discretion, if the Administrator determines that such foregoing limitations are not required (or that such additional limitations are required) in order that the transaction shall be exempt from Section 16(b) of the Exchange Act pursuant to Rule 16b-3, or any successor rule thereto. In addition, any of the foregoing limitations may be waived by the Administrator, in its sole discretion, if the Administrator determines that Rule 16b-3, or any successor rule thereto, is not applicable to the exercise of the Option by the Optionee or for any other reason. (c) Any securities tendered or withheld in accordance with this Section 6.1.9 shall be valued by the Company as of the Tax Date. 6.1.10 OTHER PROVISIONS. Each Option granted under this Plan may contain such other terms, provisions, and conditions not inconsistent with this Plan as may be determined by the Administrator, and each ISO granted under this Plan shall include such provisions and conditions as are necessary to qualify the Option as an "incentive stock option" 8 within the meaning of Section 422 of the Code. If Options provide for a right of first refusal in favor of the Company with respect to stock acquired by employees, directors or consultants, such Options shall provide that the right of first refusal shall terminate upon the closing of the Company's initial registered public offering to the public generally. 6.1.11 DETERMINATION OF VALUE. For purposes of the Plan, the value of Common Stock or other securities of the Company shall be determined as follows: (a) If the stock of the Company is listed on any established stock exchange or a national market system, including without limitation the National Market System of the National Association of Securities Dealers, Inc. Automated Quotation System, its fair market value shall be the closing sales price for such stock or the closing bid if no sales were reported, as quoted on such system or exchange (or the largest such exchange) for the date the value is to be determined (or if there are no sales for such date, then for the last preceding business day on which there were sales), as reported in the Wall Street Journal or similar publication. (b) If the stock of the Company is regularly quoted by a recognized securities dealer but selling prices are not reported, its fair market value shall be the mean between the high bid and low asked prices for the stock on the date the value is to be determined (or if there are no quoted prices for the date value is to be determined, then for the last preceding business day on which there were quoted prices). (c) In the absence of an established market for the stock, the fair market value thereof shall be determined in good faith by the Administrator by consideration of such factors as the Administrator in its discretion deems appropriate, including but not limited to the recent issue price of other securities of the Company, the Company's net worth, prospective earning power, dividend-paying capacity, and other relevant factors, including the goodwill of the Company, the economic outlook in the Company's industry, the Company's position in the industry and its management, and the values of stock of other corporations in the same or a similar line of business. 6.1.12 OPTION TERM. Subject to Section 6.1.14, no Option shall be exercisable more than 10 years after the date of grant, or such lesser period of time as is set forth in the Option Agreement (the end of the maximum exercise period stated in the Option Agreement is referred to in this Plan as the "EXPIRATION DATE"). 6.1.13 LIMITS ON GRANTS FOR QUALIFIED PERFORMANCE-BASED COMPENSATION. The Company may not issue Options covering in the aggregate more than 600,00 shares of Common Stock to any one participant in any calendar year. 6.1.14 EXERCISE PRICE. The exercise price of any Option granted to any person who owns, directly or by attribution under Section 424(d) of the Code, stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or of any Affiliate (a "TEN PERCENT SHAREHOLDER") shall in no event be less than 110% of the fair 9 market value (determined in accordance with Section 6.1.11) of the stock covered by the Option at the time the Option is granted. 6.2 EXERCISE PRICE OF NQOS. Except as set forth in Section 6.1.13, the exercise price of any NQO granted under this Plan shall be not less than 85% of the fair market value (determined in accordance with Section 6.1.11) of the stock subject to the Option on the date of grant. 6.3 TERMS AND CONDITIONS TO WHICH ONLY ISOS ARE SUBJECT. Options granted under this Plan which are designated as ISOs shall be subject to the following terms and conditions: 6.3.1 EXERCISE PRICE. Except as set forth in Section 6.1.14, the exercise price of an ISO shall be determined in accordance with the applicable provisions of the Code and shall in no event be less than the fair market value (determined in accordance with Section 6.1.11) of the stock covered by the Option at the time the Option is granted or deemed granted under Section 6.3.3. 6.3.2 DISQUALIFYING DISPOSITIONS. If stock acquired by exercise of an ISO granted pursuant to this Plan is disposed of in a "disqualifying disposition" within the meaning of Section 422 of the Code, the holder of the stock immediately before the disposition shall promptly notify the Company in writing of the date and terms of the disposition and shall provide such other information regarding the Option as the Company may reasonably require. 6.3.3 GRANT DATE. If an ISO is granted in anticipation of employment as provided in Section 5.4, the Option shall be deemed granted, without further approval, on the date the grantee assumes the employment relationship forming the basis for such grant, and, in addition, satisfies all requirements of this Plan for Options granted on that date. 6.3.4 VESTING. Notwithstanding any other provision of this Plan, ISOs granted under all incentive stock option plans of the Company and its subsidiaries may not "vest" for more than $100,000 in fair market value of stock (measured on the grant dates(s)) in any calendar year. For purposes of the preceding sentence, an option "vests" when it first becomes exercisable. If, by their terms, such ISOs taken together would vest to a greater extent in a calendar year, including vesting resulting from a change in control of the Company, such ISOs shall be treated as NQOs to the extent such $100,000 limit is exceeded. In no event shall more than $100,000 in fair market value of stock (measured on the grant date(s)) vest in any calendar year with respect to the ISOs. Additionally, in no event, will the operation of this Section 6.3.4 cause an ISO to vest before its terms or, having vested, cease to be vested. 6.3.5 TERM. Notwithstanding Section 6.1.12, no ISO granted to any Ten Percent Shareholder shall be exercisable more than five years after the date of grant. 7. MANNER OF EXERCISE 7.1 WRITTEN NOTICE AND PAYMENT. An Optionee wishing to exercise an Option shall give written notice to the Company at its principal executive office, to the attention of the 10 officer of the Company designated by the Administrator, accompanied by payment of the exercise price as provided in Section 6.1.6. The date the Company receives written notice of an exercise hereunder accompanied by payment of the exercise price will be considered as the date such Option was exercised. 7.2 ISSUANCE OF STOCK. Promptly after receipt by the Company of written notice of exercise of an Option, the exercise price as provided in Section 6.1.6, a signed stock purchase agreement in the form attached to the Option Agreement and such other items as required under the Option Agreement, the Company shall, without stock issue or stock transfer taxes to the Optionee or other person entitled to exercise the Option, deliver to the Optionee or such other person a certificate or certificates for the requisite number of shares of stock or register such Optionee as a shareholder by book entry. An Optionee or permitted transferee of an Optionee shall not have any privileges as a shareholder with respect to any shares of stock covered by the Option until the date of issuance (as evidenced by the appropriate entry on the books of the Company or a duly authorized transfer agent) of such shares. 8. EMPLOYMENT OR CONSULTING RELATIONSHIP Nothing in this Plan or any Option granted thereunder shall interfere with or limit in any way the right of the Company or of any of its Affiliates to terminate any Optionee's employment or consulting relationship at any time, nor confer upon any Optionee any right to continue in the employ of, or consult with, the Company or any of its Affiliates, nor interfere in any way with provisions in the Company's charter documents or applicable law relating to the election, appointment, terms of office, and removal of members of the Board. 9. FINANCIAL INFORMATION The Company shall provide to each Optionee during the period such Optionee holds an outstanding Option, and to each holder of Common Stock acquired upon exercise of Options granted under the Plan for so long as such person is a holder of such Common Stock, annual financial statements of the Company as prepared either by the Company or independent certified public accountants of the Company. Such financial statements shall include, at a minimum, a balance sheet and an income statement, and shall be delivered as soon as practicable following the end of the Company's fiscal year. The provisions of this Section 9 shall not apply with respect to Optionees who are key employees of the Company whose duties in connection with the Company assures them access to information equivalent to the information provided in the financial statements. 10. CONDITIONS UPON ISSUANCE OF SHARES Shares of Common Stock shall not be issued pursuant to the exercise of an Option unless the exercise of such Option and the issuance and delivery of such shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended (the "SECURITIES ACT"). 11 11. NONEXCLUSIVITY OF THE PLAN The adoption of the Plan shall not be construed as creating any limitations on the power of the Company to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of stock options other than under the Plan. 12. AMENDMENTS TO PLAN The Board may at any time amend, alter, suspend or discontinue this Plan. Without the consent of an Optionee, no amendment, alteration, suspension or discontinuance may adversely affect outstanding Options except to conform this Plan and ISOs granted under this Plan to the requirements of federal or other tax laws relating to incentive stock options. No amendment, alteration, suspension or discontinuance shall require shareholder approval unless (a) shareholder approval is required to preserve incentive stock option treatment for federal income tax purposes, (b) shareholder approval is required to preserve option grants as "qualified performance-based compensation" under Section 162(m) of the Code, or (c) the Board otherwise concludes that shareholder approval is advisable. 13. EFFECTIVE DATE OF PLAN This Plan shall become effective upon adoption by the Board provided, however, that no Option shall be exercisable unless and until written consent of the shareholders of the Company, or approval of shareholders of the Company voting at a validly called shareholders' meeting, is obtained within 12 months after adoption by the Board. If such shareholder approval is not obtained within such time, Options granted hereunder shall terminate and be of no force and effect from and after expiration of such 12-month period. Options may be granted and exercised under this Plan only after there has been compliance with all applicable federal and state securities laws. Plan adopted by the Board of Directors on: April 24, 2001. Plan approved by Shareholders on: April 24, 2001. Plan amended by the Board of Directors on October 3, 2005 in connection with the acquisition of the Company by Xtrana. 12 EX-10 6 ex10-3.txt EX-10.3 EXHIBIT 10.3 ALPHA INNOTECH CORPORATION EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "AGREEMENT") is made and entered into as of May 11, 2001 by and between Alpha Innotech Corporation, a California corporation (the "COMPANY") and Haseeb Chaudhry (the "EMPLOYEE"). BACKGROUND A. The Company desires to retain the services of the Employee as the Chief Executive Officer of the Company from the date of this Agreement (the "EFFECTIVE DATE"). The Company also desires to provide employment security to the Employee, thereby inducing the Employee to continue employment with the Company and enhancing the Employee's ability to perform effectively. B. The Employee is willing to be employed by the Company on the terms and subject to the conditions set forth in this Agreement. THE PARTIES AGREE AS FOLLOWS: 1. POSITIONS AND DUTIES. 1.1 TITLE. The Employee shall be employed by the Company as its Chief Executive Officer, and the Company agrees to employ and retain the Employee in such capacity. 1.2 DUTIES. The Employee shall devote all of his business time, energy, and skill to the affairs of the Company; provided, however, that reasonable time for personal business, charitable or professional activities shall be permitted, so long as such activities do not materially interfere with the Employee's performance of services under this Agreement. 2. TERMS OF EMPLOYMENT. 2.1 DEFINITIONS. For purposes of this Agreement, the following terms shall have the following meanings: (a) "ACCRUED COMPENSATION" shall mean any accrued Total Cash Compensation, any accrued benefits under any plan of the Company in which the Employee is a participant to the full extent of Employee's rights under such plans, any accrued vacation pay, and any reasonable business expenses incurred by the Employee in connection with the performance of Employee's duties hereunder, all to the extent unpaid on the date of termination of Employee's employment. (b) "BASE SALARY" shall have the meaning set forth in Section 3.1 hereof. (c) "DEATH TERMINATION" shall mean termination of the Employee's employment because of the death of the Employee. (d) "DISABILITY TERMINATION" means termination by the Company of the Employee's employment by reason of the Employee's incapacitation due to disability. The Employee shall be deemed to be incapacitated due to disability if at the end of any month the Employee is unable to perform substantially all of his or her duties under this Agreement in the normal and regular manner due to illness, injury or mental or physical incapacity, and has been unable so to perform for either (i) three consecutive full calendar months then ending, or (ii) 90 or more of the normal working days during the 12 consecutive full calendar months then ending. Nothing in this paragraph shall alter the Company's obligations under applicable law, which may, in certain circumstances, result in the suspension or alteration of the foregoing time periods. (e) "TERMINATION FOR CAUSE" means termination by the Board of Directors of the Company of the Employee's employment (i) by reason of the Employee's commission of a felony or other illegal conduct involving dishonesty, fraud or other matters of moral turpitude, (ii) by reason of the Employee's dishonesty towards, fraud upon, or deliberate injury or attempted injury to the Company or any of its affiliates, or (iii) by reason of the Employee's willfully engaging in misconduct which is materially and demonstrably injurious to the Company or any of its affiliates, or (iv) Employee's violation of confidentiality obligations to the Company or misappropriation of Company assets. (f) "TERMINATION OTHER THAN FOR CAUSE" means termination by the Board of Directors of the Company of the Employee's employment for any reason other than as specified in Sections 2.1(c), (d), (e) or (h) hereof. Termination Other Than For Cause shall also include any substantial change in the Employee's duties and responsibilities as set forth in Section 1. (g) "TOTAL CASH COMPENSATION" shall mean the Employee's Base Salary (as defined in Section 3.1) plus any cash bonuses, commissions or similar payment accrued during any single calendar year. (h) "VOLUNTARY TERMINATION" means termination of the Employee's employment by the voluntary action of the Employee other than by reason of a Disability Termination. 2 2.2 TERM. Employee shall be an "at will" employee and the Company shall have the right to terminate the employment of Employee at any time, provided, however that upon a Termination Other Than For Cause, Employee shall receive 30 days advance written notice. 2.3 TERMINATION FOR CAUSE. Upon Termination For Cause, the Company shall pay the Employee Accrued Compensation, if any. 2.4 TERMINATION OTHER THAN FOR CAUSE. Upon Termination Other Than For Cause, the Company shall pay the Employee all Accrued Compensation, if any, and shall continue to pay Base Salary, plus any cash bonuses, commissions or similar payment accrued prior to termination, until one year from the date of termination, at the rate and upon the normal payroll schedule in effect at the time of termination. 2.5 DISABILITY TERMINATION. The Company shall have the right to effect a Disability Termination by giving written notice thereof to the Employee. Upon Disability Termination, the Company shall pay the Employee all Accrued Compensation, if any, and shall continue to pay Base Salary, plus any cash bonuses, commissions or similar payment accrued prior to termination, for a period of six months from the date of termination at the rate and upon the normal payroll schedule in effect at the time of termination. 2.6 DEATH TERMINATION. The Employee's employment shall be deemed to have terminated as of the last day of the month during which his or her death occurs, and the Company shall promptly pay to the Employee's estate Accrued Compensation, if any, and a lump sum payment equal to six month's Base Salary, plus any cash bonuses, commissions or similar payment accrued prior to termination, at the rate in effect at the time of termination, less applicable withholding. 2.7 VOLUNTARY TERMINATION. The Employee shall have the right to effect a Voluntary Termination by giving at least 30 days advance written notice to the Company. During such period, the Employee shall continue to receive regularly scheduled Base Salary payments and benefits. Following the effective date of a Voluntary Termination, the Company shall pay the Employee Accrued Compensation, if any. 2.8 TIMING OF TERMINATION PAYMENTS. Unless expressly provided otherwise, the foregoing termination payments shall be made at the usual and agreed times provided for in Section 3.1 of this Agreement. 3 3. SALARY, BENEFITS, AND BONUS. 3.1 BASE SALARY. As payment for the services to be rendered by the Employee as provided in Section 1 and subject to the provisions of Section 2 of this Agreement, the Company shall pay the Employee a "Base Salary" at the rate of $200,000 per year, payable on the Company's normal payroll schedule. 3.2 FRINGE BENEFITS. (a) FRINGE BENEFITS. The Employee shall be eligible to participate in such of the Company's benefit plans as are now generally available or later made generally available to senior officers of the Company, including, without limitation, medical, dental, life, and disability insurance plans. (b) EXPENSE REIMBURSEMENT. The Company agrees to reimburse the Employee for all reasonable, ordinary and necessary travel and entertainment expenses incurred by the Employee in conjunction with his or her services to the Company consistent with the Company's standard reimbursement policies. The Company shall pay travel costs incurred by the Employee in conjunction with his or her services to the Company consistent with the Company's standard travel policy. (c) VACATION. The Employee shall be entitled, without loss of compensation, to the amount of vacation per year generally available or later made generally available to senior officers of the Company. Unused vacation may be accrued by the Employee up to a maximum of six weeks, when it will cease accruing until the Employee reduces the accrued, unused amount through use of vacation time. 3.3 BONUS. The Employee shall participate in any management bonus plan adopted by the Company on terms comparable to other senior officers of the Company. 4. CONDITIONAL NATURE OF SEVERANCE PAYMENTS. 4.1 NONCOMPETE. Employee acknowledges that the nature of the Company's business is such that if Employee were to become employed by, or substantially involved in, the business of a competitor of the Company during the twelve months following the termination of Employee's employment with the Company, it would be very difficult for the Employee not to rely on or use the Company's trade secrets and confidential information. Thus, to avoid the inevitable disclosure of the Company's trade secrets and confidential information, Employee agrees and acknowledges that Employee's right to receive the severance payments set forth in Sections 2.4 and 2.5 (to the extent Employee is otherwise entitled to such payments) shall be conditioned upon the Employee not directly engaging in (whether as an employee, consultant, agent, proprietor, principal, 4 partner, controlling stockholder, corporate officer, director or otherwise) or participating in the financing, operation, management or control of, any person, firm, corporation or business that directly competes with the Company's business. Upon any breach of this Section, all severance payments pursuant to this Agreement shall immediately cease. 4.2 NON-SOLICITATION. Until the date one year after the termination of Employee's employment with the Company for any reason, Employee agrees and acknowledges that Employee's right to receive the severance payments set forth in Sections 2.4 and 2.5 (to the extent Employee is otherwise entitled to such payments) shall be conditioned upon Employee not either directly or indirectly soliciting, inducing, attempting to hire, recruiting, encouraging, taking away, hiring any employee of the Company or causing an employee to leave the Company either for Employee or for any other entity or person. 4.3 UNDERSTANDING OF COVENANTS. The Employee represents that Employee: (i) is familiar with the foregoing covenants not to compete and not to solicit, and (ii) is fully aware of Employee's obligations hereunder, including, without limitation, the reasonableness of the length of time, scope and geographic coverage of these covenants. 4.4 CONFIDENTIALITY. Employee shall maintain in confidence the contents and terms of this Agreement, including any documents incorporated by reference, and the consideration for this Agreement (hereinafter collectively referred to as "Employment Information"). Employee agrees to take every reasonable precaution to prevent disclosure of any Employment Information to third parties, and agrees that there will be no publicity, directly or indirectly, concerning any Employment Information. Employee agrees to take every precaution to disclose Employment information only to those attorneys, accountants, governmental entities and family members who have a reasonable need to know of such Employment Information. After termination of employment for any reason Employee shall continue to maintain the confidentiality of all Employment information. 5. MISCELLANEOUS. 5.1 WAIVER. The waiver of the breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach of the same or other provision hereof. 5.2 NOTICES. All notices and other communications under this Agreement shall be in writing and shall be given by personal or courier delivery, facsimile or first class mail, certified or registered with return receipt requested, and shall be deemed to have been duly given upon receipt if personally delivered or delivered by courier, on the date of transmission if transmitted by facsimile, or three days after mailing if mailed, to the addresses of the Company and the Employee contained in the records of 5 the Company at the time of such notice. Any party may Change such party's address for notices by notice duly given pursuant to this Section 4.2. 5.3 HEADINGS. The section headings used in this Agreement are intended for convenience of reference and shall not by themselves determine the construction or interpretation of any provision of this Agreement. 5.4 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of California applicable to contracts entered into and wholly to be performed within the State of California by California residents. 5.5 SURVIVAL OF OBLIGATIONS. This Agreement shall be binding upon and inure to the benefit of the executors, administrators, heirs, successors, and assigns of the parties; provided, however, that except as herein expressly provided, this Agreement shall not be assignable either by the Company (except to an affiliate or successor of the Company) or by the Employee without the prior written consent of the other party. 5.6 COUNTERPARTS. This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one and the same Agreement. 5.7 WITHHOLDING. All sums payable to the Employee hereunder shall be reduced by all federal, state, local, and other withholdings and similar taxes and payments required by applicable law. 5.8 ENFORCEMENT. If any portion of this Agreement is determined to be invalid or unenforceable, such portion shall be adjusted, rather than voided, to achieve the intent of the parties to the extent possible, and the remainder shall be enforced to the maximum extent possible. 5.9 ENTIRE AGREEMENT; MODIFICATIONS. Except as otherwise provided herein or in the exhibits hereto, this Agreement represents the entire understanding among the parties with respect to the subject matter of this Agreement, and this Agreement supersedes any and all prior and contemporaneous understandings, agreements, plans, and negotiations, whether written or oral, with respect to the subject matter hereof, including, without limitation, any understandings, agreements, or obligations respecting any past or future compensation, bonuses, reimbursements, or other payments to the Employee from the Company. All modifications to the Agreement must be in writing and signed by each of the parties hereto. IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the date set forth in the first paragraph. 6 ALPHA INNOTECH CORPORATION By: /S/ DARRYL RAY -------------------------- Darryl Ray Title: President /S/ HASEEB CHAUDHRY ----------------------------------- Haseeb Chaudhry 7 EX-10 7 ex10-4.txt EX-10.4 EXHIBIT 10.4 AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT This AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT (the "AMENDMENT"), is entered into as of this 6th day of April, 2005 by and between Alpha Innotech Corporation, a California corporation (the "COMPANY"), and Haseeb Chaudhry (the "EMPLOYEE"). RECITALS A. On May 11, 2001, the Company and the Employee entered into an Employment Agreement (the "AGREEMENT") pursuant to which the Company retained the services of the Employee. B. The Company and Xtrana, Inc. ("XTRANA") are parties to that certain Agreement and Plan of Merger dated December 14, 2004, as amended by Amendment No. 1 to Agreement and Plan of Merger dated March 25, 2005 (as amended, the "MERGER AGREEMENT"), pursuant to which the Company would merge with and into a subsidiary of Xtrana. C. It is a condition to closing of the transactions contemplated by the Merger Agreement that the Company and the Employee enter into this Amendment. D. The parties desire to amend the provisions of the Agreement on the terms and conditions set forth herein. AGREEMENT NOW, THEREFORE, in consideration of the premises and the mutual agreements, representations and undertakings this Agreement contains, the parties hereto hereby agree as follows: 1. AMENDMENT TO SECTION 1.1. Section 1.1 of the Agreement is hereby amended in its entirety to read as follows: "1.1 TITLE. The Employee shall be employed by the Company as its Chief Executive Officer or such other position as the Board of Directors of the Company may from time to time appoint the Employee." 2. AMENDMENT TO SECTION 2.1(f). Section 2.1(f) of the Agreement is hereby amended in its entirety as follows: "(f) "TERMINATION FOR GOOD REASON" means the Employee's resignation from the Company within six months of a significant reduction in the level of responsibilities, duties or job description from those of Chief Executive Officer, unless otherwise mutually agreed." 3. AMENDMENT TO SECTION 2.4. Section 2.4 of the Agreement is hereby amended in its entirety to read as follows: "2.4 TERMINATION OTHER THAN FOR CAUSE, DEATH, DISABILITY OR GOOD REASON. Upon termination by the Company of the Employee's employment for any reason other than as specified in Sections 2.1(c), (d), (e), (f) or (h) hereof, the Company shall pay the Employee all Accrued Compensation (including outstanding deferred compensation), if any, and shall continue to pay the Employee the Base Salary for a period of one year from the date of the termination, at the rate and upon the normal payroll schedule in effect at the time of termination. Notwithstanding the foregoing, the payment of any such severance payments (other than Accrued Compensation) shall be contingent upon (i) the Employee executing a general release of claims (in a form prescribed by the Company) of all known and unknown claims that the Employee may then have against the Company or persons affiliated with the Company relating to the Employee's employment with the Company and (ii) the Employee's continued compliance with the obligations contained in Section 4 hereof. Notwithstanding the above, if the Employee would be subject to an excise tax for the above described severance payments under Internal Revenue Code Section 409A, the Employee shall be entitled to elect to receive such severance payments in a lump sum in the year of termination." 4. AMENDMENT TO SECTION 2.8. The Agreement is hereby amended to renumber the existing Section 2.8 of the Agreement as Section 2.9 and to add the following new Section 2.8: "2.8 TERMINATION FOR GOOD REASON. Upon Termination For Good Reason, the Company shall pay the Employee all Accrued Compensation (including outstanding deferred compensation), if any, and shall continue to pay the Employee the Base Salary for a period of one year from the date of the termination, at the rate and upon the normal payroll schedule in effect at the time of termination. Notwithstanding the foregoing, the payment of any such severance payments (other than Accrued Compensation) shall be contingent upon (i) the Employee executing a general release of claims (in a form prescribed by the Company) of all known and unknown claims that the Employee may then have against the Company or persons affiliated with the Company relating to the Employee's employment with the Company and (ii) the Employee's continued compliance with the obligations contained in Section 4 hereof. Notwithstanding the above, if the Employee would be subject to an excise tax for the above described severance payments under Internal Revenue Code Section 409A, the Employee shall be entitled to elect to receive such severance payments in a lump sum in the year of termination." 5. AMENDMENT TO SECTION 3.1. Section 3.1 of the Agreement is hereby amended in its entirety to read as follows: "3.1 BASE SALARY. As payment for the services to be rendered by the Employee as provided in Section 1 and subject to the provisions of Section 2 of this Agreement, the Company shall pay the Employee a "Base Salary" at the rate of (i) $200,000 per year for period from May 11, 2001 through December 31, 2004 and 2 (ii) $100,000 for the period from January 1, 2005 through the remaining term of this Agreement, in each case payable on the Company's normal payroll schedule. The Base Salary shall be subject to adjustment, upward but not downward, at the discretion of the Board of Directors of the Company at any time following the earlier to occur of the (x) the completion of the Company's anticipated reverse-merger transaction with Xtrana, Inc. (the "REVERSE MERGER") and (y) a failure to close the Reverse Merger and termination of the Agreement and Plan of Merger dated December 14, 2004, and amended as of March 25, 2005, among the Company, Xtrana, Inc. and AIC Merger Corporation (as amended, the "MERGER AGREEMENT")." 6. AMENDMENT TO SECTION 4.1. The second sentence of Section 4.1 of the Agreement is hereby amended to read as follows: "Thus, to avoid the inevitable disclosure of the Company's trade secrets and confidential information, the Employee agrees and acknowledges that the Employee's right to receive the severance payments set forth in Sections 2.4, 2.5 and 2.8 (to the extent the Employee is entitled to receive such payments) shall be conditioned upon the Employee not directly engaging in (whether as an employee, consultant, agent, proprietor, principal, partner, controlling stockholder, corporate officer, director or otherwise) or participating in the financing, operation, management or control of, any person, firm, corporation or business that directly competes with the Company's business." 7. AMENDMENT TO SECTION 4.2. Section 4.2 of the Agreement is hereby amended in its entirety to read as follows: "4.2 NON-SOLICITATION. Until the date one year after termination of the Employee's employment with the Company for any reason, the Employee agrees and acknowledges that the Employee's right to receive the severance payments set forth in Sections 2.4, 2.5 and 2.8 (to the extent the Employee is otherwise entitled to such payments) shall be conditioned upon the Employee not either directly or indirectly soliciting, inducing, attempting to hire, recruiting, encouraging, taking away, hiring any employee of the Company or causing an employee to leave the Company either for the Employee or for any other entity or person." 8. WARRANT. The Company shall issue the Employee a warrant to purchase 700,000 shares of the Company's Common Stock at a purchase price of $0.01 per share. 9. MANAGEMENT BONUS PLAN. The Employee shall be eligible to receive a bonus based on the Company's achievement of certain revenue milestones for fiscal years 2005, 2006 and 2007, as set forth in further detail in the management bonus plan attached hereto as EXHIBIT A. The Employee and the Company acknowledge and agree that the bonus plan attached hereto supersedes and replaces that certain letter from the Company to the Employee dated as of December 30, 2004, which letter shall cease to have any further force or effect. 3 10. EFFECTIVENESS. This Amendment shall be effective upon execution and delivery hereof by the Company and the Employee; provided, however, that if the Reverse Merger does not close and the Merger Agreement is terminated, then this Amendment shall become null and void. 11. RATIFICATION OF REMAINING TERMS. Except as set forth above, the remaining terms and conditions of the Agreement shall not be amended by this Amendment and shall remain in full force and effect, and binding in accordance with their respective terms. 12. COUNTERPARTS. This Amendment may be executed in two or more counterparts, each of which shall constitute an original, but all of which, when taken together, shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date set forth in the first paragraph. ALPHA INNOTECH CORPORATION By: /S/ DARRYL RAY -------------------------------- Name: Darryl Ray Title: President HASEEB CHAUDHRY /S/ HASEEB CHAUDHRY ------------------------------------ 4 EX-10 8 ex10-5a.txt EX-10.5 EXHIBIT 10.5 ALPHA INNOTECH CORPORATION EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "AGREEMENT") is made and entered into as of May 11, 2001 by and between Alpha Innotech Corporation, a California corporation (the "COMPANY") and Darryl Ray (the "EMPLOYEE"). BACKGROUND A. The Company desires to retain the services of the Employee as the President and Chief Operating Officer of the Company from the date of this Agreement (the "EFFECTIVE DATE"). The Company also desires to provide employment security to the Employee, thereby inducing the Employee to continue employment with the Company and enhancing the Employee's ability to perform effectively. B. The Employee is willing to be employed by the Company on the terms and subject to the conditions set forth in this Agreement. THE PARTIES AGREE AS FOLLOWS: 1. POSITIONS AND DUTIES. 1.1 TITLE. The Employee shall be employed by the Company as its President and Chief Operating Officer, and the Company agrees to employ and retain the Employee in such capacity. 1.2 DUTIES. The Employee shall devote all of his business time, energy, and skill to the affairs of the Company; provided, however, that reasonable time for personal business, charitable or professional activities shall be permitted, so long as such activities do not materially interfere with the Employee's performance of services under this Agreement. 2. TERMS OF EMPLOYMENT. 2.1 DEFINITIONS. For purposes of this Agreement, the following terms shall have the following meanings: (a) "ACCRUED COMPENSATION" shall mean any accrued Total Cash Compensation, any accrued benefits under any plan of the Company in which the Employee is a participant to the full extent of Employee's rights under such plans, any accrued vacation pay, and any reasonable business expenses incurred by the Employee in connection with the performance of Employee's duties hereunder, all to the extent unpaid on the date of termination of Employee's employment. (b) "BASE SALARY" shall have the meaning set forth in Section 3.1 hereof. (c) "DEATH TERMINATION" shall mean termination of the Employee's employment because of the death of the Employee. (d) "DISABILITY TERMINATION" means termination by the Company of the Employee's employment by reason of the Employee's incapacitation due to disability. The Employee shall be deemed to be incapacitated due to disability if at the end of any month the Employee is unable to perform substantially all of his or her duties under this Agreement in the normal and regular manner due to illness, injury or mental or physical incapacity, and has been unable so to perform for either (i) three consecutive full calendar months then ending, or (ii) 90 or more of the normal working days during the 12 consecutive full calendar months then ending. Nothing in this paragraph shall alter the Company's obligations under applicable law, which may, in certain circumstances, result in the suspension or alteration of the foregoing time periods. (e) "TERMINATION FOR CAUSE" means termination by the Board of Directors of the Company of the Employee's employment (i) by reason of the Employee's commission of a felony or other illegal conduct involving dishonesty, fraud or other matters of moral turpitude, (ii) by reason of the Employee's dishonesty towards, fraud upon, or deliberate injury or attempted injury to the Company or any of its affiliates, or (iii) by reason of the Employee's willfully engaging in misconduct which is materially and demonstrably injurious to the Company or any of its affiliates, or (iv) Employee's violation of confidentiality obligations to the Company or misappropriation of Company assets. (f) "TERMINATION OTHER THAN FOR CAUSE" means termination by the Board of Directors of the Company of the Employee's employment for any reason other than as specified in Sections 2.1(c), (d), (e) or (h) hereof. Termination Other Than For Cause shall also include any substantial change in the Employee's duties and responsibilities as set forth in Section 1. (g) "TOTAL CASH COMPENSATION" shall mean the Employee's Base Salary (as defined in Section 3.1) plus any cash bonuses, commissions or similar payment accrued during any single calendar year. (h) "VOLUNTARY TERMINATION" means termination of the Employee's employment by the voluntary action of the Employee other than by reason of a Disability Termination. 2 2.2 TERM. Employee shall be an "at will" employee and the Company shall have the right to terminate the employment of Employee at any time, provided, however that upon a Termination Other Than For Cause, Employee shall receive 30 days advance written notice. 2.3 TERMINATION FOR CAUSE. Upon Termination For Cause, the Company shall pay the Employee Accrued Compensation, if any. 2.4 TERMINATION OTHER THAN FOR CAUSE. Upon Termination Other Than For Cause, the Company shall pay the Employee all Accrued Compensation, if any, and shall continue to pay Base Salary, plus any cash bonuses, commissions or similar payment accrued prior to termination, until one year from the date of termination, at the rate and upon the normal payroll schedule in effect at the time of termination. 2.5 DISABILITY TERMINATION. The Company shall have the right to effect a Disability Termination by giving written notice thereof to the Employee. Upon Disability Termination, the Company shall pay the Employee all Accrued Compensation, if any, and shall continue to pay Base Salary, plus any cash bonuses, commissions or similar payment accrued prior to termination, for a period of six months from the date of termination at the rate and upon the normal payroll schedule in effect at the time of termination. 2.6 DEATH TERMINATION. The Employee's employment shall be deemed to have terminated as of the last day of the month during which his or her death occurs, and the Company shall promptly pay to the Employee's estate Accrued Compensation, if any, and a lump sum payment equal to six month's Base Salary, plus any cash bonuses, commissions or similar payment accrued prior to termination, at the rate in effect at the time of termination, less applicable withholding. 2.7 VOLUNTARY TERMINATION. The Employee shall have the right to effect a Voluntary Termination by giving at least 30 days advance written notice to the Company. During such period, the Employee shall continue to receive regularly scheduled Base Salary payments and benefits. Following the effective date of a Voluntary Termination, the Company shall pay the Employee Accrued Compensation, if any. 2.8 TIMING OF TERMINATION PAYMENTS. Unless expressly provided otherwise, the foregoing termination payments shall be made at the usual and agreed times provided for in Section 3.1 of this Agreement. 3 3. SALARY, BENEFITS, AND BONUS. 3.1 BASE SALARY. As payment for the services to be rendered by the Employee as provided in Section 1 and subject to the provisions of Section 2 of this Agreement, the Company shall pay the Employee a "Base Salary" at the rate of $200,000 per year, payable on the Company's normal payroll schedule. 3.2 FRINGE BENEFITS. (a) FRINGE BENEFITS. The Employee shall be eligible to participate in such of the Company's benefit plans as are now generally available or later made generally available to senior officers of the Company, including, without limitation, medical, dental, life, and disability insurance plans. (b) EXPENSE REIMBURSEMENT. The Company agrees to reimburse the Employee for all reasonable, ordinary and necessary travel and entertainment expenses incurred by the Employee in conjunction with his or her services to the Company consistent with the Company's standard reimbursement policies. The Company shall pay travel costs incurred by the Employee in conjunction with his or her services to the Company consistent with the Company's standard travel policy. (c) VACATION. The Employee shall be entitled, without loss of compensation, to the amount of vacation per year generally available or later made generally available to senior officers of the Company. Unused vacation may be accrued by the Employee up to a maximum of six weeks, when it will cease accruing until the Employee reduces the accrued, unused amount through use of vacation time. 3.3 BONUS. The Employee shall participate in any management bonus plan adopted by the Company on terms comparable to other senior officers of the Company. 4. CONDITIONAL NATURE OF SEVERANCE PAYMENTS. 4.1 NONCOMPETE. Employee acknowledges that the nature of the Company's business is such that if Employee were to become employed by, or substantially involved in, the business of a competitor of the Company during the twelve months following the termination of Employee's employment with the Company, it would be very difficult for the Employee not to rely on or use the Company's trade secrets and confidential information. Thus, to avoid the inevitable disclosure of the Company's trade secrets and confidential information, Employee agrees and acknowledges that Employee's right to receive the severance payments set forth in Sections 2.4 and 2.5 (to the extent Employee is otherwise entitled to such payments) shall be conditioned upon the Employee not directly engaging in (whether as an employee, consultant, agent, proprietor, principal, 4 partner, controlling stockholder, corporate officer, director or otherwise) or participating in the financing, operation, management or control of, any person, firm, corporation or business that directly competes with the Company's business. Upon any breach of this Section, all severance payments pursuant to this Agreement shall immediately cease. 4.2 NON-SOLICITATION. Until the date one year after the termination of Employee's employment with the Company for any reason, Employee agrees and acknowledges that Employee's right to receive the severance payments set forth in Sections 2.4 and 2.5 (to the extent Employee is otherwise entitled to such payments) shall be conditioned upon Employee not either directly or indirectly soliciting, inducing, attempting to hire, recruiting, encouraging, taking away, hiring any employee of the Company or causing an employee to leave the Company either for Employee or for any other entity or person. 4.3 UNDERSTANDING OF COVENANTS. The Employee represents that Employee: (i) is familiar with the foregoing covenants not to compete and not to solicit, and (ii) is fully aware of Employee's obligations hereunder, including, without limitation, the reasonableness of the length of time, scope and geographic coverage of these covenants. 4.4 CONFIDENTIALITY. Employee shall maintain in confidence the contents and terms of this Agreement, including any documents incorporated by reference, and the consideration for this Agreement (hereinafter collectively referred to as "Employment Information"). Employee agrees to take every reasonable precaution to prevent disclosure of any Employment Information to third parties, and agrees that there will be no publicity, directly or indirectly, concerning any Employment Information. Employee agrees to take every precaution to disclose Employment information only to those attorneys, accountants, governmental entities and family members who have a reasonable need to know of such Employment Information. After termination of employment for any reason Employee shall continue to maintain the confidentiality of all Employment information. 5. MISCELLANEOUS. 5.1 WAIVER. The waiver of the breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach of the same or other provision hereof. 5.2 NOTICES. All notices and other communications under this Agreement shall be in writing and shall be given by personal or courier delivery, facsimile or first class mail, certified or registered with return receipt requested, and shall be deemed to have been duly given upon receipt if personally delivered or delivered by courier, on the date of transmission if transmitted by facsimile, or three days after mailing if mailed, to the addresses of the Company and the Employee contained in the records of 5 the Company at the time of such notice. Any party may Change such party's address for notices by notice duly given pursuant to this Section 4.2. 5.3 HEADINGS. The section headings used in this Agreement are intended for convenience of reference and shall not by themselves determine the construction or interpretation of any provision of this Agreement. 5.4 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of California applicable to contracts entered into and wholly to be performed within the State of California by California residents. 5.5 SURVIVAL OF OBLIGATIONS. This Agreement shall be binding upon and inure to the benefit of the executors, administrators, heirs, successors, and assigns of the parties; provided, however, that except as herein expressly provided, this Agreement shall not be assignable either by the Company (except to an affiliate or successor of the Company) or by the Employee without the prior written consent of the other party. 5.6 COUNTERPARTS. This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one and the same Agreement. 5.7 WITHHOLDING. All sums payable to the Employee hereunder shall be reduced by all federal, state, local, and other withholdings and similar taxes and payments required by applicable law. 5.8 ENFORCEMENT. If any portion of this Agreement is determined to be invalid or unenforceable, such portion shall be adjusted, rather than voided, to achieve the intent of the parties to the extent possible, and the remainder shall be enforced to the maximum extent possible. 5.9 ENTIRE AGREEMENT; MODIFICATIONS. Except as otherwise provided herein or in the exhibits hereto, this Agreement represents the entire understanding among the parties with respect to the subject matter of this Agreement, and this Agreement supersedes any and all prior and contemporaneous understandings, agreements, plans, and negotiations, whether written or oral, with respect to the subject matter hereof, including, without limitation, any understandings, agreements, or obligations respecting any past or future compensation, bonuses, reimbursements, or other payments to the Employee from the Company. All modifications to the Agreement must be in writing and signed by each of the parties hereto. IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the date set forth in the first paragraph. 6 ALPHA INNOTECH CORPORATION By: /S/ HASEEB CHAUDHRY -------------------------- Haseeb Chaudhry Title: CEO /S/ DARRYL RAY ----------------------------------- Darryl Ray 7 EX-10 9 ex10-6a.txt EX-10.6 EXHIBIT 10.6 AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT This AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT (the "AMENDMENT"), is entered into as of this 6th day of April, 2005 by and between Alpha Innotech Corporation, a California corporation (the "COMPANY"), and Darryl Ray (the "EMPLOYEE"). RECITALS A. On May 11, 2001, the Company and the Employee entered into an Employment Agreement (the "AGREEMENT") pursuant to which the Company retained the services of the Employee. B. The Company and Xtrana, Inc. ("XTRANA") are parties to that certain Agreement and Plan of Merger dated December 14, 2004, as amended by Amendment No. 1 to Agreement and Plan of Merger dated March 25, 2005 (as amended, the "MERGER AGREEMENT"), pursuant to which the Company would merge with and into a subsidiary of Xtrana. C. It is a condition to closing of the transactions contemplated by the Merger Agreement that the Company and the Employee enter into this Amendment. D. The parties desire to amend the provisions of the Agreement on the terms and conditions set forth herein. AGREEMENT NOW, THEREFORE, in consideration of the premises and the mutual agreements, representations and undertakings this Agreement contains, the parties hereto hereby agree as follows: 1. AMENDMENT TO SECTION 1.1. Section 1.1 of the Agreement is hereby amended in its entirety to read as follows: "1.1 TITLE. The Employee shall be employed by the Company as its President and Chief Operating Officer or such other position as the Board of Directors of the Company may from time to time appoint the Employee." 2. AMENDMENT TO SECTION 2.1(f). Section 2.1(f) of the Agreement is hereby amended in its entirety as follows: "(f) "TERMINATION FOR GOOD REASON" means the Employee's resignation from the Company within six months of a significant reduction in the level of responsibilities, duties or job description from those of President and Chief Operating Officer, unless otherwise mutually agreed." 3. AMENDMENT TO SECTION 2.4. Section 2.4 of the Agreement is hereby amended in its entirety to read as follows: "2.4 TERMINATION OTHER THAN FOR CAUSE, DEATH, DISABILITY OR GOOD REASON. Upon termination by the Company of the Employee's employment for any reason other than as specified in Sections 2.1(c), (d), (e), (f) or (h) hereof, the Company shall pay the Employee all Accrued Compensation (including outstanding deferred compensation), if any, and shall continue to pay the Employee the Base Salary for a period of one year from the date of the termination, at the rate and upon the normal payroll schedule in effect at the time of termination. Notwithstanding the foregoing, the payment of any such severance payments (other than Accrued Compensation) shall be contingent upon (i) the Employee executing a general release of claims (in a form prescribed by the Company) of all known and unknown claims that the Employee may then have against the Company or persons affiliated with the Company relating to the Employee's employment with the Company and (ii) the Employee's continued compliance with the obligations contained in Section 4 hereof. Notwithstanding the above, if the Employee would be subject to an excise tax for the above described severance payments under Internal Revenue Code Section 409A, the Employee shall be entitled to elect to receive such severance payments in a lump sum in the year of termination." 4. AMENDMENT TO SECTION 2.8. The Agreement is hereby amended to renumber the existing Section 2.8 of the Agreement as Section 2.9 and to add the following new Section 2.8: "2.8 TERMINATION FOR GOOD REASON. Upon Termination For Good Reason, the Company shall pay the Employee all Accrued Compensation (including outstanding deferred compensation), if any, and shall continue to pay the Employee the Base Salary for a period of one year from the date of the termination, at the rate and upon the normal payroll schedule in effect at the time of termination. Notwithstanding the foregoing, the payment of any such severance payments (other than Accrued Compensation) shall be contingent upon (i) the Employee executing a general release of claims (in a form prescribed by the Company) of all known and unknown claims that the Employee may then have against the Company or persons affiliated with the Company relating to the Employee's employment with the Company and (ii) the Employee's continued compliance with the obligations contained in Section 4 hereof. Notwithstanding the above, if the Employee would be subject to an excise tax for the above described severance payments under Internal Revenue Code Section 409A, the Employee shall be entitled to elect to receive such severance payments in a lump sum in the year of termination." 5. AMENDMENT TO SECTION 3.1. Section 3.1 of the Agreement is hereby amended in its entirety to read as follows: "3.1 BASE SALARY. As payment for the services to be rendered by the Employee as provided in Section 1 and subject to the provisions of Section 2 of this Agreement, the Company shall pay the Employee a "Base Salary" at the rate of (i) $200,000 per year for period from May 11, 2001 through December 31, 2004 and 2 (ii) $100,000 for the period from January 1, 2005 through the remaining term of this Agreement, in each case payable on the Company's normal payroll schedule. The Base Salary shall be subject to adjustment, upward but not downward, at the discretion of the Board of Directors of the Company at any time following the earlier to occur of the (x) the completion of the Company's anticipated reverse-merger transaction with Xtrana, Inc. (the "REVERSE MERGER") and (y) a failure to close the Reverse Merger and termination of the Agreement and Plan of Merger dated December 14, 2004, and amended as of March 25, 2005, among the Company, Xtrana, Inc. and AIC Merger Corporation (as amended, the "MERGER AGREEMENT")." 6. AMENDMENT TO SECTION 4.1. The second sentence of Section 4.1 of the Agreement is hereby amended to read as follows: "Thus, to avoid the inevitable disclosure of the Company's trade secrets and confidential information, the Employee agrees and acknowledges that the Employee's right to receive the severance payments set forth in Sections 2.4, 2.5 and 2.8 (to the extent the Employee is entitled to receive such payments) shall be conditioned upon the Employee not directly engaging in (whether as an employee, consultant, agent, proprietor, principal, partner, controlling stockholder, corporate officer, director or otherwise) or participating in the financing, operation, management or control of, any person, firm, corporation or business that directly competes with the Company's business." 7. AMENDMENT TO SECTION 4.2. Section 4.2 of the Agreement is hereby amended in its entirety to read as follows: "4.2 NON-SOLICITATION. Until the date one year after termination of the Employee's employment with the Company for any reason, the Employee agrees and acknowledges that the Employee's right to receive the severance payments set forth in Sections 2.4, 2.5 and 2.8 (to the extent the Employee is otherwise entitled to such payments) shall be conditioned upon the Employee not either directly or indirectly soliciting, inducing, attempting to hire, recruiting, encouraging, taking away, hiring any employee of the Company or causing an employee to leave the Company either for the Employee or for any other entity or person." 8. WARRANT. The Company shall issue the Employee a warrant to purchase 700,000 shares of the Company's Common Stock at a purchase price of $0.01 per share. 9. MANAGEMENT BONUS PLAN. The Employee shall be eligible to receive a bonus based on the Company's achievement of certain revenue milestones for fiscal years 2005, 2006 and 2007, as set forth in further detail in the management bonus plan attached hereto as EXHIBIT A. The Employee and the Company acknowledge and agree that the bonus plan attached hereto supersedes and replaces that certain letter from the Company to the Employee dated as of December 30, 2004, which letter shall cease to have any further force or effect. 3 10. EFFECTIVENESS. This Amendment shall be effective upon execution and delivery hereof by the Company and the Employee; provided, however, that if the Reverse Merger does not close and the Merger Agreement is terminated, then this Amendment shall become null and void. 11. RATIFICATION OF REMAINING TERMS. Except as set forth above, the remaining terms and conditions of the Agreement shall not be amended by this Amendment and shall remain in full force and effect, and binding in accordance with their respective terms. 12. COUNTERPARTS. This Amendment may be executed in two or more counterparts, each of which shall constitute an original, but all of which, when taken together, shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date set forth in the first paragraph. ALPHA INNOTECH CORPORATION By: /S/ HASEEB CHAUDHRY -------------------------------- Name: Haseeb Chaudhry Title: Chief Executive Officer DARRYL RAY /S/ DARRYL RAY ------------------------------------ 4 EX-10 10 ex10-7a.txt EX-10.7 EXHIBIT 10.7 SECURED PROMISSORY NOTE $1,500,000 April 8, 2005 San Leandro, California FOR VALUE RECEIVED, ALPHA INNOTECH CORPORATION, a California corporation ("BORROWER"), hereby unconditionally promises to pay to the order of Alexandria Finance, LLC, a Delaware limited liability company ("LENDER"), in lawful money of the United States of America and in immediately available funds, the principal sum of One Million Five Hundred Thousand Dollars ($1,500,000), or such lesser principal amount as has been advanced to Borrower under the terms hereof (the "LOAN"), together with accrued and unpaid interest thereon, each due and payable on the dates and in the manner set forth below. This Secured Promissory Note ("NOTE") is referred to in and is executed and delivered in connection with that certain Security Agreement dated as of even date herewith and executed by Borrower in favor of Lender and that certain Intellectual Property Security Agreement dated as of even date herewith and executed by Borrower in favor of Lender (as the same may from time to time be amended, modified, supplemented or restated, collectively, the "SECURITY AGREEMENT"). Additional rights of the Lender are set forth in the Security Agreement. 1. PRINCIPAL REPAYMENT. Except as provided in Section 9 below, the outstanding principal amount of the Loan shall be due and payable in 30 equal monthly installments beginning on the first calendar day of the seventh calendar month immediately following the date of the Advance (as defined below) and continuing on the first calendar day of each succeeding calendar month. 2. INTEREST RATE. Borrower further promises to pay interest on the outstanding principal amount hereof from the date hereof until payment in full, which interest shall be payable at the rate of twelve and one-half percent (12.5%) per annum or the maximum rate permissible by law (which under the laws of the State of California shall be deemed to be the laws relating to permissible rates of interest on commercial loans), whichever is less. Interest shall be due and payable monthly in arrears beginning on the first calendar day of the first calendar month immediately following the date of the Advance and continuing on the first calendar day of each succeeding calendar month, and shall be calculated on the basis of a 365/366-day year for the actual number of days elapsed. Any principal repayment or interest payment on the Loan hereunder not paid when due, whether at stated maturity, by acceleration or otherwise, shall bear interest at the rate of fifteen and one-half percent (15.5%) per annum. If any payment of principal or interest is not made within five (5) days after the date such payment is due, Borrower shall pay Lender a late fee equal to (i) four percent (4%) of the amount of such unpaid amount or (ii) the maximum amount permitted to be charged under applicable law, whichever is less. 1 3. EXPENSES AND FEES. Borrower shall pay to Lender all Lender Expenses (including reasonable attorneys' fees and expenses) incurred through and after the date hereof when due, provided that Borrower shall not be required to pay to Lender attorneys' fees incurred through the date hereof in an amount that exceeds $20,000 provided that this transaction closes on or before April 8, 2005. In addition, Borrower shall pay to Lender on the date hereof a commitment fee equal to one percent (1%) of the maximum original principal amount of the Loan. 4. PLACE OF PAYMENT. All amounts payable hereunder shall be payable at the office of Lender, 135 N. Los Robles Avenue, Suite 250, Pasadena, CA 91101, unless another place of payment shall be specified in writing by Lender. 5. APPLICATION OF PAYMENTS. Payment on this Note shall be applied to the amounts owing hereunder and under the Security Agreement in such manner as reasonably determined by Lender. 6. ADVANCE. Lender shall make available to Borrower a single advance (the "ADVANCE") in the principal amount indicated on the face of this Note as provided herein. The proceeds of the Advance will be used solely (i) to reimburse Borrower for the purchase of laboratory and computer equipment and inventory, and (ii) for general corporate purposes. When repaid, the Advance may not be reborrowed. Borrower shall notify Lender in writing at the address specified in SECTION 4 of this Note, Attn: Joel S. Marcus, by facsimile transmission to 626-578-0770 no later than 3:00 p.m. Pacific time, one (1) calendar day prior to the date on which the Advance is requested to be made, and shall provide to Lender invoices for the equipment and inventory sought to be financed and such additional information as Lender may request. 7. SECURED NOTE. The full amount of this Note is secured by the Collateral identified and described as security therefor in the Security Agreement. 8. CONDITIONS PRECEDENT TO ADVANCE. The obligations of Lender under this Note are subject to the occurrence, prior to or simultaneously with the date hereof, of each of the following conditions: 8.1 DOCUMENTS EXECUTED AND FILED. (a) This Note; (b) The Security Agreement; (c) UCC-1 Financing Statement covering the Collateral and all other actions required by Lender to perfect or protect Lender's security interest in the Collateral, including without limitation, appropriate filings with the United States Copyright Office and United States Patent and Trademark Office and execution and delivery of control agreements with any depository banks or securities intermediaries; and (d) That certain Warrant executed by Borrower in favor of Lender, dated as of even date herewith (the "WARRANT"). 2 8.2 RESOLUTIONS. Lender shall have received in form and substance satisfactory to Lender, a certified copy of the records of all actions (including all resolutions or unanimous consents) taken by Borrower, authorizing or relating to the execution and delivery or this Note, the Security Agreement, the Warrant or any other document executed in connection herewith or therewith, and the consummation of the transactions contemplated hereby and thereby. 8.3 NOTICE OF BORROWING. Lender shall have received a notice of borrowing in accordance with SECTION 6 hereof, together with such information required in SECTION 6 hereof. 8.4 CERTIFICATE. Lender shall have received a certificate, executed by the chief executive or chief financial officer of Borrower, certified as of the date of the Advance, that no Default or Event of Default has occurred and is continuing and the representations and warranties in this Note, the Security Agreement, and each other Loan Document are true and correct in all material respects as of the date of such certificate. 8.5 EVIDENCE OF INSURANCE. Lender shall have received evidence of insurance coverage required by Section 5.5 of the Security Agreement. 8.6 LANDLORD AGREEMENT. Lender shall have received a landlord agreement in form and substance acceptable to Lender with respect to any premises leased by Borrower. 8.7 BFI AND XTRANA CONSENTS. Lender shall have received (i) the written consent of BFI Business Finance, a California corporation ("BFI") to the consummation of the Loan transaction, the issuance of this Note and the Warrant, and the entering into the Security Agreement, under that certain Loan and Security Agreement between Borrower and BFI dated March 9, 2004 ("BFI LOAN AND SECURITY AGREEMENT") and that certain Intellectual Property Security Agreement between Borrower and BFI dated March 9, 2004 ("BFI IP SECURITY AGREEMENT") and (ii) the written consent of Xtrana, Inc. ("XTRANA") to the consummation of the Loan transaction, the issuance of the Note and the Warrant, and the entering into the Security Agreement, under that certain Agreement and Plan of Merger by and among Borrower, AIC Merger Corporation and Xtrana dated December 14, 2004 ("MERGER AGREEMENT") and that certain Secured Promissory Note dated December 16, 2004 issued by Borrower to Xtrana (the "XTRANA NOTE"). 8.8 BFI SUBORDINATION AND INTERCREDITOR AGREEMENTS. BFI and Lender shall have executed and delivered a Subordination Agreement and an Intercreditor Agreement relating to the BFI Loan and Security Agreement and the BFI IP Security Agreement, in form and substance satisfactory to Lender. 8.9 XTRANA INTERCREDITOR AGREEMENT. Xtrana and Lender shall have executed and delivered an Intercreditor Agreement relating to the Xtrana Note and the Collateral (as defined in the Security Agreement), in form and substance satisfactory to Lender 8.10 RECONVEYANCE OF ABSOLUTE ASSIGNMENTS OF INTELLECTUAL PROPERTY TO BFI. Lender shall have received evidence that BFI has reconveyed to Borrower all intellectual property of Borrower as to which the entire interest was assigned to BFI. 3 8.11 OTHER DOCUMENTS. Borrower shall have provided Lender with such other documents and information as Lender may reasonably request. 9. PREPAYMENT; CONVERSION. 9.1 VOLUNTARY PREPAYMENT. This Note may be prepaid in whole but not in part upon sixty (60) calendar days written notice to Lender at any time 12 months after the date of the Advance subject to a prepayment fee equal to 2% of the principal amount prepaid. Borrower shall also pay all accrued interest on the amount prepaid at the time of prepayment. 9.2 MANDATORY PREPAYMENT OR CONVERSION. If at any time prior to repayment in full of this Note, Lender determines in good faith that the Loan together with any equity investment of Lender or other outstanding loan in or to Borrower or Borrower's Affiliates would cause Lender or Lender's Affiliates not to be in compliance with the applicable REIT rules, Lender may, as it may elect in its sole discretion, upon prior written notice to Borrower stating the exact principal amount of the Loan that is in excess of the allowable amount under the applicable REIT rules (the "REIT Notice") (i) cause Borrower, no later than three (3) business days prior to the end of the calendar quarter during which the REIT Notice is sent, to use commercially reasonable efforts to prepay the minimum amount of the outstanding principal balance of the Loan required to be converted in order to bring Lender back into compliance with the applicable REIT rules, together with accrued interest on the amount prepaid through the date of prepayment, or (ii) convert, no later than three (3) business days prior to the end of the calendar quarter during which the REIT Notice is sent, the minimum amount of the outstanding principal amount of this Note required to be converted in order to bring Lender back into compliance with the applicable REIT rules, together with accrued and unpaid interest with respect to such principal amount to be converted, into Equity Securities at the Conversion Price. Lender shall endeavor to send to Borrower the REIT Notice as early as possible, but Lender's failure to send the REIT Notice earlier than three (3) business days prior to the end of the calendar quarter during which the REIT Notice is sent shall not excuse Borrower from complying with its obligations hereunder. If a REIT Notice is sent to Borrower, Borrower may enter into an agreement with a third-party lender pursuant to which such third-party lender purchases the entire unpaid principal amount of the Loan together with any accrued but unpaid interest thereon from Lender, provided that such purchase takes place on or before three (3) business days prior to the end of the calendar quarter during which the REIT Notice is sent. For purposes of this Note, the term "Equity Securities" shall mean shares of Borrower's Common Stock, and the term "Conversion Price" shall mean the greater of (i) $0.20 or (ii) the fair market value of Borrower's Common Stock on the date the REIT Notice is sent. In the event of a demand for prepayment or conversion pursuant to the preceding paragraph, Lender shall forfeit that number of shares subject to the Warrant that is equal to: (x) the dollar amount specified in the REIT Notice multiplied by (y) 0.12 divided by (z) $0.20 (the "Forfeited Share Amount"). On the date of the prepayment or conversion, Lender shall tender the Warrant to Borrower and Borrower shall immediately reissue to Lender a warrant in substantially the same form as the Warrant to purchase that number of shares of Borrower's Common Stock equal to 900,000 less the Forfeited Share Amount. 4 If, prior to the conversion of the principal balance under this Note into Equity Securities, Borrower (i) reclassifies the Equity Securities or makes a distribution thereon, (ii) subdivides the Equity Securities into a greater number of Equity Securities, (iii) combines the outstanding Equity Securities into a smaller number of Equity Securities, or (iv) issues rights or warrants to purchase the Equity Securities at less than fair market value, then the Conversion Price and, as a result, the number of Equity Securities issuable upon conversion of this Note, shall be appropriately adjusted to take into consideration the events specified in clauses (i), (ii), (iii) and (iv) of this paragraph. If, prior to the conversion of the principal balance under this Note into Equity Securities, Borrower shall enter into any agreement to merge with or otherwise be acquired by any other company (including any dissolution or liquidation of Borrower following such merger or acquisition), the outstanding principal amount of this Note shall become convertible into any consideration to be received upon such merger or acquisition by holders of the Equity Securities at a conversion price which reflects the Conversion Price then in effect with respect to the Equity Securities, as adjusted in the manner set out in this paragraph. No fractional shares shall be issued upon conversion of this Note, whether in whole or in part. In lieu of Borrower issuing any fractional shares to Lender upon the full or partial conversion of this Note, Borrower shall pay to Lender an amount equal to the product obtained by multiplying the Conversion Price by the fraction of a share not issued pursuant to the previous sentence. Borrower shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of this Note, such number of its shares of Common Stock, free from preemptive rights, as shall from time to time be sufficient to effect the conversion of this Note, and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of this entire Note, in addition to such other remedies as shall be available to Lender, Borrower shall take such action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes. If any shares of its Common Stock to be reserved for the purpose of issuance upon conversion of this Note require registration with or approval of any governmental authority under any applicable law before such shares of Common Stock may be validly issued or delivered, then Borrower shall secure such registration or approval, as the case may be, and maintain such registration or approval in effect so long as so required. Upon conversion of this Note in full as provided in this SECTION 9.2, Borrower shall be forever released from all of its obligations and liabilities under this Note. Section 16 of the Warrant (Registration Rights) is hereby incorporated herein by reference as though such Section 16 had been fully set forth herein, except that (i) "Company" shall mean "Borrower," (ii) "Holder" shall mean "Lender," and (iii) "Registrable Securities" shall mean such number of shares of Common Stock issued or issuable upon the conversion of this Note. Lender represents and warrants, to the best of its knowledge, that as of the date of this Note, Lender is in full compliance with any and all applicable REIT rules relating to the Loan and Lender's equity investment in Borrower. 5 10. DEFAULT. Each of the following events shall be an "EVENT OF DEFAULT" hereunder: 10.1 Borrower fails to pay timely any of the principal amount due under this Note within five (5) days of the date the same becomes due and payable or any accrued interest or other amounts due under this Note within five (5) days of the date the same becomes due and payable; 10.2 Borrower violates any covenant in Section 14 or Borrower defaults in the performance of any other material term, obligation, covenant or condition hereunder or any other Loan Document and such default is not cured within ten (10) days after Lender's delivery to Borrower of written notice thereof; 10.3 Any representation or warranty made herein or in any other Loan Document shall prove to have been false or misleading in any material respect when made or deemed made; 10.4 Borrower files any petition or action for relief under any bankruptcy, reorganization, insolvency or moratorium law or any other law for the relief of, or relating to, debtors, now or hereafter in effect, or makes any assignment for the benefit of creditors or takes any corporate action in furtherance of any of the foregoing; 10.5 An involuntary petition is filed against Borrower (unless such petition is dismissed or discharged within sixty (60) days) under any bankruptcy statute now or hereafter in effect, or a custodian, receiver, trustee, assignee for the benefit of creditors (or other or similar official) is appointed to take possession, custody or control of any property of Borrower; 10.6 If there (i) occurs a material adverse change in the business, operations, or condition (financial or otherwise) of the Borrower, or (ii) is a material impairment of the prospect of repayment of any portion of the Obligations or (iii) is a material impairment of the value or priority of Lender's security interests in the Collateral (any of the foregoing is referred to herein as a "Material Adverse Change"); 10.7 If any material portion of Borrower's assets is attached, seized, levied on, or comes into possession of a trustee or receiver and the attachment, seizure or levy is not removed in 10 days, or if Borrower is enjoined, restrained, or prevented by court order from conducting a material part of its business or if a judgment or other claim becomes a Lien on a material portion of Borrower's assets, or if a notice of lien, levy, or assessment is filed against any of Borrower's assets by any government agency and not paid within 10 days after Borrower receives notice; 10.8 If there is a default in any agreement between Borrower and a third party that gives the third party the right to accelerate any Indebtedness exceeding $100,000 or that could cause a Material Adverse Change; 10.9 If a money judgment(s) in the aggregate of at least $50,000 is rendered against Borrower and is unsatisfied and unstayed for 10 days; or 6 10.10 If the Merger Agreement is terminated or abandoned at any time prior to the Effective Time (as defined in the Merger Agreement). 11. REMEDIES. Upon the occurrence of an Event of Default hereunder, Lender may, at its election, without notice of its election and without demand, do any one or more of the following, all of which are authorized by Borrower: 11.1 Declare all unpaid principal, accrued interest and other amounts owing hereunder immediately due and payable (provided, that upon the occurrence of an Event of Default described in SECTION 10.4 or 10.5, all such amounts shall become immediately due and payable without any action by Lender; provided further that, upon the occurrence of an Event of Default described in SECTION 10.10, such amounts may not be declared immediately due and payable sooner than 90 days after the occurrence of such Event of Default); 11.2 Cease making Advances to or for the benefit of Borrower; and 11.3 Exercise any rights and remedies granted to Lender under the Security Agreement or under applicable law or equity. Lender's rights and remedies under this Note and the other Loan Documents are cumulative. 12. REPRESENTATIONS AND WARRANTIES. Except as set forth on the Schedule of Exceptions attached hereto (the "SCHEDULE"), Borrower represents and warrants to Lender that as of the date hereof, and as of the date of the Advance hereunder: 12.1 CORPORATE EXISTENCE AND POWER. (a) Borrower is a corporation duly organized, validly existing and in good standing under the laws of the State of California; (b) Borrower has the power and authority to conduct its business in the manner in which it is currently being conducted and is currently proposed to be conducted; and (c) Borrower has the power and authority to execute, deliver and perform this Note and to borrow money in accordance with its terms and has the power and authority to execute, deliver and perform each other Loan Document. Borrower is qualified and licensed to do business in, and is in good standing in, any state in which the conduct of its business or its ownership of property requires that it be qualified, except where the failure to do so could not reasonably be expected to cause a Material Adverse Change. Borrower has not changed its state of formation or its organizational structure or type or any organizational number (if any) assigned by its jurisdiction of formation. 12.2 VALID AND BINDING AGREEMENT. The execution, delivery and performance of this Note and each other Loan Document and the borrowings hereunder have been duly authorized by all requisite action of the Borrower, and do not conflict with Borrower's formation documents, nor constitute an event of default under any material agreement by which Borrower is bound. This Note and each other Loan Document constitute valid and binding obligations of the Borrower, enforceable against Borrower in accordance with their respective terms. Borrower is not in default under any agreement to which or by which it is bound in which the default could reasonably be expected to cause a Material Adverse Change. 12.3 FINANCIAL STATEMENTS. All of the financial statements of the Borrower delivered or to be delivered to Lender pursuant to the terms hereof are true and correct in all material respects, have been prepared in accordance with generally accepted accounting 7 principles ("GAAP") and fairly present the financial condition of Borrower as of the dates, and the results of operation for the fiscal period for which the same are furnished to Lender. Borrower has no material contingent obligations, liabilities for taxes, long-term leases or unusual forward or long-term commitments not disclosed by, or reserved against in the financial statements. 12.4 FINANCIAL CONDITION. Borrower is solvent, able to pay its debts as they mature, has capital sufficient to carry on its business and has assets the fair market value of which exceed its liabilities, and Borrower will not be rendered insolvent, under-capitalized or unable to pay maturing debts by the execution or performance of this Note, the Warrant or the Security Agreement. There has been no material adverse change in the business, properties or condition (financial or otherwise) of the Borrower since the date of the latest of the financial statements. 12.5 LITIGATION. Except as shown in the Schedule, there are no actions or proceedings pending or, to the knowledge of Borrower's Responsible Officers, threatened by or against Borrower in which a likely adverse decision could reasonably be expected to cause a Material Adverse Change. 12.6 REGULATORY COMPLIANCE. Borrower is not an "investment company" or a company "controlled" by an "investment company" under the Investment Company Act. Borrower is not engaged as one of its important activities in extending credit for margin stock (under Regulations T and U of the Federal Reserve Board of Governors). Borrower has complied in all material respects with the Federal Fair Labor Standards Act. Borrower has not violated any laws, ordinances or rules, the violation of which could reasonably be expected to cause a Material Adverse Change. None of Borrower's properties or assets has been used by Borrower or, to the best of Borrower's knowledge, by previous Persons, in disposing, producing, storing, treating, or transporting any hazardous substance other than legally. Borrower has timely filed all required tax returns and paid, or made adequate provision to pay, all material taxes, except those being contested in good faith with adequate reserves under GAAP. Borrower has obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all government authorities that are necessary to continue its business as currently conducted, except where the failure to do so could not reasonably be expected to cause a Material Adverse Change. 12.7 SUBSIDIARIES. Borrower does not own any stock, partnership interest or other equity securities except for Permitted Investments. 12.8 FULL DISCLOSURE. No written representation, warranty or other statement of Borrower in any certificate or written statement given to Lender (taken together with all such written certificates and written statements to Lender) contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained in the certificates or statements not misleading, with it being recognized by Lender that the projections and forecasts provided by Borrower in good faith and based upon reasonable assumptions are not viewed as facts and that actual results during the period or periods covered by such projections and forecasts may differ from the projected and forecasted results. 8 13. AFFIRMATIVE COVENANTS. On a continuing basis from the date of this Note until all indebtedness hereunder is paid in full and Lender no longer has an obligation to lend hereunder, Borrower covenants and agrees as follows: 13.1 USE OF PROCEEDS. Borrower shall use the proceeds of the Advance in accordance with Section 6 hereof. 13.2 ANNUAL FINANCIAL REPORTS. Borrower shall furnish to Lender, in form and reporting basis satisfactory to Lender, not later than one hundred eighty (180) days after the close of each fiscal year of Borrower beginning with the fiscal year ending December 31, 2004, audited financial statements of Borrower on a consolidated and consolidating basis containing the balance sheet of Borrower as of the close of each such fiscal year, statements of income and retained earnings and a statement of cash flows for each such fiscal year and such other comments and financial details as are usually included in similar financial statements; such financial statements shall be prepared according to GAAP and audited by independent certified public accountants of recognized standing selected by Borrower and acceptable to Lender and shall contain an unqualified opinion on such financial statements. 13.3 QUARTERLY UNAUDITED FINANCIAL STATEMENTS. Furnish to Lender, in form and reporting basis reasonably satisfactory to Lender, not later than thirty (30) days after the end of each fiscal quarter of Borrower, financial statements on a consolidated and consolidating basis containing the balance sheet of Borrower as of the end of each such period, a statement of profit and loss and a statement of cash flow for such quarter then ended, and such other comments and financial details as are usually included in similar reports. These statements shall be prepared on the same accounting basis as the statements required in SECTION 13.2 above and shall be in such detail as Lender may reasonably require, and the accuracy of the statements shall be certified by the chief executive or chief financial officer of Borrower. In addition, Borrower shall deliver to Lender such other business or financial information concerning Borrower and its Affiliates as Lender may reasonably request from time to time. 13.4 REPORTS, AUDIT. (a) Borrower will deliver to Lender: (i) a prompt report of any legal actions pending or threatened against Borrower or any Subsidiary that could result in damages or costs to Borrower or any Subsidiary of $100,000 or more; and (ii) budgets, sales projections, operating plans or other financial information Lender reasonably requests. (b) Borrower will allow Lender to audit the Collateral at Borrower's expense at such times as Lender reasonably determines are appropriate. 13.5 GOVERNMENT COMPLIANCE. Borrower will maintain its legal existence and good standing and the legal existence and good standing of all Subsidiaries' in the applicable jurisdiction of formation and maintain qualification in each applicable jurisdiction in which the failure to so qualify would reasonably be expected to cause a material adverse effect on Borrower's business or operations. Borrower will comply, and have each Subsidiary comply, with all laws, ordinances and regulations to which such party is subject to the extent that noncompliance therewith could have a material adverse effect on Borrower's business or operations or could reasonably be expected to cause a Material Adverse Change. 9 13.6 TAXES. Borrower will make, and cause each Subsidiary to make, timely payment of all material federal, state, and local taxes or assessments (other than taxes and assessments which Borrower is contesting in good faith, with adequate reserves maintained in accordance with GAAP) and will deliver to Lender, on demand, appropriate certificates attesting to the payment. 13.7 PREFERRED SHAREHOLDERS. If the Merger Agreement is terminated and abandoned in accordance with its terms, Borrower shall (i) promptly notify Lender to that effect and (ii) within 30 days after such termination and abandonment, deliver to Lender evidence that each holder of the outstanding shares of Borrower's Series A Preferred and Series A-1 Preferred has waived his right to require Borrower to redeem such shares pursuant to Section 5 of Borrower's Fourth Amended and Restated Articles of Incorporation until all indebtedness hereunder is paid in full and Lender no longer has an obligation to lend hereunder. 14. NEGATIVE COVENANTS. On a continuing basis from the date of this Note until all indebtedness hereunder is paid in full and Lender no longer has an obligation to lend hereunder, Borrower will not do any of the following without Lender's prior written consent: 14.1 CHANGES IN BUSINESS, OWNERSHIP, MANAGEMENT OR BUSINESS LOCATIONS. Engage in or permit any of its Subsidiaries to engage in any business other than the businesses currently engaged in by Borrower or reasonably related thereto or except upon consummation of the Merger (as defined in the Merger Agreement), have a material change in its ownership of greater than 25% (other than by the sale of Borrower's equity securities in a public offering or to venture capital investors so long as Borrower identifies the venture capital investors prior to the closing of the investment). Borrower will not change the persons holding the offices of Chief Executive Officer or Chief Financial Officer (each a "Senior Executive") unless a replacement is approved by a majority of Borrower's Board of Directors, including a majority of those members of the Board of Directors who were members of the Board of Directors and not employees of Borrower as of the date of this Agreement (the "Outside Directors"), within 90 days of the date of the termination of such Senior Executive, provided that if a majority of the Outside Directors determine that such Senior Executive shall not be replaced, that Borrower shall so notify Lender within 30 days of the determination. 14.2 MERGERS OR ACQUISITIONS. Except for the Merger, merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with any other Person, or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock or property of another Person, except where: (i) no Default or Event of Default has occurred and is continuing or would result from such transaction and (ii) such transactions do not in the aggregate exceed $100,000. A Subsidiary may merge or consolidate into another Subsidiary or into Borrower as long as no Default or Event of Default is occurring prior thereto or arises thereafter and Borrower is the surviving corporation in the case of a merger into Borrower. 14.3 INDEBTEDNESS. Create, incur, assume, or be liable for any Indebtedness, or permit any Subsidiary to do so, other than Permitted Indebtedness. 14.4 DISTRIBUTIONS; INVESTMENTS. Directly or indirectly acquire or own any Person, or make any Investment in any Person, other than Permitted Investments or mergers or 10 acquisitions not prohibited by Section 14.2 above, or permit any of its Subsidiaries to do so. Pay any dividends or make any distribution or payment or redeem, retire or purchase any capital stock, except (a) dividends and distributions payable solely in capital stock of Borrower and (b) repurchases of stock from former employees, consultants or directors of Borrower under the terms of applicable repurchase agreements in an aggregate amount not to exceed $50,000 in the aggregate in any fiscal year, provided that no Default or Event of Default has occurred, is continuing or would exist after giving effect to any such repurchase. 14.5 TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter into or permit to exist any material transaction with any Affiliate of Borrower except for transactions that are in the ordinary course of Borrower's business, upon fair and reasonable terms that are no less favorable to Borrower than would be obtained in an arm's length transaction with a nonaffiliated Person. 14.6 SUBORDINATED DEBT. Make or permit any payment on any Subordinated Debt, except under the terms of the Subordinated Debt, or amend any provision in any document relating to the Subordinated Debt without Lender's prior written consent. 14.7 COMPLIANCE. Become an "investment company" or a company controlled by an "investment company," under the Investment Company Act of 1940 or undertake as one of its important activities extending credit to purchase or carry margin stock, or use the proceeds of any Credit Extension for that purpose; fail to meet the minimum funding requirements of ERISA, permit a Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair Labor Standards Act or violate any other law or regulation, if the violation could reasonably be expected to have a material adverse effect on Borrower's business or operations or would reasonably be expected to cause a Material Adverse Change, or permit any of its Subsidiaries to do so. 15. WAIVER. Borrower waives presentment and demand for payment, notice of dishonor, notice of nonpayment, protest and notice of protest, and all other notices and demands in connection with or relating to this Note. Borrower further waives any requirement that Lender proceed against, or exercise any right or remedy to which Lender is entitled, with respect to the Collateral. Borrower promises to pay all costs of collection when incurred, including, without limitation, reasonable attorneys' fees, costs and other expenses. The right to plead any and all statutes of limitations as a defense to any demands hereunder is hereby waived to the full extent permitted by law. 16. NO WAIVER BY LENDER. The waiver by Lender, or any holder hereof, of any of the terms of this Note will not be deemed to be, nor does the same constitute, a waiver of a future breach or default on the part of Lender. No failure on the part of Lender to exercise, and no delay in exercising, any right, power or privilege hereunder operates as a waiver thereof; nor does any single or partial exercise of any right, power or privilege hereunder by Lender preclude any other or further exercise thereof, or the exercise of any other right, power or privilege by Lender. Any waiver by Lender or the holder hereof of any provision of this Note and any consent by Lender or the holder hereof to the departure from the terms of any provision of this Note is effective only in the specific instance and for the specific purpose for which given. 11 No notice or demand on Borrower in any case entitles Borrower to any other or further notice or demand in similar or other circumstances. 17. NO SET-OFFS BY BORROWER. All sums payable by Borrower pursuant to this Note, the Security Agreement or any other documents executed in connection herewith shall be payable without set-off or reduction of any manner whatsoever. 18. WAIVER OF JURY TRIAL. The parties hereby irrevocably waive any and all right to trial by jury in any legal proceeding arising out of or related to this Note or the transactions contemplated hereby. 19. NOTICES. Any notice, request, or other communication shall in writing and shall be given by personal delivery, national overnight courier, or by certified or registered United States mail, postage prepaid to the addresses set forth on the signature page hereof. Notices shall be effective upon receipt or when proper delivery is refused. In case of service by mail, notices shall be deemed complete at the expiration of the second (2nd) business day after mailing. Either party may change its address for purposes of notice by giving notice of such change of address to the other party in accordance with the provisions of this SECTION 19. 20. GOVERNING LAW. This Note shall be governed by, and construed and enforced in accordance with, the laws of the State of California, excluding conflict of laws principles that would cause the application of laws of any other jurisdiction. 21. ENTIRE AGREEMENT. This Note, the Security Agreement and the other Loan Documents constitute and contain the entire agreement between Borrower and Lender respecting the subject matter hereof, and supersede any and all prior agreements, negotiations, correspondence, understandings and communications among the parties, whether written or oral, respecting the subject matter hereof. 22. SUCCESSORS AND ASSIGNS. The provisions of this Note shall inure to the benefit of and be binding on any successor to Borrower and shall extend to any holder hereof. Neither this Note not any rights hereunder may be assigned by Borrower without the Lender's prior written consent. Lender may assign this Note and its rights hereunder at any time without consent of or notice to Borrower. 23. SEVERABILITY OF PROVISIONS. Each provision of this Note is severable from every other provision in determining the enforceability of any provision. 24. AMENDMENTS AND WAIVERS IN WRITING. None of the terms or provisions of this Note may be waived, altered, modified or amended except by an instrument in writing, duly executed by Borrower and Lender. 25. COUNTERPARTS. This Note may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, are an original, and all taken together, constitute one Note. 26. INDEMNIFICATION. Borrower will indemnify, defend and hold harmless Lender and its officers, employees, and agents against: (a) all obligations, demands, claims, and 12 liabilities asserted by any other party in connection with the transactions contemplated by the Loan Documents; and (b) all losses or Lender Expenses incurred, or paid by Lender from, following, or consequential to transactions between Lender and Borrower (including reasonable attorneys fees and expenses), except for losses caused by Lender's gross negligence or willful misconduct. 27. SURVIVAL. All covenants, representations and warranties made in this Note continue in full force while any Obligations remain outstanding. The obligations of Borrower in Section 26 to indemnify Lender will survive until all statutes of limitations for actions that may be brought against Lender have run. 28. DEFINITIONS. 28.1 Accounting terms not defined in this Note will be construed following GAAP. Calculations and determinations must be made following GAAP. The term "financial statements" includes the notes and schedules. The terms "including" and "includes" always mean "including (or includes) without limitation," in this or any other Loan Document. 28.2 The following capitalized terms not otherwise defined herein shall have the respective meanings set forth below or in the Security Agreement: "Accounts" are all existing and later arising accounts, contract rights, and other obligations owed Borrower in connection with its sale or lease of goods (including licensing software and other technology) or provision of services, all credit insurance, guaranties, other security and all merchandise returned or reclaimed by Borrower and Borrower's Books relating to any of the foregoing. "Affiliate" of a Person is a Person that owns or controls directly or indirectly the Person, any Person that controls or is controlled by or is under common control with the Person, and each of that Person's senior executive officers, directors, partners and, for any Person that is a limited liability company, that Person's managers and members. "Borrower's Books" are all Borrower's books and records including ledgers, records regarding Borrower's assets or liabilities, the Collateral, business operations or financial condition and all computer programs or discs or any equipment containing the information. "Contingent Obligation" is, for any Person, any direct or indirect liability, contingent or not, of that Person for (i) any indebtedness, lease, dividend, letter of credit or other obligation of another such as an obligation directly or indirectly guaranteed, endorsed, co made, discounted or sold with recourse by that Person, or for which that Person is directly or indirectly liable; (ii) any obligations for undrawn letters of credit for the account of that Person; and (iii) all obligations from any interest rate, currency or commodity swap agreement, interest rate cap or collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; but "Contingent Obligation" does not include endorsements in the ordinary course of business. The amount of a Contingent Obligation is the stated or determined amount of the primary obligation for which the Contingent Obligation is made or, if not determinable, the maximum reasonably anticipated liability for it 13 determined by the Person in good faith; but the amount may not exceed the maximum of the obligations under the guarantee or other support arrangement. "Default" shall mean any event or occurrence which with the passing of time or the giving of notice or both would become an Event of Default hereunder. "ERISA" is the Employment Retirement Income Security Act of 1974, and its regulations. "GAAP" is described in Section 12.3. "Indebtedness" is (a) indebtedness for borrowed money or the deferred price of property or services, such as reimbursement and other obligations for surety bonds and letters of credit, (b) obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease obligations and (d) Contingent Obligations. "Insolvency Proceeding" is any proceeding described in Section 10.4 or 10.5. "Investment" is any beneficial ownership of (including stock, partnership interest or other securities) any Person, or any loan, advance or capital contribution to any Person. "Lender Expenses" are all audit fees and expenses and reasonable costs and expenses (including reasonable attorneys' fees and expenses) for preparing, negotiating, administering, defending and enforcing the Loan Documents (including appeals or Insolvency Proceedings). "Loan Documents" are, collectively, this Note, the Security Agreement, the Warrant, and any other present or future agreement between Borrower and/or for the benefit of Lender in connection with this Note, all as amended, extended or restated. "Material Adverse Change" is described in Section 10.6. "Obligations" are debts, principal, interest, Lender Expenses and other amounts Borrower owes Lender now or later, including interest accruing after Insolvency Proceedings begin and debts, liabilities, or obligations of Borrower assigned to Lender. "Permitted Indebtedness" is: (a) Borrower's indebtedness to Lender under this Note or any other Loan Document; (b) Indebtedness to BFI under that certain Loan and Security Agreement (Short Form) dated as of March 9, 2004 (the "BFI Loan and Security Agreement") by and between Borrower and BFI in an amount not to exceed $1,000,000 in the aggregate at any one time, unless Borrower can maintain a higher loan balance without exceeding 60% of the Net Face Amount of Prime Accounts (as such terms are defined in the BFI Loan and Security Agreement); (c) Indebtedness to Xtrana in the amount of $500,000 evidenced by the Xtrana Note; provided that such Indebtedness shall no longer constitute Permitted Indebtedness after consummation of the Merger; (d) Subordinated Debt; (e) Indebtedness to trade creditors incurred in the ordinary course of business; (f) Indebtedness secured by Permitted Liens; and (g) Extensions, refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness as set forth in (a), (b), (c) and (f) above, provided that the principal amount thereof is not increased or the terms thereof are not modified to impose more burdensome terms upon Borrower or its Subsidiaries, as the case may be. "Permitted Investments" are: (a) Investments shown on the Schedule and existing on the date of this Note; and (b) (i) marketable direct obligations issued or unconditionally guaranteed by the United States or its agency or any State maturing within 1 year from its acquisition, (ii) commercial paper maturing no more than 1 year after its creation and having the highest rating from either Standard & Poor's Corporation or Moody's Investors Service, Inc., and (iii) any Investments permitted by Borrower's investment policy, as amended from time to time, provided that such investment policy (and any such amendment thereto) has been approved by Lender. "Person" is any individual, sole proprietorship, partnership, limited liability company, joint venture, company association, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or government agency. "Responsible Officer" is each of the Chief Executive Officer, the President, and the Chief Financial Officer of Borrower. "Schedule" is the attached schedule of exceptions. "Subordinated Debt" is debt incurred by Borrower subordinated to Borrower's indebtedness owed to Lender and which is reflected in a written agreement in a manner and form acceptable to Lender and approved by Lender in writing. "Subsidiary" is for any Person, or any other business entity of which more than 50% of the voting stock or other equity interests is owned or controlled, directly or indirectly, by the Person or one or more Affiliates of the Person As used herein the term "Subsidiary" shall mean a Subsidiary of Borrower unless otherwise indicated. 14 29. FAIR MARKET VALUE OF NOTE AND WARRANT. Lender and Borrower, as a result of arm's length bargaining, agree that: (i) the aggregate fair market value of this Note, if issued apart from the Warrant, is $1,470,000 and the aggregate fair market value of the Warrant, if issued apart from this Note, is $30,000; and (ii) all tax returns and other information return of each party relative to this Note and the Warrant shall consistently reflect the matters agreed to in (i). [Remainder of page intentionally left blank] 15 BORROWER ALPHA INNOTECH CORPORATION, a California corporation By: /s/ Haseeb Chaudry ------------------------------------------ Printed Name: Haseeb Chaudhry Title: Chief Executive Officer Notice Address for Borrower: 2401 Merced St. San Leandro, CA 94577 Attn: Haseeb Chaudhry LENDER Acknowledged and Agreed: ALEXANDRIA FINANCE, LLC, a Delaware limited liability company By: Alexandria Real Estate Equities, L.P., a Delaware limited partnership, its managing member By: ARE-QRS Corp., a Maryland corporation, its general partner By: /s/ Joel S. Marcus ------------------------ Its:_________________________ Notice Address for Lender: 135 N. Los Robles Avenue, Suite 250 Pasadena, CA 91101 Attn: Joel S. Marcus 16 EX-10 11 ex10-8.txt EX-10.8 EXHIBIT 10.8 LOAN AND SECURITY AGREEMENT This Loan and Security Agreement (as amended hereafter, this "Agreement") is entered into as of MARCH 9, 2004 and confirms the understanding and agreement by and between BFI BUSINESS FINANCE, a California corporation ("Lender"), with an address at 1655 The Alameda, San Jose, California 95126 and ALPHA INNOTECH CORPORATION, a(n) CALIFORNIA CORPORATION ("Borrower") regarding the loan to be made by Lender and Lender's terms and conditions. RECITALS A. Borrower has requested Lender to make loans to Borrower for business purposes. B. Lender is willing to make such loans to Borrower, on the terms and conditions set forth in the Agreement, and Borrower agrees to make the payments required by this Agreement and to comply with the other terms and conditions of this Agreement. AGREEMENT 1. Lender shall from time to time in Lender's sole discretion advance sums to Borrower up to EIGHTY PERCENT (80%) of the Net Face Amount of Prime Accounts (as defined below in Paragraph 6) and such other sums as Lender may determine (each, an "Advance" and collectively, "Advances"), but in no event shall the aggregate indebtedness (under this Agreement or under all Obligations) to Lender at any one time exceed without Lender's prior written approval, the sum of ONE MILLION AND 00/100 DOLLARS ($1,000,000.00) (the "Maximum Amount"). In the event that the balance owing under this Agreement exceeds the Maximum Amount, or in the event that said balance exceeds the percentage set forth above of the Value of Prime Accounts as determined by Lender, Borrower understands and agrees that Lender shall make no further Advances to the Borrower unless and until Borrower pays Lender the amount of such excess (each an "Overadvance"), and Borrower hereby promises to pay the Overadvance to Lender upon Lender's demand. 2. Each Advance and Borrower's total indebtedness to Lender shall be paid by Borrower as follows: (a) the delivery to Lender of all collections received by Borrower on Accounts assigned to Lender; (b) the delivery to Lender from time to time on demand, of a sum equal to the Net Face Amount (as defined in Paragraph 6) of all Accounts assigned to Lender and which remain uncollected more than ninety (90) days from the date of each invoice or which are more than sixty (60) days past due. In addition, Borrower's entire unpaid indebtedness, whenever and however created, shall become immediately due and payable upon the occurrence of an Event of Default (as defined in Paragraph 22) or in the case of termination, (as set forth in Paragraph 24), whether by notice, lapse of time or otherwise, whichever occurs first. Payments received shall be applied first against fees and costs, if any, then against interest and then against principal. Each accounting rendered by Lender to Borrower shall be deemed correct and binding unless Borrower notifies Lender in writing to the contrary within thirty (30) days after the date of each accounting rendered by Lender. 3. Advances hereunder shall bear interest, on the average daily outstanding balance, at the rate (the "Rate") of THREE PERCENTAGE POINT(S) (3.0%) PER ANNUM over and above the rate announced as the "prime" rate in the Western Edition of the Wall Street Journal which is in effect from time to time (the "Prime Rate"); provided that the Prime Rate shall at all times be deemed to be not less than FOUR PERCENT (4.00%) per annum (the "Deemed Prime Rate") and provided that the minimum amount of interest payable together with the Administrative Fees as defined in paragraph 4 hereof shall in no event be less than TWO THOUSAND AND 00/100 DOLLARS ($2,000.00) per month (the "Minimum Monthly Interest Payment"). In the event that the Prime Rate is changed, the adjustment in the Rate charged shall be made on the day such change occurs. The Prime Rate is a rate used by certain financial institutions as one of their index rates and serves as a basis upon which effective rates of interest are calculated for loans making reference thereto and may not be the lowest of such financial institutions' index rates. Interest shall be computed on the basis of a 360-day year for the actual number of days elapsed. Interest shall be due and payable monthly on the first day of each month, and if not so paid, shall bear interest at the Rate. At Lender's option, accrued interest may be charged as an Advance under this Agreement. Notwithstanding anything to the contrary contained in this Agreement, no payment made by check shall be deemed made until THREE (3) BUSINESS DAYS after receipt thereof by Lender, to allow for and subject to, clearance of such checks. 4. At the time of funding hereof and annually, every twelve (12) months, thereafter, Borrower agrees to pay Lender a loan fee of ONE PERCENT (1.0%) of the Maximum Amount (the "Loan Fee"). While any indebtedness remains outstanding pursuant to this Agreement, on or before the first day of each month, Borrower agrees to pay an administrative fee equal to ONE HALF OF ONE PERCENT (0.50%) per month of the average daily outstanding balance during the preceding month (the "Administrative Fee"). For purposes of computing the average daily outstanding balance during the month and the Administrative Fee payable on account thereof, payments made by check shall be applied as set forth in Paragraph 2 and 3 above. Borrower shall pay to Lender the fees and costs incurred by Lender in connection with the negotiation and preparation of this Agreement and the Loan Documents, including but not limited to attorneys' fees, audit fees, and recording fees. Lender has received or will receive a deposit in the amount of TWO THOUSAND FIVE HUNDRED AND 00/100 DOLLARS ($2,500.00) (the "Good Faith Deposit") to be applied against such fees and costs and an additional deposit in the amount of ----------N/A---------- AND 00/100 DOLLARS ($----------N/A----------) to be applied against legal fees and costs, (the "Legal Fee Deposit")(both collectively, the "Deposit"). Any unpaid portion of the Deposit shall be due and payable at the funding hereof. In the event that such fees and costs are less than the Deposit, any such excess amount will be applied to the Loan Fee, or if the Loan Fee has been paid in full, such excess amount shall be refunded to Borrower. Additionally, Borrower shall pay to Lender on demand SEMI-ANNUAL AUDIT FEES OF SEVEN HUNDRED FIFTY AND 00/100 DOLLARS ($750.00) each, plus actual out of pocket costs related to each audit. Page 1 of 11 5. This Agreement secures the following (a) Borrower's obligations under the Advances and this Agreement; (b) all of Borrower's other present and future obligations to Lender; (c) the repayment of (i) any amounts that Lender may advance or spend for the maintenance or preservation of the Collateral; and (ii) any other expenditures that Lender may make under the provisions of this Agreement or for the benefit of Borrower; (d) all amounts owed under any modifications, renewals or extensions of any of the foregoing obligations whether or not of the nature contemplated at the date hereof; (e) all other amounts now or in the future owed by Borrower to Lender; (f) any of the foregoing that arises after the filing of a petition by or against Borrower under the Bankruptcy Code, even if the obligations do not accrue because of the automatic stay under Bankruptcy Code ss.362 or otherwise; and (g) interest on the preceding amounts as agreed between Lender and Borrower, or if no such agreement, at the maximum rate permitted by law (collectively, the "Obligations"). These Obligations shall be secured by a continuing security interest in all of the personal property and trade fixtures now owned or hereafter acquired by Borrower whether now existing or hereafter arising and wherever located, together with all collateral now or hereafter described in any form UCC-1 filed against Borrower naming Lender as the secured party, including without limitation, (1) all Accounts; (2) all Chattel Paper including without limitation Electronic Chattel Paper; (3) all Inventory; (4) all Equipment; (5) all trade fixtures and all Fixtures if real property collateral is involved; (6) all Instruments; (7) all Investment Property; (8) all Documents; (9) all Deposit Accounts; (10) all Letter of Credit Rights; (11) all General Intangibles including without limitation copyrights, trademarks, and patents in all countries, Payment Intangibles and Software; (12) all Supporting Obligations; (13) any Commercial Tort Claim listed on any schedule provided herewith or hereafter; (14) all returned or repossessed goods arising from or relating to any Accounts or Chattel Paper; (15) all certificates of title and certificates of origin or manufacturers statements of origin relating to any of the foregoing, now owned or hereafter acquired; (16) all property similar to any of the foregoing hereafter acquired by Borrower; (17) all ledger sheets, files, records, documents, instruments, and other books and records (including without limitation related electronic data processing Software) evidencing an interest in or relating to the above; (18) all money, cash or cash equivalents; and (19) to the extent not otherwise included in the foregoing, all proceeds, products, insurance claims, and other rights to payment and all accessions to, replacements for, substitutions for, and rents and profits of, and noncash proceeds of each of the foregoing (all of the foregoing collectively, the "Collateral"). All of the foregoing terms, capitalized or otherwise, shall have the meaning given in the California Uniform Commercial Code, as amended from time to time (the "UCC"). Notwithstanding any contrary term of this Agreement, Collateral shall not include any waste or other materials that have been or may be designated as toxic or hazardous. Each new Advance (and all prior Advances, indebtedness or liabilities) shall be covered by this Agreement and all other security agreements that Borrower has then given or caused to be given to Lender. Except to the extent otherwise provided, this Agreement does not secure any obligation that is secured by a consensual lien on real property. 6. As used in this Agreement, unless otherwise indicated by the context, "Net Face Amount" shall mean with respect to an Account, the gross face amount of such Account less all trade discounts or other deductions to which the account debtor is entitled. "Prime Accounts" shall mean Accounts created by Borrower which: (a) are acceptable to Lender; (b) are creditworthy; (c) have been validly assigned to Lender; (d) as of the date of determination, are not more than sixty (60) days past due or remain uncollected more than ninety (90) days from the date of each invoice; and (e) strictly comply with all Borrower's warranties and representations to Lender. "Value" shall mean the lower of cost or fair market value. "Premises" shall mean 2401 MERCED STREET, SAN LEANDRO, CALIFORNIA 94577, the Borrower's chief executive office (the "Chief Executive Office"), and ----------N/A---------- Borrower's additional place(s) of business, collectively. 7. Borrower shall preserve Borrower's existence and not, in one transaction or a series of related transactions, (a) merge into or consolidate with any other entity, or sell all or substantially all of Borrower's assets; not change the Debtor's State, not change Borrower's legal name; (b) relocate its Chief Executive Office or Premises; or (c) open any new locations unless Borrower (1) gives thirty (30) days' prior written notification to Lender; and (2) executes and delivers, or causes to be executed and delivered, to Lender such agreements, documents, and instruments as Lender may deem reasonably necessary or desirable to protect Lender's interests in the Collateral at such locations, including without limitation, UCC-1 Financing Statements and waivers with an acknowledgement of Lender's interest from any landlord, bailee, or warehouseman in form and substance satisfactory to Lender. The Collateral, however, shall not at any time now or hereafter be stored with a landlord, bailee, warehouseman, or similar party without Lender's prior written consent and Lender's receipt of an acknowledgement from the third party that it is holding the Collateral for the benefit of Lender. Borrower will cooperate with Lender in obtaining possession or control, where Lender chooses to require possession or control in addition to the filing of a financing statement. Borrower will cooperate with Lender in obtaining possession or control with respect to Collateral consisting of Deposit Accounts, Investment Property, Letter of Credit Rights, and Electronic Chattel Paper. 8. Borrower shall not do business under any name other than ALPHA INNOTECH CORPORATION unless Borrower has provided to Lender evidence it has taken such legal steps required with respect to fictitious or assumed names under the applicable laws of the jurisdictions in which Borrower is located and/or does business. To that effect, Lender has received acceptable documentation indicating that Borrower will be doing business under the following additional name(s): ----------N/A----------. 9. So long as Borrower is indebted to Lender, Borrower warrants, represents and agrees that: (a) all Collateral in which a security interest has been or will be given or caused to be given by Borrower to Lender is and will be a first security interest on the property described in each such security agreement (except insofar as Borrower has notified Lender to the contrary in writing) and shall remain personal property at all times; (b) the property covered by all security agreements given or caused to be given by Borrower to Lender (1) is solely owned by Borrower, the party described in such security agreement; or (2) Borrower has rights in or the power to grant a security interest in such property; (c) the property covered by all security agreements given or caused to be given by Borrower to Lender (except for sales of Inventory in the ordinary course of business) is free and clear of all liens, encumbrances, security interests, adverse claims, or restrictions on transfer or pledge except as created by such Page 2 of 11 security agreements; (d) the Collateral covered by all security agreements given or caused to be given by Borrower to Lender is kept in good condition and repair, is not subject to waste, will not (except for sales of Inventory in the ordinary course of business) be affixed to any real property in any manner which would change the Collateral's nature from that of personal property to real property and/or fixture, or removed from the Premises described in such security agreements without first obtaining Lender's prior written consent; (e) all Collateral consisting of goods shall be located solely in CALIFORNIA or such other state as Lender consents to in writing, the "Collateral State(s)"; (f) all Accounts when delivered or otherwise transmitted to Lender pursuant to this Agreement will be Prime Accounts and will have been created by absolute sales of Borrower's merchandise or service, will be genuine, bona fide and collectible; (g) Accounts delivered or otherwise transmitted to Lender pursuant to this Agreement will not be subject to any dispute, right of offset, counterclaim, or right of cancellation or return; (h) at the time of delivery or transmission of Accounts to Lender pursuant to this Agreement, all property giving rise to such Accounts will have been delivered (from Premises in the United States) to, and unconditionally accepted by, each account debtor; (i) prior to the delivery and transmission of an Account to Lender pursuant to this Agreement, Borrower will have performed all things required by the terms of all agreements or purchase orders giving rise to such Account; (j) at the time of delivery or other transmission to Lender pursuant to this Agreement, all Accounts will be due and unconditionally payable on terms of thirty (30) days or less, or on such other terms (as are acceptable to Lender) which are expressly set forth on the face of all invoices, copies of which shall be delivered to Lender and no Account will then be past due; (k) Accounts do not consist of progress billings, bill and hold invoices or retainage invoices; (l) neither the account debtor nor any officer, employee or agent of the account debtor with respect to such Accounts is an officer, employee or agent of or affiliated with Borrower directly or indirectly by virtue of family membership, ownership, control, management or otherwise; (m) the account debtors with respect to such Accounts are not any foreign government, the United States of America, any State or any political subdivision, department, agency or instrumentality thereof; unless, if the account debtor is the United States of America, any state or any political subdivision, department, agency or instrumentality thereof, the Federal Assignment of Claims Act of 1940, as amended, or any similar State or local law, if applicable, has been complied with in a manner satisfactory to Lender; (n) Accounts of a single account debtor or its affiliates do not constitute more than twenty-five percent (25%) of all otherwise Prime Accounts (but the portion of the Accounts not in excess of such percentage may be deemed Prime Accounts); (o) Accounts are not owed by any account debtor who has Accounts unpaid more than ninety (90) days after the date of the original invoice therefore and which constitute more than twenty-five percent (25%) of the total Accounts from such account; (p) all facts, figures, representations given, or caused to be given by Borrower to Lender in connection with the Value of the Collateral or regarding each Advance or Account or pertaining to anything done under this Agreement shall be true and correct; (q) Borrower's books and records fully and accurately reflect all of Borrower's assets and liabilities (absolute and contingent), are kept in the ordinary course of business in accordance with GAAP, ) as defined in Paragraph 35) consistently applied and all information contained therein is true and correct; (r) the fair market value of the property covered by all security agreements given by Borrower to Lender, is and shall at all times be, not less than the price which Borrower paid therefor (less normal depreciation caused by ordinary wear and tear) and as represented to Lender; (s) Borrower will not borrow any money in excess of Ten Thousand and 00/100 Dollars ($10,000.00) in the aggregate, except pursuant to this Agreement without first obtaining the consent of Lender; (t) all taxes of any governmental or taxing authority due or payable by, or imposed or assessed against Borrower have been paid and shall be paid in full before delinquency; (u) there are no actions or proceedings pending by or against Borrower before any court or administrative agency, and there are no pending, threatened, or know to be imminent litigations, governmental investigations or claims, complaints, or prosecutions involving Borrower except as heretofore disclosed in writing to Lender; (v) Borrower has the legal power and authority to enter into this Agreement and to perform and discharge all of its obligations hereunder; (w) Borrower's exact legal name is as set forth in the first paragraph of this Agreement; (x) Borrower is a CORPORATION and Borrower will do all things necessary to preserve good standing as a CORPORATION under the laws of the State of CALIFORNIA, the state of Borrower's organization and the state(s) where Borrower conducts business, specifically CALIFORNIA; and (y) every payment falling due on Accounts assigned to Lender will be duly paid and received by Lender on or before the earlier of ninety (90) days from the date of each invoice or sixty (60) days from the due date of each invoice. Lender does not authorize, and Borrower agrees not to: (1) make any sales or leases of any of the Collateral outside of the ordinary course of business; (2) enter into an exclusive license of any of the Collateral, a license of any of the Collateral outside of the ordinary course of business or fail to notify Lender of any license permitted hereunder; or (3) grant any other security interest in any of the Collateral. To the extent Borrower uses Advances under this Agreement to purchase Collateral, Borrower's repayment of the Advances shall apply on a "first-in first-out" basis so that the portion of the Advances used to purchase a particular item of Collateral shall be paid in the chronological order in which Borrower purchased the Collateral. 10. Borrower agrees to execute upon demand by Lender any and all Financing Statements, Continuation Statements or other statements intended to perfect and/or continue Lender's security interest in the Collateral, in whatsoever form Lender may require including but not limited to an abbreviated Collateral description such as "All Assets of the Borrower", as provided for and defined in Division 9 of the California UCC, but Lender shall be entitled and is hereby expressly authorized to execute and file the same on Borrower's behalf, and Lender is hereby appointed Borrower's attorney-in-fact for such purpose. 11. Each warranty, representation, and agreement contained in this Agreement shall be automatically deemed repeated with each Advance and shall be conclusively presumed to have been relied on by Lender regardless of any investigation made, or information possessed by Lender. The warranties, representations and agreements set forth herein shall be cumulative and in addition to any and all other warranties, representations and agreements contained in any other document or instrument which Borrower shall give, or cause to be given, to Lender either now or hereafter. 12. Notwithstanding termination of this Agreement, all assignments, pledges, liens, and/or other security interest now or hereafter granted to Lender shall continue in full force until all of the Obligations owing to Lender have been paid. Page 3 of 11 13. Borrower shall promptly pay any and all expenses of storing, warehousing, insuring, handling and shipping of Borrower's property and any and all excise, property, sales and other taxes (providing Lender with evidence of payment thereof), security interest, encumbrances and liens, levied or imposed by any governmental or taxing authority on Borrower or on any of Borrower's property or any property caused to be given to Lender as security. If Borrower fails to promptly pay when due, whether to Lender or any other person, monies which Borrower is required to pay under any portion of this Agreement, Lender may, but need not, pay the same and charge Borrower's account therefore and Borrower shall promptly reimburse Lender therefor. Any and all sums shall become additional indebtedness owing to Lender and shall bear interest at the rate provided in Paragraph 3 hereof and shall be covered by all security now or hereafter given by Borrower or which Borrower causes to be given to Lender. Lender need not inquire as to, or contest the validity of, any such expense, tax, security interest, encumbrance or lien, and the receipt of the usual official for the payment thereof shall be conclusive evidence that the same was validly due and owing. 14. All documents to be delivered by Borrower shall contain such terms and be in such form as Lender may require. Each assignment, pledge or other security agreement shall include and cover all of Borrower's right, title and interest in property described therein and all of Borrower's books, records and files relating thereto. All ledger sheets, files, records and documents, files and records relating to Accounts, Inventory, or other Collateral assigned to Lender shall, unless delivered to or removed by Lender, be kept on the Premises in trust for, and without cost to Lender. Lender may at any time remove from the Premises all documents, files and records relating to the Collateral. 15. Prior to Lender's first verification of Inventory or audit of Borrower's Accounts, Lender may, in Lender's sole discretion, determine or redetermine the Value of Borrower's Inventory or Accounts by applying to Borrower's assigned Value thereof such percentage as Lender deems appropriate, based upon Lender's initial sample of other basis. Lender may likewise determine or redetermine the Value thereof between Lender's Inventory verifications and audits of Borrower's Accounts, based upon Lender's last preceding verification, audit, sampling, review, or other basis. 16. Borrower shall have the revocable privilege to collect at Borrower's expense the payments due on Accounts delivered or otherwise transmitted to Lender pursuant to this Agreement, upon the express condition, however, that all such collections shall (a) be received by Borrower in trust for Lender; (b) not be mingled with Borrower's funds; and (c) be delivered to Lender in kind within twenty-four (24) hours after Borrower's receipt of the same. Borrower's collection privilege as described above is subject to revocation by Lender at any time and shall be automatically revoked upon the happening of an Event of Default as defined below. Unless the instruments so received by Borrower are dishonored, or unless Borrower shall in Borrower's discretion have remitted the amount thereof to Lender, Lender shall credit the amount thereof against Borrower's indebtedness to Lender as set forth in Paragraphs 2 and 3 above. Lender is hereby irrevocably appointed Borrower's attorney-in-fact with authority and power to endorse Borrower's name on any checks, notes, acceptances, money orders, drafts, or other forms of payment or security that may come into Lender's possession; to sign Borrower's name on any invoice or bill of lading related to any Accounts, on drafts against account debtors, on schedules and assignments of Accounts, on verification of Accounts, and notices to account debtors; to establish a lock box arrangement and/or at Lender's sole discretion to notify the post office authorities to change the address for delivery of Borrower's mail; to receive and open all mail addressed to Borrower and to retain all mail relating to Lender's security, forwarding all other mail to Borrower; to send, whether in writing or by telephone, requests for verification of Accounts; and to do all things necessary to carry out this Agreement. Lender shall have the right at any time to enforce Borrower's rights against the account debtors and obligors. 17. If any property referred to or covered by any Account assigned to Lender shall remain in, or revert to, Borrower's possession, Borrower will forthwith set it apart, mark and designate it as Lender's Collateral and promptly notify Lender. 18. Borrower will prepare and deliver to Lender financial statements, balance sheets, profit and loss statements, schedules of Accounts, agings (listing the names and addresses of, and amounts owing by date, by account debtors), preliminary fiscal year end financial statements, reviewed fiscal year end statements and/or tax returns, and such other reports, analysis and operating data as Lender may from time to time reasonably request orally or in writing, all in form acceptable to Lender, but in any event shall provide the following: (a) Monthly internally prepared financial statements due within thirty (30) days of month end; (b) Monthly accounts payable aging due within fifteen (15) days of month end; (c) Payroll tax receipts due within thirty (30) days of payment. All taxes must be paid when due; (d) Preliminary year-end statements due within sixty (60) days of fiscal year end; and (e) Corporate tax returns and reviewed fiscal year end statements due within one hundred twenty (120) days of fiscal year end. 19. Lender or Lender's agents or employees shall have the right, during reasonable business hours if prior to an Event of Default and at any time if on or after an Event of Default, to have access to, examine, inspect and/or audit any or all of Borrower's books and records, including but not limited to minute books, ledgers, records indicating, summarizing or evidencing the assets (including Accounts, Inventory and Equipment) and liabilities, and all information relating thereto, records indicating, summarizing or evidencing Borrower's business operations or financial condition, and all computer programs, disc or tape files, printouts, runs and other computer prepared information and the equipment containing such information, and permit Lender or Lender's employees or agents to Page 4 of 11 copy and make extracts therefrom. Borrower hereby irrevocably authorizes all accountants and third parties to disclose and deliver to Lender at Borrower's expense all financial information, books and records, work papers, management reports and other information in their possession relating to Borrower. 20. Borrower shall accept no returns and shall grant no allowances or credits to account debtors without notifying Lender at the time credit is issued. Borrower shall maintain insurance at Borrower's expense on property given to Lender as security with such carriers, covering such risks and containing such amount of coverage and other terms (including an endorsement providing for non-cancellation except upon thirty (30) days' written notice to Lender and a loss payable endorsement, 438BFU, in Lender's favor) as Lender may from time to time specify in writing. Borrower shall promptly deliver to Lender copies of all policies, endorsements, evidence of premium payment, claims and reports to insurance carriers. 21. Borrower promises and agrees to pay all costs and expenses and all attorneys' fees incurred by Lender in connection with this Agreement and the transactions contemplated hereby (including without limitation the prosecution of motions or actions seeking relief from any stay or restraint under the United States Bankruptcy Code from pursuing any remedy hereunder), whether or not suit between Borrower and Lender is brought. Lender may bring all proceedings for collection in Lender's name or in Borrower's name and may exercise Borrower's right of stoppage in transit, replevin, and reclamation. Should an Event of Default occur, Borrower shall pay to Lender all costs reasonably incurred by Lender for the purpose of enforcing Lender's rights hereunder, including without limitation: (a) costs of foreclosure; (b) costs of obtaining money damages; and (c) a reasonable fee for the services of attorneys employed by Lender, whether outside counsel or in house counsel, for any purpose related to this Agreement or the obligations, including consultation, drafting documents, sending notices or instituting, prosecuting or defending litigation or arbitration, and in the case of bankruptcy, in providing debtor-in possession financing, in seeking relief from the automatic stay, and in prosecuting a complaint to determine dischargeability and other matters to enforce Lender's rights; and (d) costs, and expenses of third party claims or any other suit paid or incurred by Lender in enforcing or defending the Loan Documents and adjusting or settling disputes and claims with account debtors with respect to the Accounts; and Lender's reasonable attorneys' fees and expenses incurred in advising, structuring, drafting, reviewing, administering, amending, terminating, enforcing the Obligations. 22. Without limiting any other portion of this Agreement, all Borrower's indebtedness and Obligation shall automatically accelerate and become immediately due and payable, and the revocable collection privilege referred to in Paragraph 16 shall be automatically revoked, upon termination (by lapse of time or otherwise) of this Agreement or upon the happening of any one of the following which shall, at the option of Lender, constitute an "Event of Default": (a) Borrower's failure to make any payment to Lender when due, or any default under, or breach or violation of, any warranty, representation, obligation, agreement, condition or undertaking contained herein or in any other written document which Borrower now or hereafter executes and delivers, or which Borrower now or hereafter causes to be executed and delivered to Lender; (b) the Obligations at any time exceed the Maximum Amount (c) Any change in Borrower's business, (including, without limitation, the ownership thereof) or financial condition or that of any guarantor of any of Borrower's Obligations or indebtedness hereunder or any decline in the Value of any property given to Lender as security, which causes Lender to deem itself insecure; (d) The withdrawal or cancellation of any guarantor of any of Borrower's Obligations or indebtedness hereunder, or the termination of any subordination agreement whereby any indebtedness is subordinated to Borrower's Obligations; (e) The ceasing to do business as a going concern, or the assignment of any property for the benefit of creditors or the commission of any act of bankruptcy or insolvency, by or on the part of Borrower or any guarantor of any of Borrower's Obligations or indebtedness hereunder; (f) The filing by or against Borrower or any guarantor of any of Borrower's Obligations or indebtedness hereunder of any petition or application in bankruptcy, reorganization, arrangement, trusteeship or receivership, whether under the United States Bankruptcy Code or otherwise, or the appointment of a trustee or receiver over all or any part of the property or business of Borrower or any guarantor of any of Borrower's Obligations or indebtedness hereunder, or the levying of an attachment or garnishment on any of Borrower's property which is not released within ten (10) days; (g) Any of the property or Collateral covered by any of the security agreements given or caused to be given by Borrower to Lender is lost, secreted, misused, destroyed, transferred, or disposed of or is located in any state other than the Collateral State(s) unless Lender has so agreed in writing; (h) Borrower's failure to comply with, or become subject to any administrative or judicial proceeding under any federal, state or local (1) hazardous waste or environmental law; (2) asset forfeiture of property; or (3) other law, where noncompliance may have any significant effect on the Collateral; (i) Lender's receipt, at any time following the initial funding, of a report from the Secretary of State indicating that Lender's security interest is not prior to all other security interests or other interests reflected in the report; or (ii) Any delinquency on Borrower's part in paying any tax when it comes due. 23. Borrower waives presentment, demand, protest, and notice of dishonor as to any instrument. Borrower consents to any extensions, modifications, allowances, compromises or releases of security which Lender may grant, none of which shall release Borrower or any guarantors from, or affect, any of Borrower's or Guarantor's Obligations. 24. This Agreement shall be effective as of the date of the initial funding hereof and shall remain in full force and effect for a period of TWELVE (-12-) MONTH(S) (the "Basic Term"). Notwithstanding the preceding sentence, this Agreement shall be renewed automatically for successive periods (each, a "Renewal Term") equal to the Basic Term unless this Agreement is terminated by Borrower giving written notice (a "Termination Notice") to Lender specifying such termination. Termination Notices shall be given by mailing a registered or certified letter specifying such termination not less than thirty (30) days prior to the effective date of such termination, addressed to Lender at the address set forth herein, and the termination shall be effective as of the date fixed in such notice. Notwithstanding the foregoing, Lender reserves the right to terminate this Agreement at Lender's sole discretion upon giving thirty (30) days' prior written notice to Borrower or should Borrower be in default of one or more Page 5 of 11 rovisions of this Agreement, Lender may terminate this Agreement at any time without notice. After termination and when Lender has received all sums due, Lender shall reassign to Borrower all Collateral held by Lender, and shall execute a cancellation of, and/or reconveyance under, all security agreements given by Borrower to Lender. 25. The Obligations may be prepaid by Borrower at any time and to the extent such Prepayment occurs, Borrower shall pay to Lender a fee equal to the amount of the Minimum Monthly Interest Payment times the number of months remaining in the Basic Term or Renewal Term, as applicable (the "Prepayment Fee"). In addition, Borrower shall also pay any prepayment fees or penalties provided for in any other agreement with Lender. "Prepayment" includes any payment or other reduction of the balance of the Obligations, regardless of whether such payment or other reduction (a) is voluntary or involuntary; (b) is occasioned by Lender's acceleration of the Obligations or demand hereunder; (c) is made by Borrower or other third party, including Guarantor; (d) results from Lender's receipt or collection of proceeds of Collateral, including insurance proceeds and condemnation awards; (e) results from Lender's exercise of Lender's right of setoff; and/or (f) is made during a bankruptcy, reorganization or other proceeding, or is made pursuant to any plan of reorganization or liquidation. 26. Borrower will reimburse Lender for all out-of-pocket expenses incurred by Lender, including, without limitation, the cost of title searches, title reports, title insurance, recording fees, filing fees, publication fees, attorneys' fees, appraisals, and all other expenses similar to the foregoing. If during the term hereof, Borrower fails to make any such payment required, Lender may, but need not, pay the same and charge Borrower's account therefor. 27. Lender may, in its discretion, make advances under this Agreement or under the Obligations to make any payments due from Borrower to Lender under this Agreement or any of the Obligations. Lender may also, in its sole discretion, reserve under this Agreement or under the Obligations, for amounts due under this Agreement or any of the Obligations 28. In case of any breach or default by Borrower, or the occurrence of any Event of Default described in Paragraph 22, or if Borrower fails or neglects to promptly pay any and all of their Obligations, when due, all of their Obligations shall, without notice or demand, become immediately due and payable at Lender's option. Thereafter, all amounts outstanding shall bear interest at the rate of an additional THREE PERCENT (3.0%) per annum in excess of the Rate (the "Default Rate"). Upon the occurrence of any such Event of Default Lender may immediately, or at any time or times thereafter, without any demand or notice to Borrower or any guarantor of any of the Obligations and without advertisement or notice, all of which are expressly waived, commence an action for the recovery of any and all such Obligations, commence proceedings, without giving any warranties of merchantability, fitness for purpose, title or similar warranty, to sell, lease or otherwise dispose of any and all Collateral covered by this Agreement and by all security agreements given or caused to be given by Borrower to Lender or, without legal proceedings, enter such places as any of such Collateral may be found and take possession of such Collateral and sell the same. Such Collateral may be sold where it is located at the time of the breach or default, or elsewhere, at public or private sale, for cash, upon credit or otherwise at Lender's sole option and discretion. Lender waives any requirements that such property be physically present at the place of sale. Lender shall provide Borrower such notice of any private or public sale as may be reasonable. Lender has no obligation to clean up or otherwise prepare the Collateral for sale. Lender may specifically disclaim any warranties of title or any similar warranty. Any person, including Lender, may purchase at any such sale, free from any right of redemption which is expressly waived by Borrower, and if Lender is the purchaser, may turn all or part of any of Borrower's indebtedness to Lender in toward payment of the purchase price. The proceeds of any such sale or other disposition shall be applied, first to all expenses of setting all liens and claims against, and all costs, charges and expenses incurred in taking, removing, holding, repairing and selling such Collateral, including without limitation, all attorneys' fees and costs incurred by Lender, and second, to the payment of all Obligations, whether due, or to become due, and whether arising under this Agreement or otherwise. The surplus, if any, shall be delivered to Borrower. Borrower shall pay any deficiency forthwith. 29. All notices or demands hereunder shall be in writing and sent by certified, first class mail. They shall be deemed received when deposited in a United States Post Office Mail Box, postage paid, properly addressed to Lender or Borrower at the addresses set forth herein or to such other address as Lender or Borrower may from time to time specify in writing. 30. Borrower has the risk of loss of the Collateral Lender shall not be liable or responsible for the safekeeping of any Collateral. Lender shall not be responsible for any lost profits of Borrower arising from any breach of contract, tort (excluding the Lender's gross negligence or willful misconduct), or any other wrong arising from the establishment, administration, or collection of the Obligations. Lender has no duty to collect any income accruing on the Collateral or to preserve any rights relating to the Collateral. 31. Borrower hereby releases and exculpates Lender, Lender's officers, employees, agents, designees, attorneys, directors, shareholders, and accountants from any liability arising from any acts under this Agreement, the documents executed in connection with this Agreement or subsequent to this Agreement or in furtherance thereof, whether of omission or commission, and whether based upon any error of judgment or mistake of law or fact, except for gross negligence or willful misconduct. In no event shall Lender have any liability to Borrower for lost profits or other special or consequential damages. 32. If there are two or more Borrowers, then (a) regardless of the form of Lender's check or other papers, Advances hereunder shall be deemed to be made to each and all Borrowers and each Borrower shall be jointly and severally obligated to repay the Obligations; (b) each Borrower jointly and severally makes, and is liable for, each and every warranty, representation, obligation, covenant and undertaking under this Agreement; (c) when permitted by the context, the word "Borrower" shall include and mean all, or any one of the undersigned Borrowers; (d) each Borrower hereby waives its rights of subrogation, reimbursement, indemnification, and contribution and Page 6 of 11 any other rights and defenses that are or may become available to any Borrower by reason of Sections 2787 to 2855, inclusive of the California Civil Code; (e) each Borrower waives all rights and defenses it may have if this Agreement is secured by real property, which means, among other things: (1) Lender may collect from any Borrower without first foreclosing on any real or personal property collateral pledged by Borrower; and (2) if Lender forecloses on any real property collateral pledged by any Borrower: (i) the amount of the debt may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price; and (ii) Lender may collect from any Borrower even if Lender, by foreclosing on the real property collateral, has destroyed any right any Borrower may have to collect from any other Borrower. This is an unconditional and irrevocable waiver of any rights and defenses any Borrower may have because Borrower's debt is secured by real property. These rights and defenses include, but are not limited to, any rights or defenses based upon Section 580a, 580b, 580d, or 726 of the Code of Civil Procedure; (f) each Borrower waives all rights and defenses arising out of an election of remedies by Lender, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for a guaranteed obligation, has destroyed any Borrower's rights of subrogation and reimbursement against the principal by the operation of Section 580d of the Code of Civil Procedure or otherwise, and each Borrower further waives any and all benefits or defenses, if any, arising directly or indirectly under any one or more of Sections 3116, 3118, 3119, 3419, 3605, 9504, 9505, and 9507 of the California Uniform Commercial Code; and (g) each Borrower hereby agrees that it is jointly and severally, directly, and primarily liable to Bank for payment and performance in full of all duties, obligations, and liabilities under this Agreement and each other document, instrument, and agreement entered into by any Borrower with or in favor of Lender in connection herewith, and that such liability is independent of the duties, obligations, and liabilities of any other Borrower or any other guarantor of the Obligations, as applicable. Each reference herein to Borrower shall mean each and every Borrower that is a party hereto, individually and collectively, jointly and severally. 33. Lender's rights and remedies under this Agreement and all security agreements shall be cumulative and Lender shall have all other rights and remedies not inconsistent therewith as provided by law; no exercise by Lender of one right or remedy shall be deemed an election and no waiver by Lender of any default in Borrower's part shall be deemed a continuing waiver. No delay or omission by Lender shall constitute a waiver or election. This Agreement shall be binding when signed by Lender where indicated below and shall bind and inure to the benefit of heirs, legatees, executors, administrators, successors, and assigns of Lender and shall bind all parties which become bound as a borrower to this Agreement. However, Borrower may not assign this Agreement or any rights hereunder without Lender's prior written consent. No such consent by Lender shall release Borrower or any guarantor of any Obligation or indebtedness hereunder. Lender reserves the right to sell, assign, transfer, negotiate or grant participations in all or any part of, or any interest in, Lender's rights and benefits under each of the documents executed herewith or hereafter. In connection therewith, Lender may disclose all documents and information that Lender now has or may hereafter acquire relating to any credit extended by Lender to Borrower, or about Borrower or Borrower's business, any guarantor or the business of any guarantor, or any Collateral required hereunder. Lender may assign Lender's rights and interests under this Agreement. If an assignment is made by Lender, Borrower shall render performance under this Agreement to such assignee. Borrower waives and will not assert against any assignee any claims, defenses or set-offs that Borrower could assert against Lender except defenses that cannot be waived. 34. Paragraphs and paragraph numbers have been set forth herein for convenience only; unless the contrary is compelled by the context, everything contained in each paragraph applies equally to all paragraphs herein. Neither this Agreement nor any uncertainty, or ambiguity herein shall be construed or resolved against Lender or Borrower whether under any rule of construction or otherwise; on the contrary, this Agreement has been reviewed by all parties and shall be construed and interpreted according to the ordinary meaning of the words so used as to fairly accomplish the purposes and intentions of all parties hereto. When permitted by the context, the singular includes the plural and vice versa. No reference to "proceeds" in this Agreement authorizes any sale, transfer, or other disposition of the Collateral by Borrower. "Includes" and "including" are not limiting. "Or" is not exclusive. "All" includes "any" and "any" includes "all". Any reference herein to a "writing", a "written document", or an executed document shall also mean an "authenticated" writing or document or "authentication" (as defined in the UCC) unless Lender shall otherwise require an original writing. 35. This Agreement and all transactions contemplated hereunder and/or evidenced hereby shall be governed by, construed under, and enforced in accordance with the internal laws of the State of California without giving effect to conflicts of law principles. This Agreement and all agreements relating to the subject matter hereof are the product of negotiation and preparation by and among each party and its respective attorneys, and shall be construed accordingly. The parties waive the provisions of California Civil Code ss.1654. 36. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with GAAP. All other terms contained in this Agreement, which are not specifically defined herein, shall have the meanings provided in the UCC to the extent the same are used herein. All references herein to the singular or plural shall also mean the plural or the singular, respectively. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and pronouncements of the Financial Accounting Standards Board (or any successor authority) that are applicable as of the date of determination. 37. Any Collateral pledged to Lender to secure any obligation of Borrower shall also secure any other obligation of Borrower to Lender except that any real property pledged to secure any obligation of Borrower shall only secure any other obligation of Borrower if Lender specifically so agrees in writing. 38. An Event of Default under this Agreement shall be an Event of Default under the Obligations and vice versa. Page 7 of 11 39. Each and every provision of this Agreement shall be severable from every other provision for the purposes of determining legal enforceability of any such provision or provisions. 40. This Agreement embodies the entire agreement and understanding among and between the parties hereto with respect to the subject matter hereof, and supersedes all prior or contemporaneous agreements and understandings between said parties, verbal or written, express or implied, relating to the subject matter hereof. No promises of any kind have been made by Lender or any third party to induce Borrower to execute this Agreement. No course of dealing, course of performance or trade usage, and no parol evidence of any nature, shall be used to supplement or modify any terms of this Agreement. 41. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if all signatures were upon the same instrument. Delivery of an executed counterpart of the signature page to this Agreement by telefacsimile shall be effective as delivery of a manually executed counterpart of this Agreement, and any party delivering such an executed counterpart of the signature page to this Agreement by telefacsimile to any other party shall thereafter also promptly deliver a manually executed counterpart of this Agreement to such other party, provided that the failure to deliver such manually executed counterpart shall not affect the validity, enforceability, or binding effect of this Agreement. 42. ANY LAWSUIT OR OTHER PROCEEDING ARISING OR CONNECTED WITH THIS AGREEMENT OR THE SECURITY INTERESTS CREATED HEREUNDER SHALL, TO THE EXTENT PERMITTED BY LAW, BE BROUGHT AND TRIED SOLELY IN THE SUPERIOR COURT OF SANTA CLARA COUNTY, CALIFORNIA. BORROWER AND LENDER HEREBY WAIVE ANY RIGHT TO A JURY TRIAL IN ANY ACTION HEREUNDER OR ARISING OUT OF THE TRANSACTIONS BETWEEN BORROWER AND LENDER. This Loan and Security Agreement is subject to the terms and conditions set forth in Addendum A and the Environmental Rider attached hereto and made a part hereof. IN WITNESS WHEREOF, the parties hereto have caused this Loan and Security Agreement to be executed as of the date first set forth above. ALPHA INNOTECH CORPORATION ("Borrower") /s/ Haseeb R. Chaudry --------------------------------- By: Haseeb R. Chaudhry Its: C.E.O. BFI BUSINESS FINANCE ("Lender") /s/ David Drogos --------------------------------- By: David Drogos Its: President Page 8 of 11 ADDENDUM A TO LOAN AND SECURITY AGREEMENT Pursuant to this Addendum A to Loan and Security Agreement (this "Addendum"), the foregoing Loan and Security Agreement by and between BFI Business Finance and ALPHA INNOTECH CORPORATION (the "Agreement") is hereby amended and/or supplemented by the following terms and conditions, which are incorporated by this reference in this Agreement as the following additional paragraphs to this Agreement: 43. Lender agrees that Accounts of a foreign account debtor or its affiliates (each, a "Foreign Account") may be deemed to be Prime Accounts provided: (i) such Foreign Account otherwise is a Prime Account; (ii) Borrower has obtained credit insurance for each Foreign Account on terms, in amounts and from insurers satisfactory to Lender; and (iii) such Foreign Accounts do not constitute more than thirty-three and one third percent (33.33%) of all otherwise Prime Accounts (but the portion of such Foreign Accounts not in excess of such percentage may be deemed to be Prime Accounts). 44. Notwithstanding the provisions of Section 9 (s), Borrower has advised Lender of certain existing and unsecured debt (the "Existing Debt") in the form of several promissory notes (individually the "Note" and collectively the "Notes"). Borrower has also advised Lender that it intends to replace such Existing Debt as well as obtain additional unsecured funding from parties other than Lender (collectively the "Replacement Debt"). Lender hereby acknowledges and consents to such Replacement Debt providing Borrower (i) shall make no payment other than payment in full to any Note under the Existing Debt; (ii) Borrower shall have repaid in its entirety and replaced the Existing Debt no later than thirty (30) days from the funding hereof; (iii) any documentation executed in connection with the Replacement Debt shall include language acceptable to Lender making the payment of said Replacement Debt junior and subordinate to that of Lender, a copy of which shall be provided to Lender within five (5) days of the execution thereof; and (iv) the combined aggregate amount of all agreements to repay said Replacement Debt shall not at any one time be greater than the amount of TWO MILLION EIGHT HUNDRED TEN THOUSAND AND 00/100 DOLLARS ($2,810,000.00). In the event Borrower, during the first thirty (30) days after the funding hereof, shall not have obtained Replacement Debt sufficient to make payment in full on the Existing Debt leaving amounts still due, payable, and owing (the "Remaining Existing Debt"), Borrower shall obtain and provide to Lender agreements in form and substance acceptable to Lender making the payment of any and all obligations under the Remaining Existing Debt subordinate to that of Lender. Lender shall agree to an additional thirty (30) day period from the date of the funding hereof, but in any event not longer than a total of sixty (60) days from the funding hereof, during which Borrower shall obtain said agreements and provide Lender with evidence of same. Page 9 of 11 ENVIRONMENTAL RIDER This Environmental Rider (this "Rider") is entered into as of MARCH 9, 2004 and is hereby made a part of and incorporated into that certain LOAN AND SECURITY AGREEMENT (the "Agreement") dated MARCH 9, 2004 between BFI BUSINESS FINANCE, a California corporation ("Lender") and ALPHA INNOTECH CORPORATION, a(n) CALIFORNIA CORPORATION ("Borrower"). 1. Borrower hereby represents, warrants and covenants that none of the collateral or real property occupied and/or owned by Borrower has ever been used by Borrower or any other previous owner and/or operator in connection with the disposal of or to refine, generate, manufacture, produce, store, handle, treat, transfer, release, process or transport any hazardous waste, as defined in 42 U.S.C. 9601 (14) or any successor statute, all as amended from time to time ("Hazardous Substance" or "Hazardous Waste"), and Borrower will not at any time use the collateral or such real property for the disposal of, refining of, generating, manufacturing, producing, storing, handling, treating, transferring, releasing, processing, or transporting any such Hazardous Substance and/or Hazardous Waste. 2. None of the collateral or real property used and/or occupied by Borrower has been designated, listed or identified in any manner by the United States Environmental Protection Agency (the "EPA") or under and pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980 set forth at 42 U.S.C. 9601 et seq. ("CERCLA") or any successor statute, as amended from time to time, or the Resource Conservation and Recovery Act of 1986 set forth at 42 U.S.C. 9601 et seq. ("RCRA") or any successor statute, as amended from time to time, or any other environmental protection statute as a Hazardous Substance or Hazardous Waste disposal or removal site, superfund or cleanup site or candidate for removal of closure pursuant to RCRA, CERCLA or any other environmental protection statute. 3. Borrower has not received a summons, citation, notice, directive, letter or other communication, written or oral, from the EPA or any other federal or state governmental agency or instrumentality, authorized pursuant to an environmental protection statute, concerning any intentional or unintentional action or omission by Borrower resulting in the releasing, spilling, leaking, pumping, pouring, emitting, emptying, dumping or otherwise disposing of Hazardous Substance or Hazardous Waste into the environment resulting in damage thereto or to the fish, shellfish, wildlife, biota or other natural resources. 4. Borrower shall not cause or permit to exist, as a result of an intentional or unintentional action or omission on its part, or on the part of any third party, on property owned and/or occupied by Borrower, any disposal, releasing, spilling, leaking, pumping, omitting, pouring, emptying or dumping of a Hazardous Substance or Hazardous Waste into the environment where damage may result to the environment, fish, shellfish, wildlife, biota or other natural resources unless such disposal, release, spill, leak, pumping, emission, pouring, emptying or dumping is pursuant to and in compliance with the conditions of a permit issued by the appropriate federal or state governmental authority. 5. Borrower shall furnish to Lender: (a) Promptly and in any event within thirty (30) days after receipt thereof, a copy of any notice, summons, citation, directive, letter or other communications from the EPA or any other governmental agency or instrumentality concerning any intentional or unintentional action or omission on Borrower's part in connection with the handling, transporting, transferring, disposal or in the releasing, spilling, leaking, pumping, pouring, emitting, emptying or dumping of Hazardous Substance or Hazardous Waste into the environment resulting in damage to the environment, fish, shellfish, wildlife, biota and any other natural resource; (b) Promptly and in any event within thirty (30) days after the receipt thereof, a copy of any notice of or other communication concerning the filing of a lien upon, against or in connection with Borrower, the collateral or Borrower's real property by the EPA or any other governmental agency or instrumentality authorized to file such a lien pursuant to an environmental protection statute in connection with a fund to pay for damages and/or cleanup and/or removal costs arising from the intentional or unintentional action or omission of Borrower resulting from the disposal or in the releasing, spilling, leaking, pumping, pouring, emitting, emptying or dumping of Hazardous Substance or Hazardous Waste into the environment; (c) Promptly and in any event within thirty (30) days after the receipt thereof, a copy of any notice, directive, letter or other communication from the EPA or any other governmental agency or instrumentality acting under the authority of an environmental protection statute indicating that all or any portion of the Borrower's property or assets have been listed and/or that Borrower has been deemed by such agency to be the owner and operator of the facility that has failed to furnish to the EPA or other authorized governmental agency or instrumentality, all the information required by the RCRA, CERCLA or other applicable environmental protection statutes; and (d) Promptly and in no event more than thirty (30) days after the filing thereof with the EPA or other governmental agency or instrumentality authorized as such pursuant to an environmental protection statute, copies of any and all information reports filed with such agency or instrumentality in connection with Borrower's compliance with RCRA, CERCLA, or other applicable environmental protection statutes. 6. Any one or more of the following events which occur with respect to Borrower shall constitute an event of default: (a) The breach by Borrower of any covenant or condition, representation or warranty contained in this Rider; Page 10 of 11 (b) The failure by Borrower to comply with each, every and all of the requirements of RCRA, CERCLA or any other applicable environmental law, statute, or regulation on Borrower's other property; (c) The receipt by Borrower of a notice from the EPA or any other governmental agency or instrumentality acting under the authority of any environmental protection statute, indicating that a lien has been filed against any of the collateral, or any of Borrower's other property by the EPA or any other governmental agency or instrumentality in connection with a fund as a result of damage arising from an intentional or unintentional action or omission by Borrower resulting from the disposal, releasing, spilling, leaking, pumping, pouring, emitting, emptying or dumping of Hazardous Substances or Hazardous Waste into the environment; and (d) Any other event or condition exists which might, in the opinion of Lender, under applicable environmental protection statutes, have a material adverse effect on the financial or operational condition of Borrower or the value of all or any material part of the collateral or other property of Borrower. IN WITNESS WHEREOF, the parties hereto have caused this Environmental Rider to be executed as of the date first set forth above. ALPHA INNOTECH CORPORATION ("Borrower") /s/ Haseeb R. Chaudry --------------------------------- By: Haseeb R. Chaudhry Its: C.E.O. Page 11 of 11 EX-21 12 ex21-1.txt EX-21.1 EXHIBIT 21.1 ALPHA INNOTECH CORP. SUBSIDIARIES NAME JURISDICTION OF ORGANIZATION - ---- ---------------------------- Alpha Innotech Corporation.................... California EX-99 13 ex99-1c.txt EX-99.1 EXHIBIT 99.1 FOR IMMEDIATE RELEASE XTRANA, INC. AND ALPHA INNOTECH CORPORATION ANNOUNCE CLOSING OF REVERSE MERGER TRANSACTION, 1-FOR-10 REVERSE STOCK SPLIT AND NAME CHANGE October 4, 2005 -- XTRANA, Inc. (OTCBB: XTRN) and Alpha Innotech Corporation announced the closing, effective of as October 3, 2005, of the previously announced reverse merger transaction. Pursuant to an Agreement and Plan of Merger, Alpha Innotech Corporation was merged with a wholly-owned subsidiary of Xtrana, with Alpha Innotech Corporation being the surviving operating entity and becoming a wholly-owned subsidiary of Xtrana. As a result of the closing, the historical business operations of Alpha Innotech will comprise Xtrana's principal business operations going forward. Alpha Innotech was founded in 1992 and is headquartered in San Leandro, California. Alpha Innotech develops, manufactures and markets digital imaging and detection systems for the life science research and drug discovery markets. Alpha Innotech's goal is to combine instruments, reagents and bioinformatics software to offer integrated modular technology platforms for the electrophoresis, functional genomics, proteomics and cell analysis markets. Alpha Innotech had revenues of $10.5 million for the fiscal year ended December 31, 2004 and expects revenues to increase at least 15% for the year ending December 31, 2005 as compared to the prior year. Pursuant to the merger, all outstanding capital stock of Alpha Innotech Corporation was converted into the right to receive shares of Xtrana common stock and all outstanding Alpha Innotech Corporation stock options and warrants were converted into options and warrants to purchase Xtrana common stock. As a result of the merger, the former Alpha Innotech shareholders now hold approximately 83% of the outstanding common stock of the combined company and stockholders who held Xtrana common stock immediately prior to the merger now hold approximately 17% of the issued and outstanding common stock (excluding options and warrants). Alpha Innotech shareholders approved the merger earlier this month by written consent. Xtrana stockholders approved the merger at the annual stockholders meeting held yesterday. Additional information about the merger transaction, and Alpha Innotech Corporation, can be found in Xtrana's Definitive Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on August 12, 2005. In connection with the closing of the merger, Haseeb Chaudhry was appointed as the Chief Executive Officer of the Company and Darryl Ray, PhD, was appointed as the President, Chief Operating Officer and Acting Chief Financial Officer. In addition, in connection with the closing of the merger, the following directors were appointed as members of the Board of Directors: Haseeb Chaudhry, Darryl Ray, PhD, Nagesh Mahtre, PhD, and William Snider, in addition to two continuing directors of Xtrana, Michael D. Bick, Ph.D. and James H. Chamberlain. "We are very pleased with the results of the vote," stated Darryl Ray, President of the combined company. "We believe the merger will provide Alpha Innotech access to additional resources needed to implement our plans to grow our business through the introduction of innovative products for the life science and drug discovery markets." REVERSE STOCK SPLIT AND NAME CHANGE In connection with the merger, Xtrana shareholders also approved a one-for-ten reverse stock split and a proposal to change the name of the corporation from Xtrana, Inc. to Alpha Innotech Corp. The reverse stock split and name change were effective yesterday pursuant to a Certificate of Amendment to the Company's Certificate of Incorporation filed with the Delaware Secretary of State. The post-reverse-stock-split common stock of the Company is anticipated to start trading on the NASD Over-the-Counter Bulletin Board under the name Alpha Innotech Corp. on October 6, 2005. FORWARD-LOOKING STATEMENTS This press release contains forward-looking statements (identified by the words "estimate," "anticipate," "expect," "believe," and similar expressions), which are based upon management's current expectations and speak only as of the date made. These forward-looking statements are subject to risks, uncertainties and factors that could cause actual results to differ materially from the results anticipated in the forward-looking statements and include, but are not limited to, the timing of the introduction and success of new products by Alpha Innotech Corporation, Alpha Innotech Corporation's growth prospects, as well as other factors discussed in Xtrana's latest SEC Reports on Form 8-K, Form 10-KSB and Forms 10-QSB. CONTACT: Darryl Ray President Alpha Innotech Corporation (510) 483-9620 Dray@aicemail.com EX-99 14 ex99-2.txt EX-99.2 EXHIBIT 99.2 Alpha Innotech Corporation Unaudited Financial Information For the Six Months Ended June 30, 2005 Page ---- Condensed Consolidated Balance Sheets ................................... 2 Condensed Consolidated Statements of Operations ......................... 3 Condensed Consolidated Statement of Changes in Shareholders' Deficit .... 4 Condensed Consolidated Statements of Cash Flow .......................... 5 Notes to the Condensed Consolidated Financial Statements ................ 6-8 1 ALPHA INNOTECH CORPORATION Condensed Consolidated Balance Sheets As of June 30, 2005 and December 31, 2004 (in thousands, except share data) (Unaudited) June 30, Dec. 31, 2005 2004 -------- -------- ASSETS Current assets: Cash and cash equivalents ......................... $ 566 $ 40 Accounts receivable, net .......................... 1,261 1,975 Inventory, net .................................... 799 725 Prepaid expenses and other current assets ......... 110 170 -------- -------- Total current assets .......................... 2,736 2,910 Property and equipment, net ............................ 1,243 1,434 Other assets ........................................... 75 80 -------- -------- Total assets ............................. $ 4,054 $ 4,424 ======== ======== IABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND SHAREHOLDERS' DEFICIT Current liabilities: Accounts payable .................................. $ 1,918 $ 1,617 Accrued liabilities ............................... 1,092 1,089 Current portion of debt ........................... 1,635 1,610 Deferred revenue .................................. 586 575 Other current liabilities ......................... 167 181 -------- -------- Total current liabilities ..................... 5,398 5,072 -------- -------- Debt, less current portion ............................. 1,100 -- -------- -------- Commitments and contingencies .......................... -- -- -------- -------- Redeemable Convertible Preferred stock, no par value, authorized 24,000,000 shares: Series A, issued and outstanding 10,533,334 and 10,533,334 shares (liquidation value of $7,900 at June 30, 2005 and December 31, 2004) ..... 10,610 10,273 Series A-1, issued and outstanding 7,343,418 and 7,343,418 shares (liquidation value of $2,203 at June 30, 2005 and December 31, 2004) ..... 2,272 2,181 -------- -------- Total redeemable convertible preferred stock ...................... 12,882 12,454 -------- -------- Shareholders' deficit: Common stock, Series A, no par value per share: Authorized 60,000,000 shares Issued and outstanding 23,180,587 and 23,177,526 shares ................. 1,148 1,147 Accumulated deficit ............................... (16,474) (14,249) -------- -------- Total shareholders' deficit ................... (15,326) (13,102) -------- -------- Total liabilities, redeemable convertible preferred stock and shareholders' deficit ............. $ 4,054 $ 4,424 ======== ======== The accompanying notes are an integral part of these condensed consolidated financial statements. 2 ALPHA INNOTECH CORPORATION Condensed Consolidated Statements of Operations For the Six Months Ended June 30, 2005 and 2004 (in thousands, except share data) (Unaudited) June 30, June 30, 2005 2004 ------------ ------------ Revenue ........................................ $ 5,018 $ 4,810 Cost of goods sold ............................. 2,773 2,526 ------------ ------------ Gross profit .............................. 2,245 2,284 Operating expenses: Sales and marketing ....................... 2,428 1,939 Research and development expenses ......... 807 1,038 General and administrative expenses ....... 643 662 ------------ ------------ Total operating expenses .............. 3,878 3,639 ------------ ------------ Loss from operations ............. (1,633) (1,355) Other income (expense): Interest expense .......................... (159) (142) Other income (expense) .................... (5) (3) ------------ ------------ Total other income (expense) .......... (164) (145) ------------ ------------ Net loss .................................. (1,797) (1,500) Accretions on redeemable convertible preferred stock ............................ (428) (352) ------------ ------------ Net loss applicable to common shareholders $ (2,225) $ (1,852) ============ ============ Net loss per share - basis and diluted ......... $ (0.10) $ (0.08) ============ ============ Number of shares used in computing basis and diluted net loss per share 23,179,057 23,173,935 ============ ============ The accompanying notes are an integral part of these condensed consolidated financial statements. 3 ALPHA INNOTECH CORPORATION Condensed Consolidated Statement of Changes in Shareholders' Deficit For the Period Ended June 30, 2005 (in thousands, except share data) (Unaudited)
Redeemable Convertible Preferred Stock ---------------------------------------------- Series A Series A-1 Common Stock ---------------------- ---------------------- ---------------------- Number Number Number Accumulated of Shares Value of Shares Value of Shares Value Deficit Total ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Balance at January 1, 2005 . 10,533,334 $ 10,273 7,343,418 $ 2,181 23,177,526 $ 1,147 $ (14,249) $ (13,102) Accretion of preferred stock to redemption value ..... -- 21 -- 3 -- -- (24) (24) Accretion of cumulative preferred dividend ...... -- 316 -- 88 -- -- (404) (404) Exercise of common stock options for cash ........ -- -- -- -- 3,061 1 -- 1 Net loss ................... -- -- -- -- -- -- (1,797) (1,797) ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Balance at June 30, 2005 . 10,533,334 $ 10,610 7,343,418 $ 2,272 23,180,587 $ 1,148 $ (16,474) $ (15,326) ========== ========== ========== ========== ========== ========== ========== ==========
The accompanying notes are an integral part of these condensed consolidated financial statements. 4 ALPHA INNOTECH CORPORATION Condensed Consolidated Statements of Cash Flows For the Six Months Ended June 30, 2005 and 2004
June 30, June 30, 2005 2004 ------- ------- Cash flows from operating activities: Net loss ......................................................... $(1,797) $(1,500) Adjustments to reconcile net income to net cash used in operating activities: Depreciation ............................................ 331 388 Allowance for doubtful accounts ......................... 10 33 Interest on convertible notes payable ................... -- 24 Amortization of deferred stock-based compensation ....... -- 2 Change in operating assets and liabilities: Accounts receivables ......................................... 705 (94) Inventories .................................................. (74) 458 Prepaid expenses and other current assets .................... 60 (36) Other assets ................................................. 4 (2) Accounts payable ............................................. 301 448 Accrued liabilities .......................................... 3 158 Other accrued liabilities .................................... (14) (66) Deferred revenue ............................................. 11 (23) ------- ------- Net cash used in operating activities ................... (460) (210) ------- ------- Cash flows from investing activities: Purchase of property, plant and equipment ........................ (140) (149) ------- ------- Net cash used in investing activities ........................ (140) (149) ------- ------- Cash flows from financing activities: Proceeds from borrowing of debt obligation ....................... 1,500 800 Repayment of debt obligation ..................................... (375) (742) Proceeds from issuance of convertible notes ...................... -- 337 Proceeds from exercise of common stock options ................... 1 -- ------- ------- Net cash provided by financing activities .................... 1,126 395 ------- ------- Net increase in cash and cash equivalents ............... 526 36 Cash and cash equivalents - beginning of the period ................... 40 172 ------- ------- Cash and cash equivalents - end of the period .................... $ 566 $ 208 ======= ======= Supplemental disclosure of non-cash investing and financing activities: Accretion of preferred stock to redemption value ................. $ 428 $ 352 ======= =======
The accompanying notes are an integral part of these condensed consolidated financial statements. 5 ALPHA INNOTECH CORPORATION Notes to the Condensed Consolidated Financial Statements (in thousands, except share data) 1. Formation and Business of the Company GENERAL - Alpha Innotech Corporation and subsidiary (the "Company") was incorporated and began operations in June, 1992, in the state of California, with facilities in San Leandro, California. The Company develops and markets digital imaging systems for image documentation, quantitative analysis, and image archiving. These systems are used with electrophoresis samples (gel, blots, autoradiographs, etc), microscopy applications, and general imaging from insects to culture plates. The Company has a wholly owned subsidiary, Alpha Innotech Limited, which is located in the UK and commenced sales operation in September 2001. This office location closed its operations in August 2003. The Company obtained an additional convertible notes payable financing offering totaling $670 during March and September of 2004. However, the Company has incurred substantial losses and negative cash flows from operations. For the year ended December 31, 2004, the Company incurred a loss from operations of $3,298 and negative cash flows from operations of $1,299 and has a working capital deficiency as of December 31, 2004. Management expects operating losses to continue for the foreseeable future because of additional costs and expenses related to research and development activities. Failure to generate sufficient revenues, raise additional capital or reduce certain discretionary spending could have a material adverse effect on the Company's ability to achieve its intended business objectives. GOING CONCERN - The accompanying condensed consolidated financial statements have been prepared on a going concern basis that contemplates the realization of assets and discharge of liabilities in the normal course of business. From inception, the Company has incurred recurring losses from operation totaling approximately $13,600 and has been unable to generate positive cash flow from operations. These conditions raise substantial doubts about the Company's ability to continue as a going concern. The Company has been able to fund its operating losses to date primarily through the sale of preferred stock. The ability of the Company to manage its operating expenses to a level that can be financed by existing cash is critical to the Company's ability to continue as a going concern. Management plans to manage expenses and obtain additional funds through reverse merge with a public company. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty. 2. Summary of Significant Accounting Policies BASIS OF PRESENTATION - The accompanying interim condensed consolidated financial statements do not include all disclosures included in the consolidated financial statements for the year ended December 31, 2004, and therefore, these consolidated financial statements should be read in conjunction with these interim condensed consolidated financial in this filing. In the opinion of management, these interim condensed consolidated financial statements reflect all adjustments necessary for a fair presentation of the financial position, results of operations, and cash flows for the interim periods and dates presented. STOCK-BASED COMPENSATION - The Company has adopted the interim disclosure provisions of SFAS No. 148, "Accounting for Stock-based Compensation and Disclosures." Related interim disclosures are as follows. The Company Measures compensation expense for its employee stock-based compensation awards using the intrinsic value method and provides pro forma disclosures of net loss and loss per share as if a fair value has been applied. Therefore, compensation cost for employee stock awards is measured as the excess, if any, of the fair value of our common stock at the grant date or remeasurement date over the amount an employee must pay to acquire the stock and is amortized over the related service periods using the straight-line method. Compensation expense previously recorded for unvested employee stock-based compensation awards that are forfeited upon the employee termination is reversed in the period of forfeiture. 6 ALPHA INNOTECH CORPORATION Notes to the Condensed Consolidated Financial Statements (in thousands, except share data) 2. Summary of Significant Accounting Policies (Continued) Had compensation cost for the Company's stock option plans been determined based on the fair market value at the grant dates for stock options granted consistent with the provisions of SFAS 123, the expense, net of the related tax effect, would have been immaterial to the Company's net loss. 3. Balance Sheet Components JUNE 30, DEC. 31, 2005 2004 ------- ------- Accounts receivable, net Accounts receivable ................................. $ 1,353 $ 2,057 Less allowance for sales returns .................... (75) (35) Less allowance for doubtful accounts ................ (17) (47) ------- ------- Accounts receivable, net ........................ $ 1,261 $ 1,975 ======= ======= Inventory, net Raw materials ....................................... $ 872 $ 775 Finished goods ...................................... -- 18 Inventory in transit ................................ 41 13 Less allowance for excess and obsolete inventory .... (114) (81) ------- ------- Inventory, net .................................. $ 799 $ 725 ======= ======= Property and equipment, net Machinery and equipment ............................. $ 390 $ 353 Furniture and fixtures .............................. 208 203 Leasehold improvements .............................. 1,508 1,508 Loaner and demonstration units ...................... 1,128 1,110 Computers ........................................... 308 300 Software ............................................ 91 87 ------- ------- Property and equipment .......................... 3,633 3,561 Less accumulated depreciation and amortization ...... (2,390) (2,127) ------- ------- Property and equipment, net ..................... $ 1,243 $ 1,434 ======= ======= Accrued liabilities: Payroll and related ................................. $ 628 $ 626 Warranty ............................................ 107 101 Audit and tax accrual ............................... 35 73 Finder's fee ........................................ 198 175 Other ............................................... 124 114 ------- ------- Accrued liabilities ............................. $ 1,092 $ 1,089 ======= ======= 7 ALPHA INNOTECH CORPORATION Notes to the Condensed Consolidated Financial Statements (in thousands, except share data) 4. Xtrana On December 14, 2004, Xtrana, Inc. a Delaware corporation ("Xtrana"), AIC Merger Corporation, a California corporation and a wholly-owned subsidiary of Xtrana ("Xtrana Sub"), and the Company entered into an Agreement and Plan of Merger pursuant to which Xtrana Sub will be merged with and into the Company, with the Company continuing after the Merger as the surviving corporation and a wholly-owned subsidiary of Xtrana. This plan of merger was approved on October 3, 2005. 5. Debt On April 8, 2005, the Company secured a loan in the amount of $1,500 from Alexandria Finance, LLC. The loan bears interest at the rate of 12.5% per annum and the outstanding principal amount of the loan is due and payable in 30 equal monthly installments beginning on November 1, 2005. The obligations under the loan are secured by a second priority lien and security interest in substantially all assets of the Company. The Company has issued a seven-year warrant to purchase 900,000 shares of its common stock at a purchase price of $0.20 per share in connection with this loan financing. 8 -----END PRIVACY-ENHANCED MESSAGE-----