SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
June 26, 2002
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Date of Report
(Date of earliest event reported)
BioSyntech, Inc.
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(Exact Name of Registrant as Specified in Charter)
Nevada 0-27179 88-0329399
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
450 Boulevard Armand-Frappier, Laval, Quebec, Canada H7V 4B3
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(Address of Principal Executive Offices) (Zip Code)
(450) 686-2437
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(Registrant's telephone number,
including area code)
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(Former Name or Former Address, if Changed Since Last Report.)
Item 5. Other Events.
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Loan and Issuance of Warrants
Bio Syntech Canada Inc. (the "Borrower"), a wholly owned subsidiary
of BioSyntech, Inc. (the "Registrant"), borrowed the sum of CDN$2,500,000 (the
"Loan") pursuant to a certain Loan Agreement dated June 26, 2002 (the "Loan
Agreement") with Business Development Bank of Canada (the "Lender"). The
Borrower intends to use the proceeds of the Loan to finance its clinical
development efforts and for working capital.
The Loan bears interest at the rate of 10% per annum, compounded
monthly and calculated daily and payable on the maturity of the Loan. The
outstanding principal amount of the Loan and all accrued and unpaid interest are
due and payable on February 15, 2006. The Loan may be prepaid in minimum
increments of CDN$100,000.
To secure the Loan, the Borrower granted the Lender a security
interest on, subject to the terms of the Hypothec Agreement dated as of June 26,
2002 by and between the Lender and the Borrower (i) all of its present and
future movable and immovable properties (excluding patents); (ii) the land and
building where its principal place of business is currently located; (iii) all
its movable properties consisting of machinery, equipment, furniture and
fixtures (subject to certain encumbrances listed in the Loan Agreement); and
(iv) its present and future accounts receivable (subject to a prior security
interest of the National Bank of Canada).
The Loan is jointly and severally guaranteed by the Borrower's
parent, the Registrant, and the Borrower's affiliate, Biosyntech Europe S.A.R.L.
("BSE"). The Loan is also personally guaranteed by Dr. Amine Selmani, the
Registrant's and the Borrower's Chief Executive Officer and President, up to a
maximum amount of CDN$250,000.
Pursuant to the Loan Agreement, the Borrower, the Registrant and BSE
have agreed not to take certain actions without obtaining the written consent of
the Lender including, but not limited to:
(i) with certain exceptions, creating or permitting any lien to
exist on any of their present or future properties;
(ii) acquiring, either by purchasing shares or assets or merging
with, any other person or entity;
(iii) making a capital expenditure in excess of CDN$75,000, except
when pre-approved by the Board of Directors of the Borrower in
the annual business plan of the Borrower;
(iv) selling, transferring, leasing or disposing of any of their
respective properties;
(v) incurring any debt other than the Loan;
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(vi) redeeming, purchasing or repurchasing for cancellation or
retirement any of their respective securities or declaring or
paying any dividend, distribution or repayment of capital; and
(vii) changing the nature of their respective businesses.
As an inducement for the Lender to make the Loan, the Registrant
granted the Lender an immediately exercisable warrant (the "Warrant") to
purchase 1,000,000 shares of common stock, $.001 par value of BSI (the "Common
Stock"), at an initial exercise price of $0.33 per share. Upon exercise, the
Lender may pay the exercise price in cash or may elect to have shares withheld
by the Registrant from the shares otherwise to be received with such withheld
shares as payment, as long as the fair market value on the date of exercise is
greater than the exercise price (cashless exercise). The Warrant terminates on
June 26, 2007. The holder of the Warrant also received "piggy-back" registration
rights, subject to customary limitations, with respect to the resale of the
shares of Common Stock underlying the Warrant.
Dr. Amine Selmani and 9083-1496 Quebec, Inc., a corporation
incorporated under the Quebec Companies Act and controlled by Dr. Selmani
(together, the "Investors"), also entered into an Investor Rights Agreement with
the Borrower, the Registrant, BSE and the Lender that provides, among other
things, that (i) upon written request of the Lender, the Investors will vote all
the shares of Common Stock held by them for one nominee of the Lender in the
Board of Directors of each of the Borrower, the Registrant and BSE (each, a
"Board of Directors") and that the majority of the Board of Directors shall at
all times be composed of independent directors; and (ii) the Board of Directors
should be notified of any transaction with a related party, which shall be
carried out at fair market value. The Investor Rights Agreement requires the
Registrant to obtain the prior written approval of the Lender for corporate
actions by itself or its subsidiaries, including, but not limited to, any change
to articles of incorporation or bylaws, the issuance, redemption or purchase for
cancellation or retirement of any securities, the approval of the annual
business plan and budget, the making of any loans or the borrowing of any money,
any corporate reorganization, and any action which may result in a material
change in the nature of the Registrant's business.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(c) Exhibits. All documents are dated as of June 26, 2002 unless
otherwise indicated.
Exhibit
No. Exhibit Description
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10.1 Loan Agreement by and among BioSyntech Canada Inc. and
Business Development Bank of Canada.
10.2 Promissory Note by and among BioSyntech Canada Inc. and
Business Development Bank of Canada.
10.3 Hypothec Agreement by and between Business Development
Bank of Canada and BioSyntech Canada Inc.
10.4 Investor Rights Agreement by and among Business
Development Bank of Canada, BioSyntech, Inc.,
BioSyntech Canada Inc., Biosyntech Europe S.A.R.L.,
Amine Selmani and 9083-1496 Quebec Inc.
10.5 Warrant Subscription Agreement by and between
BioSyntech, Inc. and Business Development Bank of
Canada.
10.6 Warrant to Purchase Shares of Common Stock of
BioSyntech, Inc. issued to Business Development Bank of
Canada.
99.1 Press Release of BioSyntech, Inc. dated June 28, 2002.
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.
BioSyntech, Inc.
Dated: July 15, 2002 By: /s/ Amine Selmani
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Name: Amine Selmani
Title: Chief Executive Officer & President
