(EXHIBIT 10.2)
ORGANIZATIONAL STRUCTURE AND DEVELOPMENT AGREEMENT
THIS ORGANIZATIONAL STRUCTURE AND DEVELOPMENT AGREEMENT (the "OSD
Agreement") dated October 17, 1995 by and among DGI BIOTECHNOLOGIES, L.L.C., a
New Jersey limited liability company ("DGI"), New Brunswick Scientific Co.,
Inc., a New Jersey corporation ("NBS"), each of Richard J. Murphy, Arthur J.
Blume, Bill Kavanagh, Manus O'Donnell and Bernard Leon (collectively the
"Founders") and, to the extent it continues to exist, DGI TECHNOLOGIES INC., a
New Jersey corporation ("Inc.").
All capitalized terms not otherwise defined herein shall have that
meaning ascribed to them in the Acquisition Agreement.
W I T N E S S E T H:
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WHEREAS, NBS, Founders and Inc. are parties to a certain Technology
Acquisition Agreement (the "Acquisition Agreement") dated October 17, 1995 under
which NBS will acquire the Technology from Inc.; and
WHEREAS, it is a condition to the obligation of Inc. and of the
Founders under the Acquisition Agreement, including the obligation of Inc. to
transfer the Technology to NBS, that this OSD Agreement be executed and
delivered by each party hereto; and
WHEREAS, NBS and the Founders have formed DGI to develop the
Technology; and
WHEREAS, NBS has entered into an Assignment Agreement pursuant to which
NBS shall assign all of its right, title and interest under the Acquisition
Agreement to DGI; and
WHEREAS, NBS has agreed to provide certain funds to DGI to exercise the
rights of NBS under the Acquisition Agreement as assigned to DGI, for
operations, to acquire and lease certain equipment to DGI and to provide
laboratory space to DGI, all on the terms and conditions set forth herein; and
WHEREAS, the Founders require and NBS and DGI agree to the
organizational structure of DGI as set forth in its Operating Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations hereinafter set forth, the parties hereto agree as follows:
1. Structure of DGI and Exercise of Assigned Rights.
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(a) DGI is organized as a New Jersey limited liability company and is
governed by its Operating Agreement, dated October 17, 1995, in substantially
the form set forth in Exhibit A attached hereto.
(b) DGI shall, under the Assignment Agreement, exercise the rights of
NBS under the Acquisition Agreement. To that end NBS shall contribute, as a
capital contribution, $113,000 to DGI contemporaneously with the execution of
this Agreement.
2. Equipment.
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Subject to Section 11 of this OSD Agreement, NBS shall acquire
laboratory equipment identified by the Founders as necessary to the development
of the Technology up to a maximum aggregate cost of $775,000. NBS shall lease
such equipment to DGI on reasonable terms or DGI shall directly lease such
equipment with an NBS guarantee. NBS shall disburse funds (advanced as capital
contributions) in amounts sufficient to enable DGI to make lease payments for
equipment leased by or on behalf of DGI. DGI shall assist NBS in acquiring
equipment at the lowest reasonable cost. The Founders shall, prior to the
execution hereof, have delivered to DGI and NBS a list of equipment together
with the time such equipment is necessary, indicating which equipment is
necessary for each milestone set forth in the Technology Plan attached hereto as
Exhibit B (the "Technology Plan").
3. Laboratory Space.
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Prior to the execution and delivery hereof, the Founders shall deliver
a written statement of laboratory requirements, indicating any special
requirements for the laboratory space and stating when the laboratory is
necessary in terms of achieving the milestones set forth in the Technology Plan.
Subject to Section 11 of this OSD Agreement, NBS will modify an area of its
existing facility in Edison, New Jersey reasonably necessary to serve as the
laboratory for DGI. NBS shall be responsible for all costs associated with such
modification, provided, however, that such costs shall not exceed $125,000. The
laboratory is intended to provide reasonably suitable facilities for DGI to
develop the Technology.
4. Operating Funds.
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(a) Subject to Section 11(c) of this OSD Agreement, NBS shall provide
up to $2,825,000 (the "Maximum Amount") to DGI for operations, with such funds
to be advanced as capital contributed to DGI as required to fund budgeted
operating costs as certified by the Chief Operating Officer of DGI for the
ordinary business operations of DGI (including but not limited to salaries,
consulting fees and overhead). Funds under this Section shall be contributed by
NBS as follows:
(i) Up to $1,000,000 shall be contributed to DGI (as required and
subject to this Section) within the nine months (Phase I) following
the Starting Date (as defined in Section 5 hereof) to be used for
the creation of a universal biological library of scanners of target
surfaces.
(ii) Additional funds up to the Maximum Amount shall be
contributed to DGI (as required and subject to this Section) during
the period from 9 to 24 months (Phase II) following the Starting
Date to be used for the development of I.D. Simple Target Active
Scanners, provided, however, that DGI shall first have completed
Phase I.
(iii) Remaining funds up to the Maximum Amount shall be
contributed to DGI (as required and subject to this Section) during
the period from 10 to 24 months (Phase III) following the Starting
Date to be used for I.D. Complex Target Active Scanners and Sequence
Related Scanners, provided, however, that DGI shall first have
completed Phase II.
In connection with the foregoing, the Chief Operating Officer of DGI
shall have submitted a budget for the twenty four month period next following
the month in which the Closing occurs to the Managers of DGI and to NBS prior to
the execution and delivery of this OSD Agreement. Thereafter, NBS shall monitor
the budget on a monthly basis to ensure adherence to the budgeted expenses and
compliance with progress in meeting the established milestones. Neither DGI nor
any Manager shall incur an unbudgeted expense and NBS shall have no obligation
to provide funds for the same, subject to the authority under the Operating
Agreement of any Class A Manager specifically to authorize an unbudgeted
expenditure.
(b) NBS shall also provide funds to DGI as additional capital
contributions sufficient to pay the rental payments due on the leases of
equipment entered into consistent with Section 2 of this Agreement.
5. Establishment of Starting Date.
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For purposes of this OSD Agreement and particularly for the Technology
Plan and the milestones, the Starting Date shall be the date as promptly as
possible after the Closing when (i) DGI will have space at NBS' Edison facility
adequate to its immediate needs (which during Phase I need not include the
laboratory space NBS is to provide under Section 3 hereof); and (ii) the
equipment identified by the Founders on the equipment list (submitted to DGI
pursuant to Section 2 hereof) as necessary for Phase I shall be present and
operating at the DGI space at NBS' Edison facility. DGI shall certify the
Starting Date by a majority vote of its Board of Managers.
6. Representations and Warranties of the Founders and Inc.
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(a) Inc. and each of the Founders hereby reaffirm the accuracy and
completeness of each representation and warranty set forth in Article 3 of the
Acquisition Agreement.
(b) To the best of the knowledge of Inc. and each Founder, the
development of the Technology as contemplated hereunder does not conflict with
or require licensure under any Federal or New Jersey statute or regulation or
any order or judgment of any court or other tribunal with jurisdiction over Inc.
or the Founders.
7. Representations and Warranties of DGI.
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This OSD Agreement and the performance by DGI hereunder have been duly
authorized and do not conflict with its Operating Agreement or, to the best
knowledge of DGI, any Federal, New Jersey or local statute, regulation or
ordinance applicable to DGI or any order or judgment of any court or other
tribunal with jurisdiction over DGI.
8. Representations and Warranties of NBS.
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This OSD Agreement and the performance by NBS hereunder have been duly
authorized and do not conflict with its Certificate of Incorporation or Bylaws
or, to the best knowledge of NBS, any Federal, New Jersey or local statute,
regulation or ordinance applicable to NBS or any order or judgment of any court
or other tribunal with jurisdiction over NBS.
9. Survival of Representations and Warranties and Indemnification.
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The representations and warranties contained in Sections 6, 7 and 8
hereof shall continue during the term of this Agreement and survive termination
for a period of five (5) years from the Closing. Inc. and each of the Founders
hereby indemnifies and holds DGI and NBS harmless for any loss, liability,
damage or expense (including reasonable attorney's fees and other litigation
costs, regardless of outcome) resulting from any material breach, misstatement
or inaccuracy contained in Section 6 if, after receiving notice, such breach,
misstatement or inaccuracy is not cured or otherwise resolved within 45 days.
DGI and NBS hereby indemnify Inc. and hold each of the Founders harmless for any
loss, liability, damage or expense (including reasonable attorney's fees and
other litigation costs, regardless of outcome) resulting from any material
breach, misstatement or inaccuracy contained in Sections 7 and 8 if, after
receiving notice, such breach, misstatement or inaccuracy is not cured or
otherwise resolved within 45 days.
10. Claim of Infringement.
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If any person at any time asserts any claim with respect to the
Technology either that such other person has any right, title or interest in or
to the Technology and its exploitation by DGI or that the exploitation of the
Technology by DGI infringes upon or conflicts with any legally protected right,
title or interest of any other person (any of the foregoing being a "Claim of
Infringement"), the party hereto receiving such Claim of Infringement shall
promptly notify all other parties hereto.
11. Term and Termination.
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(a) The term of this Agreement shall commence upon the date of the
Closing and shall continue for a period of five (5) years unless earlier
terminated in accordance with this Section, unless the term is extended by
written agreement of the parties.
(b) If NBS breaches in any material respect its obligations under
Sections 2, 3 or 4 hereof or if DGI, having received adequate funds from NBS,
fails in any material respect to disburse funds for budgeted expenses in a
timely manner, then the Founders may give notice to NBS and DGI of such breach.
If such breach is not cured within 45 days, the Founders shall have the right,
upon tendering to DGI an amount in cash or cash equivalent, equal to the sum of
(x) all operating funds received by DGI from NBS and disbursed by DGI, and (y)
all funds advanced to DGI by NBS for all equipment lease payments, to reacquire
all right, title and interest in and to the Technology, as is, without any
express or implied warranty by DGI.
(c) If (i) any milestone specified in the Technology Plan is not timely
achieved in any material respect; or (ii) the Founders fail to perform under
this OSD Agreement in any material respect; or (iii) any Founder is in breach of
any of his confidentiality or non-competition obligations under Article 7 of the
Acquisition Agreement; or (iv) any representation of the Founders or Inc. in the
Acquisition Agreement or in this OSD Agreement is false or misleading in any
material respect; or (v) any Claim for Infringement is made, then DGI shall
promptly notify all parties to this OSD Agreement and if such non-achievement,
failure to perform, breach, falsehood or inaccuracy or Claim for Infringement is
not cured or otherwise resolved to the satisfaction of DGI (or in the case of a
Claim for Infringement, resolved pursuant to Section 11(g) of this Agreement),
NBS shall have the option to terminate its obligation to contribute funds, lease
equipment and provide space to DGI under Sections 2 or 4 of this OSD Agreement
or to expend funds to modify its Edison facility under Section 3 of this OSD
Agreement. In the case of (i), (ii) or (v) in the prior sentence, the Founders
may, thereafter, seek an alternative funding source if NBS chooses to terminate
its obligations hereunder. If such a source of funds is found and such source
and the terms of the alternative financing are reasonably acceptable to DGI, DGI
shall grant such source an interest in DGI.
(d) If Dr. Blume is no longer employed as President and Chief Operating
Officer of DGI, NBS shall have the option of terminating its obligations to fund
DGI, to lease equipment and to provide space under this OSD Agreement. If NBS
chooses to terminate its obligations hereunder, the Founders may thereafter seek
an alternative funding source. If such a source of funds is found and such
source and the terms of the alternative financing are reasonably acceptable to
DGI, DGI shall grant such source an interest in DGI.
(e) In any case under Section 11(b), (c)(i), (c)(ii) or (c)(v) or (d),
NBS shall in any event and notwithstanding a decision by NBS to cease further
support of DGI, for a period of up to six (6) months (i) continue to lease the
equipment then being leased to DGI; and (ii) continue to provide space to DGI,
such space to be provided at no cost to DGI.
(f) The determination as to whether a breach in any material respect
has occurred under subsection (b) of this Section or whether any of (i), (ii),
(iii) or (iv) in the first sentence of subsection (c) has occurred shall be made
by the party giving notice. If within 45 days any party receiving notice gives
written notice of disagreement, in all instances except a Claim of Infringement,
the matter shall be submitted for mediation to a professor at Rutgers, the State
University of New Jersey, Princeton University or other major university (or
another recognized figure in the appropriate scientific discipline) as
recommended by DGI's Scientific Advisory Board and reasonably acceptable to the
parties hereto. If after one (1) month from submission the parties have not
reached an amicable written resolution, the matter shall be submitted for
binding determination by a retired jurist from a recognized alternative dispute
resolution agency. During the period of any such mediation and/or binding
determination, DGI shall continue development of the Technology in accordance
with the Technology Plan and this Agreement and NBS shall continue its funding
obligations hereunder. DGI shall be responsible for costs of the mediator or of
the person making the binding determination.
(g) Any Claim of Infringement must be resolved with the person or
entity asserting the Claim of Infringement to the reasonable satisfaction of NBS
and DGI within 45 days.
12. Founders' Representative.
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The Founders hereby designate Richard J. Murphy as the Founders'
Representative to whom notices, reports or other correspondence to the Founders
under this OSD Agreement shall be sent. Further, the Founders' Representative is
expressly authorized by each of the Founders to execute and deliver any
modification, alteration, waiver or change to this OSD Agreement and to give any
consent or agreement permitted or required under this OSD Agreement, which if
executed and delivered or given, shall be binding upon and enforceable against
each of the Founders as though executed and delivered or given by him. This
authority given to the Founders' Representative to act as attorney in-fact for
each Founder is irrevocable and is coupled with an interest.
13. Miscellaneous.
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(a) This OSD Agreement shall be governed by and interpreted in
accordance with the laws of the State of New Jersey.
(b) Any notice report or other correspondence required or permitted to
be given hereunder shall be in writing and shall be sufficient if delivered
personally (including by means of recognized courier service for which a written
receipt is given) or by registered or certified mail, return receipt requested,
postage prepaid, as follows (or to such other address as shall be set forth in a
notice given in the same manner):
if to DGI:
DGI BioTechnologies, L.L.C.
40 Talmadge Road
Edison, New Jersey 08818
if to NBS:
New Brunswick Scientific Co., Inc.
44 Talmadge Road
Edison, New Jersey 08818
with a required copy to:
Peter D. Hutcheon, Esq.
Norris, McLaughlin & Marcus
721 Route 202-206
P.O. Box 1018
Somerville, New Jersey 08876-1018
if to Inc.:
DGI Technologies, Inc.
605 Valley Road
Upper Montclair, New Jersey 07042
if to Founders:
Dr. Arthur J. Blume
c/o DGI BioTechnologies, Inc.
40 Talmadge Road
Edison, New Jersey 08818
Richard Murphy
344 Highland Avenue
Ridgewood, New Jersey 07450
Bernard Leon
30 Buckingham Circle
Pine Brook, New Jersey 07058
Bill Kavanagh
c/o Kavanagh Organizational Planning
2nd Floor
605 Valley Road
Upper Montclair, New Jersey 07043
Manus O'Donnell
11 Cedar Green Lane
Berkeley Heights, New Jersey 07922
with a required copy to:
Bernard Leon, Esq.
30 Buckingham Circle
Pine Brook, New Jersey 07058
Any party may change the address by notification to the other parties
as provided in this Section.
(c) The OSD Agreement, the Acquisition Agreement, the Operating
Agreement, the Blume Employment Agreement and the Assignment Agreement,
including Exhibits attached thereto and hereto represent the entire
understanding of the parties with respect to the subject matter hereof, and
supersedes all prior agreements, negotiations, understandings, letters of
intent, representations, statements and writings between the parties. No
modification, alteration, waiver or change in any of the terms of this Agreement
shall be valid or binding upon the parties hereto unless made in writing and
duly executed by the party or parties to be charged. In the case of the
milestones established under the Technology Plan, NBS and DGI may by written
agreement signed by each of NBS and DGI, and without the consent of the
Founders, extend the time for DGI to reach a milestone and/or increase the
amount of funds contributed by NBS or costs borne by NBS in modifying its Edison
facility.
(d) The invalidity or unenforceability of any term, provision or clause
of this OSD Agreement shall not impair or affect the validity or enforceability
of any other provision of this OSD Agreement.
(e) This OSD Agreement shall be binding upon and inure to the benefit
of the successors and permitted assigns of the parties hereto. Without the prior
consent of DGI and NBS, neither any Founder nor Inc. may assign any of his or
its respective rights or obligations hereunder. Without the prior consent of the
Founders neither DGI nor NBS may assign any of its respective rights or
obligations hereunder. The foregoing shall not, however, have any impact upon
any change in ownership or control of NBS, which (should it occur) shall not
affect this OSD Agreement or the ownership of the Technology by DGI.
(f) This OSD Agreement may be executed in several counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one OSD Agreement. If this OSD Agreement is executed in counterparts, no party
shall be bound until all parties have duly executed and delivered a counterpart
of this OSD Agreement.
IN WITNESS WHEREOF each of the parties hereto has signed or caused its
thereto duly authorized person to sign this OSD Agreement on and as of the date
first above written.
NEW BRUNSWICK SCIENTIFIC CO., INC.
By:
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David Freedman
Chairman of the Board
DGI TECHNOLOGIES, INC.
By:
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Richard J. Murphy
Chairman of the Board/CEO
DGI BIOTECHNOLOGIES, L.L.C.
By:
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David Freedman
Chairman of the Board of Managers
Founders
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Arthur J. Blume
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Richard J. Murphy
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Bill Kavanagh
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Manus O'Donnell
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Bernard Leon