1
EXHIBIT 4.3
Bioanalytical Systems, Inc.
2701 Kent Avenue
West Lafayette, Indiana 47906
Primus Capital Fund II Limited Partnership
Suite 2700
One Cleveland Center
Cleveland, Ohio 44114
Attention: William C. Mulligan
Middlewest Ventures II, L.P.
20 North Meridian Street
Indianapolis, Indiana 46204
Attention: Thomas A. Hiatt
Dear Bill and Tom:
As you are aware, Bioanalytical Systems, Inc. (the "Company") intends
to file a registration statement on Form S-1 for the purpose of registering an
aggregate of 1.8 million shares of its Common Shares for sale to the public (the
"Offering") through underwriters led by Roney & Co. L.L.C. and The Ohio Company
(the "Underwriters"). The Common Shares being registered include Common Shares
subject to an over-allotment option to be granted to the Underwriters. It is
anticipated that the registration statement will be filed with the Securities
and Exchange Commission on or about September 26, 1997, and that the Offering
will be made on or about November 25, 1997. I have enclosed a draft of the
registration statement and schedules showing the pro forma share capitalization
of the Company prior to and after giving effect to the Offering. It is
anticipated that the public offering price of the Common Shares will be between
$9 and $11 per share.
This purpose of this letter is to confirm our agreement that:
1. Effective immediately prior to the time of the closing of the
underwriting agreement to be entered into between the Company and the
Underwriters with respect to the Offering (the "Underwriting Agreement") and
without the necessity of any further action on your part or on the part of the
Company (other that those actions required to deliver to you the certificates
representing the Common Shares to which you will be entitled as a result of the
conversion of the Convertible Preferred Shares and the split of the Common
Shares contemplated in connection with the Offering):
(a) All of the Convertible Preferred Shares of the Company held by
each of Primus Capital Fund II Limited Partnership ("Primus")
and Middlewest Ventures II, L.P.
2
("Middlewest"), aggregating 104,167 and 62,500 shares,
respectively will be converted into Common Shares in
accordance with the terms set forth in Section 2.3(c) of the
Articles of Incorporation of the Company, as amended (the
"Preferred Share Terms"), and you as holders of Convertible
Preferred Shares shall not have any rights under the Preferred
Share Terms with respect to the transactions contemplated by
the Underwriting Agreement. Simultaneously with your execution
of this letter, you will deliver to the Company: (i) the
certificates representing the Convertible Preferred Shares,
(ii) written notice of conversion and (iii) a proper
assignment of the certificates to the Company, as contemplated
by Paragraph 5 of the Preferred Share Terms, to be held by the
Company in escrow pending the satisfaction of the conditions
to the conversion of the shares described herein or returned
to you if those conditions are not met. We hereby confirm to
you that, based upon the current share capitalization of the
Company, each outstanding Convertible Preferred Share is
convertible into one Common Share of the Company, based upon
the Preferred Share Terms.
(b) The Share Purchase Agreement between Primus, Middlewest and
the Company dated as of March 15, 1991, shall be terminated
and of no further force or effect; provided, however, that the
termination of the Share Purchase Agreement shall not affect
the rights of the parties described in Exhibit E to the Share
Purchase Agreement (a copy of which is attached hereto) (the
"Registration Rights Agreement"), which shall continue in full
force and effect. You agree, however, that you will not
exercise your rights under Section 1 of the Registration
Rights Agreement at any time prior to the expiration of the
period set forth in the lock-up agreement required pursuant to
the Underwriting Agreement and that you will not exercise your
rights under Section 2 of the Registration Rights Agreement
with respect to the Offering.
(c) The Shareholders Agreement between you and the "Management
Shareholders" of the Company named therein, dated as of March
15, 1991, shall be terminated and of no further force or
effect. The Company agrees that, for so long as either of you
hold more than 5% of the outstanding Common Shares of the
Company, it will use its best efforts to cause one person
designated by that shareholder to be nominated for election to
the Board of Directors of the Company upon the expiration of
the term of office of the directorships now held by you or any
successive term. Consistent with the Company's past practice,
service on the Board would not entail compensation beyond out
of pocket expenses.
2. You will vote all of the Convertible Preferred Shares held by you in
favor of the approval of an amendment to the Articles of Incorporation of the
Company that, among other things, will (a) delete the current provisions of
Section 2.3(c) thereof, and (b) increase the number of authorized Preferred
Shares of the Company to 1,000,000 shares (the "Amended Articles of
Incorporation"). To that end, you hereby appoint Peter T. Kissinger and Ronald
E. Shoup, and either of them, with power of substitution, as your proxy and
agent with full power to attend any meeting
- 2 -
3
of shareholders of the Company and to vote on your behalf all of the Convertible
Preferred Shares outstanding in your names in favor of the approval of the
Amended Articles of Incorporation as described herein (or to execute a consent
to shareholder action in lieu of a meeting), and this proxy shall be deemed to
be coupled with an interest and shall not be subject to revocation by you
without the consent of the Company.
3. You agree to execute the lock-up agreement as required pursuant to
the Underwriting Agreement.
In the event that the Offering is not made on or before December 31,
1997, then your agreements set forth in paragraph 1 above shall terminate at the
close of business on that date. The Company agrees that the Amended Articles of
Incorporation described in paragraph 2 above shall not be filed with the
Secretary of State of Indiana and will not become effective until immediately
prior to the effective time of the closing of the Underwriting Agreement.
If this letter correctly sets forth the terms of our agreements, I
would appreciate it if you would sign and return the copy provided for that
purpose, and the documents described in paragraph 1(a) above (forms of which are
provided herewith). Thank you for your cooperation in this matter.
Very truly yours,
Bioanalytical Systems, Inc.
By:_______________________________
Peter T. Kissinger, President
Accepted and agreed to:
Primus Capital Fund II, L.P.
By: Primus Management II, General Partner
By: Primus Venture Partners, General Partner
By:______________________________
, General Partner
Date: ____________________, 1997
- 3 -
4
Middlewest Ventures II, L.P.
By: Middlewest Management Company, a General Partner
By: _______________________________________
, General Partner
Date: ____________________, 1997
- 4 -
5
EXHIBIT E
Registration of Common Shares
1. Required Registration. At any time and from time to time, upon the
receipt by the Company from an Investor of a written request for the
registration of all or any portion of the Common Shares owned by such Investor,
the Company shall prepare and file within 60 days of receipt of such request a
registration statement under the Securities Act of 1933 (the "1933 Act")
covering the Common Shares which are subject to such request and shall use its
best efforts to cause such registration statement to become effective within 120
days of receipt of such request. The Investors shall be entitled to an unlimited
number of registrations under this Section l; provided, however, that the
Company shall not be required to bear the expense of more than one such
registration for all the Investors and the Investor making the request shall
bear the expense of any additional registrations. In the event that an Investor
determines for any reason not to proceed with a registration of Common Shares
requested pursuant to this Section l at any time before the registration
statement has been declared effective by the Securities and Exchange Commission
("SEC"), and such registration statement, if theretofore filed with the SEC, is
withdrawn with respect to the Common Shares covered thereby, and such Investor
agrees to bear its own expenses incurred in connection therewith and to
reimburse the Company for the expenses incurred by it attributable to the
registration of such Common Shares, then the Investors shall not be deemed to
have exercised their right to require the Company to register Common Shares
pursuant to this Section l at the expense of the Company. The Company shall not
effect any registration of its securities (other than on Forms S-4 or S-8, or
any successor or similar form) from the date of a request to register Common
Shares pursuant to this Section 1 until the earlier of (i) 90 days after the
date on which all securities covered by such registration statement have been
sold or (ii) 180 days after the effective date of such registration statement.
2. Incidental Registration. Each time the Company shall determine to
proceed with the preparation and filing of a registration statement under the
1933 Act in connection with the proposed offer and sale for money of any of its
securities by the Company or any of its security holders (other than on Forms
S-4 or S-8, or any successor or similar form), the Company will give written
notice of its determination to the Investors and the other record holders of the
Common Shares. Upon the written request of an Investor or holder given to the
Company within 20 days after the mailing of any such notice by the Company as
provided in this Section 2, the Company shall, subject to Sections 5 and 9
hereof, cause all such Common Shares which such Investor or holder has requested
to be registered to be included in such registration statement. Neither the
delivery of a notice under this Section 2 nor a request by an Investor or holder
under this Section 2 shall, in any way, obligate the Company to file any
registration statement and notwithstanding the filing of a registration
statement, the Company may, at any time before the effective date thereof, elect
to terminate the entire registration process without any further obligation to
the Investors or record holders.
3. Short Form Registration. In addition to the registration rights
provided in Sections 1 and 2 hereof, if the Company qualifies for the use of
Form S-3 or any similar short form registration
- 5 -
6
then in force, the Company shall, at its expense, register Common Shares on
behalf of the Investors at the request of an Investor from time to time on such
form.
4. Limitations. Notwithstanding the provisions of Sections l and 3
hereof, (i) the Company shall have the right to delay or suspend the preparation
and filing of a registration statement for up to 90 days if in the reasonable
judgment of a majority of the Board of Directors of the Company such preparation
or filing would harm or hinder in any material fashion the ability of the
Company to conduct its affairs or would have a material adverse effect on the
business, properties or financial condition of the Company, provided, that the
Company shall use its best efforts to cause any such registration statement to
become effective within 150 days of receipt of an Investor's request therefor;
and (ii) if, prior to an Investor's request for registration, the Company has
given notice under Section 2 hereof that it intends to prepare and file a
registration statement ("Section 2 Registration Statement"), then the Company
shall have the right to delay or suspend the filing of the registration
statement requested by an Investor, provided, that the Company shall use its
best efforts to cause any such registration statement requested by an Investor
to become effective within 90 days after the date on which all securities
covered by the Section 2 Registration Statement have been sold.
5. Pro Ration. If Common Shares, including any Common Shares of the
Company to be issued and sold by it, are to be included under Sections 1, 2 or 3
above in a registration statement which pertains to one or more underwritten
public offerings and the managing underwriters advise the Company in writing
that in their opinion the number of Common Shares requested to be included
exceeds the number of Common Shares which can be sold in such offering, the
Company will include in such registration (i) first, such Common Shares as to
which demand registration rights have been exercised under Section 1 or 3, as
the case may be (the "Demand Shares"), on a pro rata basis among the holders of
Demand Shares based on the number of Common Shares with respect to which demand
is made; (ii) second, the Common Shares which the Company proposes to issue and
sell; and (iii) third, the number of Common Shares requested by the Investors
(to the extent their request was not pursuant to Section 1 or 3) to be included
which in the opinion of such underwriters can be sold (the "Secondary Shares"),
on a pro rata basis among holders of such Secondary Shares according to the
relation the number of Common Shares owned by any such holder bears to the total
number of Common Shares owned by all such holders (exclusive of Demand Shares in
each case).
6. Registration Procedures. If and whenever the Company is required by
the provisions of Sections 1, 2 or 3 to effect the registration of Common Shares
under the 1933 Act, the Company will:
(a) prepare and file with the SEC, within 60 days of receipt of an
Investor's request thereof or, a registration statement with
respect to such securities, and use its best efforts to cause
such registration statement to become effective within 120
days of receipt of such request and remain effective for such
period as may be reasonably necessary to effect the sale of
such securities, not to exceed six months;
- 6 -
7
(b) prepare and file with the SEC such amendments to such
registration statement and supplements to the prospectus
contained therein as may be necessary to keep such
registration statement effective until the earlier of (i) the
date on which all securities covered by such registration
statement have been sold and (ii) 180 days after the effective
date of such registration statement;
(c) use its best efforts to register or qualify the Common Shares
for sale under such other securities or blue sky laws of such
jurisdictions as the Investors may reasonably request and do
any and all other acts and things which may be reasonably
necessary or desirable to enable the Investors to consummate
the disposition of the Common Shares in such jurisdictions;
provided, however, that the Company shall not be required to
qualify to do business or to file a general consent to service
of process in any such jurisdictions;
(d) furnish to the Investors and to the underwriters of the
securities being registered a reasonable number of copies of
the registration statement, preliminary prospectus, final
prospectus, and such other documents as the Investors or
underwriters may reasonably request in order to facilitate the
public offering of such securities;
(e) notify the participating Investors, promptly after it shall
receive notice thereof, of the time when such registration
statement has become effective or a supplement to any
prospectus forming a part of such registration statement has
been filed;
(f) notify the Investors promptly of any request by the SEC for
the amending or supplementing of such registration statement
or prospectus or for additional information;
(g) prepare and file with the SEC, promptly upon the request of
the Investors, any amendments or supplements to such
registration statement or prospectus which, in the opinion of
counsel for the Investors (and concurred in by counsel for the
Company), is required under the 1933 Act or the rules and
regulations thereunder in connection with the distribution of
the Common Shares by the Investors;
(h) prepare and promptly file with the SEC, and promptly notify
the Investors of the filing of, any amendment or supplement to
such registration statement or prospectus as may be necessary
to correct any statements or omissions if, at the time when a
prospectus relating to such securities is required to be
delivered under the 1933 Act, any event shall have occurred as
the result of which any such prospectus or any other
prospectus as then in effect would include an untrue statement
of a material fact or omit to state any material fact
necessary to make the statement therein, in the light of the
circumstances in which they were made, not misleading;
- 7 -
8
(i) advise the Investors, promptly after it shall receive notice
or obtain knowledge thereof, of the issuance of any stop order
by the SEC suspending the effectiveness of such registration
statement or the initiation or threatening of any proceeding
for that purpose and promptly use its best efforts to prevent
the issuance of any stop order or to obtain its withdrawal if
such stop order should be issued;
(j) at least three days prior to the filing of any amendment or
supplement to such registration statement or prospectus,
furnish copies thereof to the Investors and refrain from
filing any such amendment or supplement to which the Investors
shall have reasonably objected on the grounds that such
amendment or supplement does not comply in all material
respects with the requirements of the 1933 Act or the rules
and regulations thereunder, unless in the opinion of counsel
for the Company the filing of such amendment or supplement is
reasonably necessary to protect the Company from any
liabilities under any applicable federal or state law and such
filing will not violate applicable law; and
(k) at the request of the Investors, furnish on the date or dates
provided for in the underwriting agreement: (i) an opinion of
counsel addressed to the Investors underwriters, if any,
opining as to such matters as may be reasonably agreed to by
such underwriters and the Company; and (ii) a letter or
letters from the independent certified public accountants of
the Company, addressed to the underwriters, if any, and to the
Investors, covering such matters as such underwriters and the
Investors reasonably request, in which letters such
accountants shall state (without limiting the generality of
the foregoing) that they are independent certified public
accountants within the meaning of the 1933 Act and that in the
opinion of such accountants the financial statements and other
financial data of the Company included in the registration
statement or any amendment or supplement thereto comply in all
material respects with the applicable accounting requirements
of the 1933 Act.
7. Expenses. With respect to the registrations requested pursuant to
Section 1 hereof which are to be at the expense of the Company, and with respect
to each inclusion of Common Shares in a registration statement pursuant to
Section 2 hereof and with respect to all registrations requested pursuant to
Section 3 hereof, the Company shall bear the following fees, costs, and
expenses: all registration, filing, and stock exchange fees, printing expenses,
fees and disbursements of counsel and accountants for the Company, fees and
disbursements of counsel for the underwriter or underwriters of such securities
retained by the Company, and all legal fees and disbursements and other expenses
of complying with state securities or blue sky laws of any jurisdictions in
which the securities to be offered are to be registered or qualified. Fees and
disbursements of counsel and accountants for the Investors and for any counsel
for underwriters retained solely by the Investors, underwriting discounts and
commissions and transfer taxes for the Investors, and any other expenses
incurred by the Investors not expressly included above shall be borne by the
Investors.
- 8 -
9
8. Indemnification
(a) By the Company. The Company shall indemnify and hold harmless
each holder of Common Shares that are included in a
registration statement pursuant to these provisions and any
underwriter (as defined in the 1933 Act) for such holder and
each person, if any, who controls such holder or such
underwriter within the meaning of the 1933 Act, from and
against any and all loss, damage, liability or claim to which
such holder or any such underwriter or controlling person
becomes subject under the 1933 Act or otherwise, and to
reimburse them, from time to time upon request, for any legal
or other costs or expenses reasonably incurred by them in
connection with investigating any claims or defending any
actions, insofar as such losses, damages, liabilities, costs
or expenses are caused by any untrue statement or alleged
untrue statement of any material fact contained in such
registration statement, any prospectus contained therein or
any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in
which they were made, not misleading; provided, however, that
the -------- ------- Company will not be liable in any such
case to the extent that any such loss, damage, liability, cost
or expense arises out of or is based upon (i) an untrue
statement or alleged untrue statement or omission or alleged
omission (other than a statement or omission about the
Company) made in conformity with information furnished by the
Investors in writing specifically for use in the preparation
of a registration statement or (ii) an untrue or alleged
untrue statement or omission or alleged omission (other than a
statement or omission about the Company) made in any
preliminary prospectus made in conformity with information
furnished by the Investors where the prospectus contained in
the registration statement in the form filed by the Company
with the SEC pursuant to Rule 424 under the 1933 Act shall
have corrected such statement or omission and a copy of such
prospectus shall, through no fault of the Company, not have
been sent or given to the person bringing the claim at or
prior to the confirmation of such sale to him.
(b) By Holders of Common Shares. Each holder of Common Shares that
are included in a registration pursuant to these provisions
will indemnify and hold harmless the Company, each other
holder, any underwriter and each person, if any, who controls
the Company, such other holder or such underwriter, from and
against any and all loss, damage, liability or claim, to which
the Company or such other holder or any controlling person
and/or any underwriter becomes subject under the 1933 Act or
otherwise and to reimburse them, from time to time upon
request, for any legal or other costs or expenses reasonably
incurred by them in connection with investigating any claims
or defending any actions, insofar as such losses, damages,
liabilities, costs, or expenses are caused by any untrue or
alleged untrue statement of any material fact contained in
such registration statement, any prospectus contained therein,
or any amendment or supplement thereto, or arise out of or are
based upon the omission or
- 9 -
10
the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were
made, not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was so made in
reliance upon and in strict conformity with written
information furnished by such holder specifically for use in
the preparation thereof.
(c) Notice. Promptly after receipt by an Sections indemnified
party pursuant to the provisions of paragraph (a) or (b) of
this Section 8 of notice of the commencement of any action
involving the subject matter of the foregoing indemnity
provision, such indemnified party will, if a claim thereof is
to be made against the indemnifying party pursuant to the
provisions of said paragraph (a) or (b), promptly notify the
indemnifying party in writing of the commencement thereof; but
the omission to so notify the indemnifying party will not
relieve it from any liability which it may have to any
indemnified party otherwise than hereunder. In case such
action is brought against any indemnified party and it
notifies the indemnifying party of the commencement thereof,
the indemnifying party shall have the right to participate in,
and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party;
provided, however, if the defendants in any action include
both the indemnified -------- ------- party and the
indemnifying party and there is a conflict of interest which
would prevent counsel for the indemnifying party from also
representing the indemnified party, the indemnified party or
parties shall have the right to elect separate counsel to
participate in the defense of such action on behalf of such
indemnified party or parties. After notice from the
indemnifying party to such indemnified party of its election
so to assume the defense thereof, the indemnifying party will
not be liable to such indemnified party pursuant to the
provisions of said paragraph (a) or (b) for any legal or other
expense subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable
costs of investigation, unless (i) the indemnified party shall
have employed counsel in accordance with the proviso of the
preceding sentence, (ii) the indemnifying party shall not have
employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after
the notice of the commencement of the action, or (iii) the
indemnifying party has authorized the employment of counsel
for the indemnified party at the expense of the indemnifying
party.
(d) Contribution. If for any reason the indemnification provided
for paragraphs (a) and (b) is unavailable to an indemnified
party or insufficient to hold it harmless as contemplated by
such paragraphs, then the indemnifying party shall contribute
to the amount paid or payable by the indemnified party as a
result of such loss, claim, damage or liability in such
proportion as is appropriate to reflect not only the relative
benefits received by the indemnified party and the
indemnifying party, but also the relative fault of the
indemnified party and the indemnifying party, as well as any
other
- 10 -
11
relevant equitable considerations; provided, however, that, in
any such case, (i) no holder of Common Shares will be required
to contribute any amount in excess of the purchase price of
all such Common Shares sold by such holder pursuant to such
registration statement, and (ii) no holder of Common Shares
guilty of a fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) will be entitled to
contribution from any holder of Common Shares who was not
guilty of such fraudulent misrepresentation.
Promptly after receipt by a holder of Common Shares
of notice of the commencement of any action, suit or
proceeding in connection with a public offering of Common
Shares, such holder will, if a claim for contribution in
respect thereof is able to be made against another party,
notify the contributing party of the commencement thereof. The
omission so to notify the contributing party will not relieve
it from any liability which it may have to any other party
other than for contribution under the Act. In case any such
action, suit or proceeding is brought against any party, and
such party notifies a contributing party of the commencement
thereof, the contributing party will be entitled to
participate therein with the notifying party and any other
contributing party similarly notified.
9. Limitation of Market Activity. In connection with any registration
of Common Shares pursuant to Sections 1, 2 or 3 hereof, each holder of Common
Shares who is granted registration rights under Sections 1, 2 or 3 shall, in
consideration of such grant, agree in writing prior to the date on which the
registration statement becomes effective not to offer or sell any Common Shares
for a period of up to 120 days following the date upon which such registration
statement becomes effective under the 1933 Act if the managing underwriter so
requests.
10. Transfer of Registration Rights. The registration rights and
related obligations provided herein may be transferred with the securities to
which they relate; provided, however, that (i) the Company shall be given
written notice by the transferor thereof at the time of such transfer stating
the name and address of the transferee and identifying the securities with
regard to which such rights are being transferred, and (ii) the transferee shall
agree in writing to assume the obligations of the transferor hereunder.
11. Investors to Provide Information. In the event the Investors
request a registration of Common Shares, the Investors shall provide all such
information and materials and shall take all such actions as may be reasonably
required in order to permit the Company to comply with all applicable
requirements of the SEC and to obtain any desired acceleration of the effective
date of such registration statement. Specifically, the Company may require the
Investors to furnish the Company with such information regarding the Investors
and the distribution of its securities as the Company may from time to time
reasonably request in writing and as shall be required by law or the SEC.
- 11 -
12
12. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the SEC which may permit the sale of the Common
Shares to the public without registration, the Company agrees to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the 1933 Act, at all
times from and after 90 days following the effective date of
the first registration under the 1933 Act filed by the Company
for an offering of its securities to the general public;
(b) Use its best efforts to file with the SEC in a timely manner
all reports and other documents required of the Company under
the 1933 Act and the Securities Exchange Act of 1934 (the
"1934 Act");
(c) So long as an Investor owns any Common Shares, furnish to the
Investor forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements
of Rule 144 and of the 1933 Act and the 1934 Act, a copy of
the most recent annual or quarterly report of the Company, and
such other reports and documents so filed as an Investor may
reasonably request in availing itself of any rule or
regulation of the SEC allowing an Investor to sell any such
securities without registration.
13. Definition of Common Shares. For the purposes of this Exhibit E,
the term "Common Shares" shall mean the Common Shares of the Company and any
Common Shares into which the Company's Convertible Preferred Shares, par value
$8.00 per share, may be converted.
- 12 -