SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-27316
Molecular Devices Corporation
(Exact name of registrant as specified in its charter)
Delaware 94-2914362
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1311 Orleans Drive
Sunnyvale, California 94089
(Address of principal executive offices, including zip code)
(408) 747-1700
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES_X_ NO __
As of November 12, 1998, 9,449,191 shares of the Registrant's Common Stock were
outstanding.
<PAGE>
MOLECULAR DEVICES CORPORATION
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1998
<TABLE>
Index
<CAPTION>
PAGE
PART I. FINANCIAL INFORMATION NUMBER
<S> <C>
ITEM 1. FINANCIAL STATEMENTS (Unaudited)
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 1998 and December 31, 1997......................................... 3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three and Nine Months Ended September 30, 1998 and 1997.......................... 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 1998 and 1997.................................... 5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS............................. 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.............................................. 8
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK...................................................................... 10
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS................................................................ 11
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS........................................ 11
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.................................................. 11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............................. 11
ITEM 5. OTHER INFORMATION................................................................ 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................................. 11
SIGNATURE................................................................................................. 12
</TABLE>
2
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PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
MOLECULAR DEVICES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
September 30, December 31,
1998 1997
-------- --------
ASSETS: (unaudited)
Current assets:
Cash and cash equivalents $ 30,810 $ 26,773
Accounts receivable, net 11,471 8,899
Inventories 3,992 3,465
Deferred tax asset 1,372 1,867
Other current assets 533 122
-------- --------
Total current assets 48,178 41,126
Equipment and leasehold improvements, net 1,772 1,497
Other assets 270 168
-------- --------
$ 50,220 $ 42,791
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,349 $ 1,316
Accrued liabilities 3,768 3,050
Deferred revenue 1,210 1,008
-------- --------
Total current liabilities 7,327 5,374
Stockholders' equity:
Preferred stock, no par value;
3,000,000 authorized
no shares issued or outstanding -- --
Common stock, $.001 par value;
30,000,000 shares authorized;
9,429,173 and 9,331,599 shares issued
and outstanding, at September 30, 1998
and December 31, 1997, respectively 9 9
Additional paid-in capital 41,600 40,302
Retained earnings (accumulated deficit) 2,122 (2,546)
Deferred compensation (694) (148)
Accumulated translation adjustment (144) (200)
-------- --------
Total stockholders' equity 42,893 37,417
-------- --------
$ 50,220 $ 42,791
======== ========
The accompanying notes are an integral part of these statements.
3
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<TABLE>
MOLECULAR DEVICES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES $ 11,901 $ 9,527 $ 34,114 $ 27,650
COST OF REVENUES 4,424 3,481 12,648 10,547
-------- -------- -------- --------
GROSS MARGIN 7,477 6,046 21,466 17,103
-------- -------- -------- --------
OPERATING EXPENSES:
Research and development 1,324 1,229 4,195 3,415
Write-off of acquired in-process research & development 876 -- 876 --
Selling, general and administrative 3,511 2,927 10,002 8,595
-------- -------- -------- --------
Total operating expenses 5,711 4,156 15,073 12,010
-------- -------- -------- --------
INCOME FROM OPERATIONS 1,766 1,890 6,393 5,093
Other income, net 437 284 1,196 859
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 2,203 2,174 7,589 5,952
Income tax provision (848) (804) (2,922) (2,240)
-------- -------- -------- --------
NET INCOME $ 1,355 $ 1,370 $ 4,667 $ 3,712
======== ======== ======== ========
BASIC NET INCOME PER SHARE $ 0.14 $ 0.15 $ 0.50 $ 0.41
======== ======== ======== ========
DILUTED NET INCOME PER SHARE $ 0.14 $ 0.14 $ 0.48 $ 0.38
======== ======== ======== ========
SHARES USED IN COMPUTING BASIC NET INCOME PER SHARE 9,413 9,137 9,388 9,082
======== ======== ======== ========
SHARES USED IN COMPUTING DILUTED NET INCOME PER SHARE 9,705 9,770 9,718 9,702
======== ======== ======== ========
<FN>
The accompanying notes are an integral part of these statements
</FN>
</TABLE>
4
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MOLECULAR DEVICES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
Nine Months Ended
September 30,
1998 1997
------ ------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 4,667 3,712
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 570 509
Loss on disposal of fixed assets -- 27
Amortization of deferred compensation 236 102
(Increase) decrease in assets:
Accounts receivable (2,572) (2,713)
Inventories (527) (1,847)
Deferred tax asset 495 911
Other current assets (411) 25
Increase (decrease) in liabilities:
Accounts payable 1,033 335
Accrued liabilities 872 416
Deferred revenue 202 233
------ ------
Net cash provided by operating activities 4,565 1,710
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (844) (503)
Other assets (102) 61
------ ------
Net cash used in investing activities (946) (442)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment on promissory notes -- (1,500)
Issuance of common stock, net 362 425
------ ------
Net cash provided by (used in) financing activities 362 (1,075)
------ ------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 56 (196)
Net (decrease) increase in cash and cash equivalents 4,037 (3)
Cash and cash equivalents at beginning of period 26,773 23,727
------ ------
Cash and cash equivalents at end of period 30,810 23,724
====== ======
The accompanying notes are an integral part of these statements.
5
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MOLECULAR DEVICES CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements included
herein have been prepared by the Company, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although the Company believes
the disclosures which are made are adequate to make the information presented
not misleading. These condensed consolidated financial statements should be read
in conjunction with the consolidated financial statements and the notes thereto
included in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, as filed with the Securities and Exchange Commission on March
26, 1998.
The unaudited condensed consolidated financial statements included herein
reflect all adjustments (which include only normal, recurring adjustments) which
are, in the opinion of management, necessary to state fairly the results for the
periods presented. The results for the three and nine month periods ended
September 30, 1998 are not necessarily indicative of the results to be expected
for the entire fiscal year ending December 31, 1998.
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results could differ
from those estimates.
Certain reclassifications have been made to the financial statements for the
three month and nine month periods ended September 30, 1997 to conform with the
1998 presentation for those periods.
Note 2. New Accounting Standards
As of January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130 (SFAS 130). SFAS 130 establishes new rules for the reporting
of comprehensive income and its components; however, the adoption of this
Statement had no impact on the Company's net income or stockholders' equity.
SFAS 130 requires unrealized gains or losses from the translation of the
Company's foreign subsidiaries' financial statements, which are reported
separately in stockholders' equity, to be included in other comprehensive
income. Comprehensive income was approximately $1.5 and $1.2 for the three month
periods ended September 30, 1998 and 1997, respectively. Comprehensive income
was approximately $4.7 million and $3.5 million for the nine month periods ended
September 30, 1998 and 1997, respectively.
Note 3. Inventories
Inventories consist of (in thousands):
September 30, 1998 December 31, 1997
------------------ -----------------
Finished goods $ 1,753 $ 2,051
Work in process 771 565
Raw materials and subassemblies 1,468 849
--------------- --------------
$ 3,992 $ 3,465
=============== ==============
Note 4. Write-Off of Acquired In-Process Research & Development
On August 28, 1998 the Company acquired the rights to a Telecentric Lens
Luminometer technology from Affymax Research Institute, a subsidiary of Glaxo
Welcome. Under the agreement, the Company received the rights to develop,
manufacture, market and distribute commercial systems based on this technology
in exchange for payment of up-front consideration and continuing royalties to
Affymax based on future product sales.
The $876,000 write-off of acquired in-process research and development during
the quarter represents the entire amount of up-front consideration that has
been, or will be, paid to Affymax as well as all related transaction costs
associated with this technology license agreement.
Based on the stage of development of this technology and the assessment of the
time and resources needed to complete product development, the Company believes
that the acquired technology has not yet reached economic or technological
feasibility.
6
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Note 5. Net Income Per Share
<TABLE>
Basic net income per share is computed using the weighted average number of
shares of common stock outstanding and diluted net income per share is computed
using the weighted average number of shares of common stock outstanding and
dilutive common equivalent shares from outstanding stock options (using the
treasury stock method). Computation of earnings per share is as follows:
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net Income $1,355 $1,370 $4,667 $3,712
Denominator for basic EPS - weighted average
common shares outstanding 9,413 9,137 9,388 9,082
Effect of dilutive securities - employee stock options 292 633 330 620
------ ------ ------ ------
Denominator for diluted EPS - weighted
average common shares outstanding plus dilutive
securities 9,705 9,770 9,718 9,702
------ ------ ------ ------
BASIC NET INCOME PER SHARE $ 0.14 $ 0.15 $ 0.50 $ 0.41
====== ====== ====== ======
DILUTED NET INCOME PER SHARE $ 0.14 $ 0.14 $ 0.48 $ 0.38
====== ====== ====== ======
</TABLE>
7
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MOLECULAR DEVICES CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Except for the historical information contained herein, the following discussion
contains forward-looking statements that involve risks and uncertainties. The
Company's actual results could differ materially from those discussed here.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed in this section, as well as those identified in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997 as
filed with the Securities and Exchange Commission on March 26, 1998.
The following discussion should be read in conjunction with the unaudited
condensed consolidated financial statements and notes thereto included in Part I
- - Item 1 of this Quarterly Report and the audited consolidated financial
statements and notes thereto and Management's Discussion and Analysis of
Financial Condition and Results of Operations for the year ended December 31,
1997 contained in the Company's 1997 Annual Report on Form 10-K for the year
ended December 31, 1997 as filed with the Securities and Exchange Commission on
March 26, 1998. The results for the three and nine month periods ended September
30, 1998 are not necessarily indicative of the results to be expected for the
entire fiscal year ending December 31, 1998.
Results of Operations - Three and Nine Months Ended September 30, 1998 and 1997.
REVENUES. Revenues for the third quarter of 1998 increased 25% to approximately
$11.9 million from approximately $9.5 million in the third quarter of 1997. All
three product families showed increased levels of revenue. Maxline revenues
increased primarily due to greater sales of new SPECTRAmax products worldwide.
Cell Analysis revenues increased due to both greater volume shipments of FLIPR
products worldwide and the introduction of new FLIPR products. Threshold
revenues increased due to greater volume shipments to military customers
worldwide.
Revenues for the first nine months of 1998 increased 23% to approximately $34.1
million from approximately $27.7 million in the same period of 1997. All three
product families, again, showed increased levels of revenue consistent with the
same trends discussed above for the third quarter.
GROSS MARGIN. Gross margin decreased to 62.8% in the third quarter of 1998 from
63.5% in the third quarter of 1997. The gross margin increased to 62.9% in the
first nine months of 1998 from 61.9% in the same period of 1997. The decreased
margin for the third quarter of 1998 as compared to 1997 relates primarily to a
shift in the product mix to an increased proportion of lower margin Cell
Analysis products in the third quarter of 1998. The increased margin for the
first nine months of 1998 is due to increased sales of new higher margin Maxline
products, improved margins on sales of Cell Analysis products and increased
sales of higher margin Threshold products.
RESEARCH AND DEVELOPMENT. Research and development expenses for the third
quarter of 1998 increased by 8% to approximately $1.3 million (11.1% of total
revenues) from approximately $1.2 million (12.9% of total revenues) for the
third quarter of 1997. Research and development expenses for the first nine
months of 1998 increased by 23% to approximately $4.2 million (12.3% of total
revenues) from approximately $3.4 million (12.4% of total revenues) for the same
period of 1997. The increased spending for the third quarter and the first nine
months relates primarily to additional development expenses required for new
Maxline and FLIPR products.
WRITE-OFF OF ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT. The Company recorded
an $876,000 charge during the third quarter of 1998 due to the write-off of
acquired in-process research and development related to the Company's
acquisition of technology rights from Affymax Research Institute, a subsidiary
of Glaxo Wellcome (See Note 3 of "Notes to Consolidated Financial Statements"
included in Part I- Item 1). The $876,000 represents the entire amount of
up-front consideration that has, or will be, paid to Affymax as well as all
related transaction costs associated with this technology license agreement.
Based on the stage of development of this technology and the assessment of the
time and resources needed to complete product development based on this
technology, the Company believes that the acquired technology has not yet
reached economic or technological feasibility.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses for the third quarter of 1998 increased by 20% to approximately $3.5
million (29.5% of total revenues) from approximately $2.9 million (30.7% of
total revenues) for the third quarter of 1997. Selling, general and
administrative expenses for the first nine months of 1998 increased by 16% to
approximately $10 million (29.3% of total revenues) from approximately $8.6
million (31.1% of total revenues) for the same period of 1997. The increased
spending in 1998 was primarily due to increased expenditures on marketing, sales
and service related activities. Selling, general and administrative expenses as
a percentage of total revenues has dropped for both periods as a result of
continued positive operating leverage.
OTHER INCOME (NET). Net other income, consisting primarily of interest income,
for the third quarter and first nine months of 1998 increased by 54% and 39%,
respectively, over the same periods in the prior year due to
8
<PAGE>
increased interest income resulting from higher cash balances (provided
primarily by operating activities) for both periods.
INCOME TAX PROVISION. Income tax provisions of $800,000 and $2.9 million were
recorded in the third quarter and first nine months of 1998, respectively, as
compared to $800,000 and $2.2 million in the same periods of the prior year. The
38.5% effective tax rate for 1998 has increased from the 37.6% rate for 1997
primarily due to anticipated decreased tax benefits from the Company's Foreign
Sales Corporation.
Liquidity and Capital Resources.
The Company had cash and cash equivalents of approximately $30.8 million at
September 30, 1998, compared to $26.8 million at December 31, 1997. During the
first nine months of 1998, the Company generated approximately $4.6 million and
$362,000 from operations and financing activities, respectively, as partially
offset by approximately $946,000 used in investing activities. The cash flow
from operations relates primarily to the Company's earnings. The cash flow from
financing activities relates solely to stock option exercises, while the cash
used in investing activities relates primarily to capital additions.
The Company believes that its existing capital resources and cash expected to be
generated from future operations will be sufficient to fund its operations and
anticipated capital expenditures through at least 1999. However, the Company's
future liquidity and capital requirements will depend upon numerous factors,
including the resources the Company devotes to developing, manufacturing and
marketing its products, the extent to which the Company's products generate
market acceptance and demand, potential acquisition opportunities that may arise
and other factors. As such, there can be no assurances that the Company will not
require additional financing within this time frame and, therefore, the Company
may in the future seek to raise additional funds through bank facilities, debt
or equity offerings or other sources of capital. Additional funding may not be
available when needed or on terms acceptable to the Company, which could have a
material adverse effect on the Company's business, financial condition and
results of operations.
Factors That May Affect Future Results
The Company's business, financial condition and results of operations are
subject to various risk factors, including those described below and elsewhere
in this report.
o Uncertainty of Future Operating Results. Future operating results will
depend on many factors, including demand for the Company's products, the
levels and timing of government and private sector funding of life sciences
research activities, the timing of the introduction of new products by the
Company or by competing companies, the integration of acquired products and
technology into manufacturing and distribution processes, the Company's
ability to control costs and its ability to attract and retain highly
qualified personnel. Furthermore, the Company's gross margins can be
significantly affected by many factors, including shifts in product mix,
the mix of direct sales as compared with sales through distributors,
competitive price pressures or quarterly fluctuations in sales levels
relative to fixed costs.
o Fluctuations in Quarterly Operating Results; Lack of Backlog. The Company
manufactures its products to forecast rather than to outstanding orders,
and products are typically shipped within 30 to 90 days of purchase order
receipt. As a result, the Company does not believe the amount of backlog at
any particular date is indicative of its future level of sales. The
Company's manufacturing procedures may in certain instances create a risk
of excess or inadequate inventory levels if orders do not match forecasts.
The Company's expense levels are based, in part, on expected future sales.
If sales levels in a particular quarter do not meet expectations, the
Company may not be able to adjust operating expenses sufficiently quickly
to compensate for the shortfall, and the Company's results of operations
may be materially adversely affected. Many of the Company's products are
subject to long customer procurement processes. Accordingly, the timing of
capital equipment purchases by customers is expected to be uneven and
difficult to predict. In addition, a significant portion of the Company's
revenues is typically derived from sales of a small number of relatively
high-priced systems, and sales of such products may increase as a
percentage of revenue in the future. Delays in receipt of anticipated
orders of such products could lead to substantial variability from quarter
to quarter. In addition, the Company has historically received purchase
orders and made a significant portion of each quarter's product shipments
near the end of the quarter. If that pattern continues, even short delays
in the receipt of orders or shipment of products at the end of a quarter
could have a material adverse effect on results of operations for that
quarter. The Company typically experiences a decrease in the level of sales
in the first calendar quarter as compared to the fourth quarter of the
preceding year because of budgetary and capital equipment purchasing
patterns in the life sciences industry. The Company also typically
experiences a decrease in product revenues in the third quarter compared to
the second quarter, related to seasonality primarily associated with lower
European and academic sales during the summer months. Revenues for the
third quarter of 1998 nominally exceeded second quarter 1998 revenues by
approximately $34,000 primarily due to the phasing in of new Maxline and
Cell Analysis products. The Company believes that the third quarter
seasonality trend may recur in the future as the Company increases efforts
to further penetrate European Markets. Operating results in any period
should not be considered indicative of the results to be expected for any
future period.
9
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o Dependency on New Products; Rapid Technological Change. The life sciences
instrumentation market is characterized by rapid technological change and
frequent new product introductions. The Company's future success will
depend on its ability to enhance its current products and to develop and
introduce, on a timely basis, new products that address the evolving needs
of its customers.
o Reliance on Sole Source Suppliers. Certain components used in the Company's
products are currently purchased from single sources. Any delay in the
manufacture of such components could materially adversely affect the
Company's business, financial condition and results of operations.
o Year 2000 Compliance. The Company has completed an assessment of its
internal and external Year 2000 risks and continues to monitor, validate
and implement the identified corrective actions. The Company's internal
business systems have been reviewed and plans have been defined to achieve
Year 2000 compliance. Many of the Company's systems are presently
compliant. Those that are not primarily require upgrades, many of which
will be acquired for nominal charges from the original providers by mid
1999.
All of the Company's products that are currently manufactured and supported
are Year 2000 compliant. There is an installed base of Company products no
longer distributed that are not Year 2000 compliant, all of which have an
identified upgrade path which our customers can purchase to achieve
compliance.
Our Year 2000 vendor compliance process has been established and we are
currently in the early stages of implementation and assessment which will
include questionnaires of our key vendors. In addition, we have been
collecting and assessing customer compliance data based upon questionnaires
we have received as their vendor. Upon completion of this process, any
required contingency plans will be developed.
At this time, the Company believes there are no significant incremental
costs anticipated to achieve both internal and external Year 2000
compliance. However, there can be no assurances that the vendors or
customers of the Company will be in compliance and the Company has no
control over whether such vendors or customers will be in compliance with
Year 2000 requirements. Any failure on the part of the Company's vendors or
customers, which could include inability to deliver or purchase product,
could materially adversely affect the Company's business, financial
condition and results of operations.
o Other Factors. The Company's business is affected by other factors,
including: (i) the possibility that the introduction or announcement of new
products would render existing products obsolete or result in a delay or
decrease in purchase orders for existing products; (ii) the extent to which
and the timing in which the Company's products achieve market acceptance;
(iii) the capital spending policies of the Company's customers (which
depend on various factors, including the resources available to such
customers, the spending priorities among various types of research
equipment and the policies regarding capital expenditures during
recessionary periods), including those policies of universities, government
research laboratories and other institutions whose funding is dependent on
grants from government agencies; (iv) competition in the life sciences
instrumentation market which is highly competitive and expected by the
Company to increase; (v) the Company's ability to obtain and maintain
patent and other intellectual property protection for its products and
technology; (vi) compliance with governmental regulations, including those
promulgated by the United Sates Food and Drug Administration and similar
state and foreign agencies; and (vii) the extent of the Company's sales
outside the United States, which involve certain specific risks, including
risks related to currency fluctuations, imposition of government controls,
export license requirements, restrictions on export of critical technology,
political and economic instability or conflicts, trade restrictions,
changes in tariffs and taxes, difficulties in staffing and managing
international operations and international distributor relationships and
general economic conditions.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
10
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MOLECULAR DEVICES CORPORATION
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not currently a party to any material legal proceedings.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
Pursuant to the Company's bylaws, stockholders who wish to bring matters or
propose nominees for director at the Company's 1999 annual meeting of
stockholders must provide specified information to the Company between February
20, 1999 and March 22, 1999 (unless such matters are included in the Company's
proxy statement pursuant to Rule 14a-8 under the Securities Exchange Act of
1934, as amended).
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.20 "Exclusive License and Technical Support Agreement"
with Affymax
10.21 Employee Offer Letter for Tim Harkness
10.22 Employee Offer Letter for Tony Lima
10.23 Employee Offer Letter for John Senaldi
27.1 Financial Data Schedule
27.2 RESTATED Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the
quarter ended September 30, 1998.
11
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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 thereunto duly authorized.
MOLECULAR DEVICES CORPORATION
By: Timothy A. Harkness//
---------------------------------------------------
Vice President, Finance and Chief Financial Officer
(Duly Authorized and Principal Financial and
Accounting Officer)
Date: November 13, 1998
12
EXHIBIT 10.20
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
EXCLUSIVE LICENSE AND TECHNICAL SUPPORT
AGREEMENT
THIS EXCLUSIVE LICENSE AND TECHNICAL SUPPORT AGREEMENT (the
"Agreement") is entered into as of the 28th day of August, 1998 (the "Effective
Date") by and between MOLECULAR DEVICES CORPORATION, a Delaware corporation
("MDC") having an address at 1311 Orleans Drive, Sunnyvale, California 94089,
AFFYMAX RESEARCH INSTITUTE, a ___________ corporation ("Affymax") having an
address at 4001 Miranda Avenue, Palo Alto, California 94304, GLAXO GROUP
LIMITED, a ____________ corporation having an address at
___________________________, and GLAXO WELLCOME INC., a ___________ corporation
having an address at ____________________________, (Glaxo Group Limited and
Glaxo Wellcome are sometimes collectively referred to herein as "Glaxo"). MDC,
Affymax and Glaxo are sometimes referred to herein individually as a "Party" and
collectively as the "Parties."
RECITALS
WHEREAS, Affymax has developed proprietary expertise, materials and
technology related to a telecentric lens luminometer system further described
herein (defined below as the "Licensed Technology");
WHEREAS, Glaxo Wellcome Inc. is the beneficial owner of the Licensed
Technology in the United States;
WHEREAS, Glaxo Group Limited is the beneficial owner of the Licensed
Technology outside of the United States;
WHEREAS, MDC is engaged in the development and commercialization of
high performance bioanalytical measurement systems;
WHEREAS, MDC desires to develop and commercialize a luminometer system
based upon the Licensed Technology as further described herein;
WHEREAS, Glaxo desires to grant to MDC an exclusive license to develop
and commercialize products incorporating or based upon the Licensed Technology,
according to the terms contained herein;
NOW, THEREFORE, in consideration of the foregoing and the covenants and
premises contained in this Agreement, the parties agree as follows:
[*]=Confidential treatment requested
1
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1. DEFINITIONS
As used herein, capitalized terms will have the meanings set forth
below.
1.1 "Affiliate" means any person or entity directly or indirectly
controlling, controlled by or under common control with either Party, where
"control" means the direct or indirect ownership of fifty percent (50%) or more
of the outstanding voting securities of an entity, or the right to receive fifty
percent (50%) or more of the profits or earnings of an entity, or the ability to
control management of an entity.
1.2 "Affymax Improvement" means any invention made solely by Affymax's
employees, agents or independent contractors during the term of the Agreement,
the manufacture, use, sale, offer for sale or import of which would infringe a
Valid Claim of a Licensed Patent Right or a Joint Patent Right.
1.3 "Best Efforts" means efforts to achieve the intended goal that are
consistent with sound business judgment and interests of the acting Party,
excluding any action, payment, or agreement that would result in significant
financial or commercial detriment to the acting Party, as such Party shall
determine in good faith.
1.4 "Confidential Information" means any information that one Party
discloses to the other Party pursuant to this Agreement, including without
limitation any information relating to any research, project, work in process,
future development, business plan, financial matter or personnel matter relating
to such Party, its present or future products, sales, suppliers, customers,
employees, investors or business, whether in oral, written, graphic or
electronic form. Confidential Information shall include the terms of this
Agreement.
1.5 "[*]" means the commercial luminometer system that MDC is currently
planning to develop and commercialize that is based upon the TLLS and that has
the configuration set forth in Exhibit A.
1.6 "Joint Inventions" means any invention made jointly by employees,
agents or independent contractors of both MDC and Affymax during the term of
this Agreement that relates to, is based upon or incorporates the TLLS.
1.7 "Joint Know-How" means all know-how, discoveries, creations,
inventions, technology, prototypes and information made jointly by employees,
agents or independent contractors of both MDC and Affymax during the term of
this Agreement that relates to Licensed Products or is based upon or
incorporates the TLLS. Joint Know-How includes Joint Inventions.
1.8 "Joint Patent Rights" means all patent applications, including any
and all continuations, continuation-in-part or divisional applications, that
claim Joint Inventions, any patents that issue from any of the foregoing
applications, and any extensions, reissues and re-examinations of the foregoing
patents, as well as foreign counterparts of all of the foregoing.
1.9 "Joint Technology" means the Joint Patent Rights and the Joint
Know-How.
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1.10 "Licensed Know-How" means all know-how necessary or useful for
developing, making, selling, offering for sale or importing the TLLS that was or
is developed by Affymax and owned or controlled (with the right to grant a
license or sublicense thereunder) by Glaxo during the term of this Agreement.
The Licensed Know-How excludes the Licensed Patent Rights.
1.11 "Licensed Patent Rights" means (i) the U.S. patent application
listed on Exhibit B, hereto, and (ii) all patent applications that claim an
Affymax/Glaxo Improvement, in each case together with any and all continuation,
continuation-in-part or divisional applications of the foregoing application,
any patents that issue from any of the foregoing applications, and any
extensions, reissues and reexaminations of the foregoing patents, as well as
foreign counterparts of all of the above, that are owned or controlled (with a
right to grant a license or sublicense thereunder) by Glaxo during the term of
this Agreement. The Parties may update Exhibit B from time to time to set forth
all Licensed Patent Rights.
1.12 "Licensed Products" means any product sold by MDC, its Affiliates
or sublicensees, including but not limited to the [*], the manufacture, use,
sale, offer for sale or import of which, but for the license granted herein,
would infringe a Valid Claim included in the Licensed Patent Rights or
constitute a misappropriation of the Licensed Know-How.
1.13 "Licensed Technology" means the Licensed Patent Rights and the
Licensed Know-How.
1.14 "MDC Improvements" means any invention, development, technique,
process, machine, procedure or method representing an improvement, including any
incremental modifications, of the TLLS that are not included in the Licensed
Know-How as it exists as of the Effective Date and are not claimed in the
Licensed Patent Rights, and that are made, conceived, reduced to practice or
discovered solely by one or more employees, agents or independent contractors of
MDC.
1.15 "MDC Sole Inventions" means any invention made solely by MDC's
employees, agents or independent contractors during the term of this Agreement
that relates to Licensed Products or is based upon or incorporates the TLLS,
including without limitation all MDC Improvements.
1.16 "Net Sales" means the amount invoiced for sales of the [*] by MDC,
its Affiliates and sublicensees to a Third Party, less (i) discounts, including
cash discounts, rebates, retroactive price reductions or allowances actually
granted or allowed from the billed amount, (ii) credits or allowances actually
granted upon claims, rejections or returns of such Licensed Products, including
recalls, (iii) freight, postage, shipping and insurance charges paid for
delivery of the [*], to the extent billed, and (iv) taxes, duties or other
governmental charges levied on or measured by the billing amount when included
in billing, as adjusted for rebates or refunds.
1.17 "Related Technology" means any invention, development, technique,
process, machine procedure or method that is developed, created, discovered or
invented by Affymax or Glaxo during the term of this Agreement and that (i) [*]
the TLLS, Licensed Product or a [*]; (ii) is [*] of the Licensed Patent Rights
or the TLLS; or (iii) is [*] to manufacture, use, sell, offer for
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sale or import [*]that are [*] as [*], in each case excluding Affymax/Glaxo
Improvements but including all related intellectual property rights.
1.18 "Third Party" means any person or entity other than a Party or an
Affiliate of a Party.
1.19 "TLLS" means the Telecentric Lens Luminometer System described in
Exhibit C.
1.20 "Transition Period" means the period commencing upon the Effective
Date and ending upon the first shipment to a Third Party end user, or to Glaxo,
in connection with a commercial sale of the [*].
1.21 "Valid Claim" means a claim of a pending patent application or an
issued, unexpired patent, which claim of a patent application has not lapsed or
been canceled, abandoned or disclaimed and which claim of an issued patent has
not lapsed, been declared invalid by a court or administrative body of competent
jurisdiction in an unappealed or unappealable decision, or been admitted to be
invalid or unenforceable through reissue, reexamination or disclaimer.
2. GRANT OF RIGHTS; PRODUCT DEVELOPMENT AND SUPPORT SERVICES
2.1 License Grant to MDC. Subject to the terms and conditions of this
Agreement, Glaxo hereby grants to MDC during the term of this Agreement an
exclusive (even as to Glaxo and Affymax), worldwide, royalty-bearing license
under the Licensed Technology and under Glaxo's and Affymax's interest in any
Joint Technology to make, use, sell, offer for sale and import Licensed
Products. Notwithstanding the foregoing, Affymax and its Affiliates retain a
non-exclusive license under the Licensed Technology and its interest in the
Joint Technology to make and use the Licensed Technology and Joint Technology
for solely internal research purposes. Affymax and its Affiliates shall have no
right to grant sublicenses under the foregoing license.
2.2 Sublicensing. During the term of this Agreement, MDC may sell
Licensed Product or grant sublicenses to Third Parties under the license granted
to MDC under Section 2.1; provided, however, that if MDC intends to sell
Licensed Product or grant a sublicense as permitted hereunder to any Third Party
outside the field of [*] (as defined below), then it shall so notify Affymax and
MDC and Affymax shall discuss in good faith appropriate adjustments to the
royalty rate applicable to Net Sales of Licensed Products in such other field.
Such adjusted royalty rate shall be commercially reasonable and determined in
view of relevant issues such as, but not limited to, the historical MDC
investment of MDC resources in development of the Licensed Technology including,
but not limited to, [*] and MDC Improvements; the amount of financial and other
resources necessary to develop and commercialize such Licensed Products; other
technology that must be licensed or acquired to develop and commercialize such
Licensed Products; and the potential profitability of such Licensed Products.
"[*]" shall mean all [*] applications, including without limitation (i) the
research, development, manufacture and commercialization of products useful in
the investigation of [*] or [*] processes, and (ii) the research, development,
manufacture and commercialization of [*] tools and other devices and
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provision of services useful for the activities described in (i). Nothing in
this Agreement shall be interpreted to impose upon MDC any obligation to grant
any sublicense under this Section 2.2.
2.3 No Implied License. Neither Affymax nor Glaxo will obtain any
licenses or other rights in or to any of MDC's technology or any MDC Sole
Inventions or patent applications and patents claiming such inventions. Without
limitation, Affymax and Glaxo shall have no right to design, develop, produce,
distribute, market, sell and license any MDC Improvements.
2.4 MDC Marketing and Sales Authority. Subject to Section 2.7, MDC
shall have exclusive responsibility, authority and control regarding marketing
and sales of Licensed Products.
2.5 Glaxo Support Services. MDC agrees to provide support services as
provided in this Section 2.5 for the [*] TLLSs that Affymax, as of the Effective
Date, is manufacturing for its Affiliates. As a condition to MDC's obligation to
provide such services, Affymax must permit MDC to have full access, as
reasonably necessary and at times convenient to MDC, to assist in or to observe
the production process for such TLLSs, and permit MDC to be involved in the
production of such TLLSs. MDC shall provide to Glaxo routine maintenance and
repair services for the life of the foregoing [*] TLLSs. Spare parts for such
TLLSs shall be provided at the applicable list price, and travel and labor shall
be provided [*] during the first [*] after the Effective Date, and thereafter at
MDC's list price thereof.
2.6 Transition Period Obligations. During the Transition Period, MDC
and Affymax shall cooperate to complete on a timely basis the transfer to MDC of
all Licensed Know-How in Affymax's possession according to a mutually agreed
schedule. Without limitation, the technology and technical support listed on
Exhibit D shall be transferred to MDC during the Transition Period.
Additionally, as part of such technology transfer, Affymax shall (i) arrange for
[*], or another appropriate individual reasonably acceptable to MDC, to provide
to MDC up to [*] hours per week, for up to a total of [*] hours, of consulting
services as reasonably necessary to facilitate such technology transfer, and
(ii) assist in the design of a testing plan to compare the TLLS in Affymax's
possession on the Effective Date against the [*], and shall provide all
reasonable assistance to MDC in performing such studies.
2.7 Commercialization of [*]; Diligence. MDC shall use Best Efforts to
commercialize Licensed Products. As a specific example of such efforts, MDC
shall commercially launch Licensed Products prior to or on [*] the Effective
Date. If MDC fails to achieve such commercial launch within such [*] time
period, the Parties shall promptly meet to discuss the reasons for such failure,
and mutually acceptable remedial measures that MDC shall perform to correct such
delay. If either the Parties are unable to agree upon such remedial measures
within thirty (30) days after [*] of the Effective Date, or if MDC fails to
perform diligently any mutually agreed remedial measure, then each of Affymax
and Glaxo shall have the right to terminate this Agreement pursuant to Section
8.2.
3. CONSIDERATION
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3.1 License Fee. MDC will pay Glaxo Group Limited a license fee of [*],
which amount shall be paid in three (3) [*]. The first such installment shall be
due upon [*], the second such installment shall be due upon the date that is [*]
after the Effective Date, and the last such installment shall be due [*].
3.2 Royalties Payable to Glaxo.
(a) MDC shall pay to Glaxo Group Limited a royalty on sales of [*]
equal to [*] of Net Sales. [*] will be paid on sales of peripheral equipment or
add-on components to the [*].
(b) Except as otherwise provided in Section 2.2, MDC shall pay to
Glaxo Group Limited a royalty on sales of Licensed Products other than the [*]
at a rate to be agreed in good faith by the Parties no later than sixty (60)
days prior to commercial launch of such Licensed Products, which royalty shall
not exceed [*] of Net Sales. The royalty rate for Licensed Products other than
the [*] shall be determined based upon the value of the Licensed Technology
relative to the value of any other technology made or acquired by MDC that is
necessary or useful for development or commercialization of such Licensed
Products. For example, if the Parties determine that technology other than
Licensed Technology contributes thirty percent (30%) of the value of such other
Licensed Product, then the royalty rate due to Glaxo Group Limited on sales of
such other Licensed Products shall be equal to [*] x (100%-30%), or [*].
3.3 Payment; Records Retention.
(a) Royalties shall be calculated on a calendar quarter basis (the
"Payment Period"). Payment of royalties with respect to all of the [*] sold in a
Payment Period shall be due within thirty (30) days after the end of such
Payment Period, beginning with the Payment Period in which the first commercial
sale of the [*] occurs.
(b) MDC will keep complete and accurate records pertaining to the
sale of the [*]. Such records will be maintained for a five (5) year period
following the date in which any royalty payments were made hereunder.
3.4 Payments to Glaxo. Although all payments under this Article 3 will
be made to Glaxo Group Limited, Glaxo Group Limited and Glaxo Wellcome, Inc.
shall mutually agree upon an appropriate allocation of such payments between
them.
4. REPORTS; RECORDS; AUDIT
4.1 Reports. At the same time that it makes payments of royalties due
with respect to a Payment Period, MDC shall deliver to Glaxo Group Limited a
true and complete accounting of sales of the [*] and receipts from those sales
during the term of this Agreement. Such accounting shall include Net Sales and
royalties, by territory, by value (local currency and US$), and Net Sales, by
territory, by quantity. If no sales of the [*] were made in any given reporting
period, then the statement shall be to such effect. MDC shall maintain, and
cause its Affiliates and sublicensees to maintain, complete and accurate books
and records which enable the royalties
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and other amounts payable hereunder to be verified. Such records shall be
maintained for five (5) years after the submission of each report pursuant to
this Article.
4.2 Marketing Reports. MDC shall advise Affymax on an annual basis of
MDC's general plans for marketing Licensed Products. Such plans shall not
include detailed information such as forecasts or sales projections. On December
1 of each year during the term of this Agreement, MDC shall provide Affymax with
reports on MDC's progress in performing under such plans.
4.3 Affymax Cost Reports. Within 10 days after the Effective Date,
Affymax will provide MDC with a complete, detailed analysis of all development
costs incurred by Affymax for developing the TLLS prior to the Effective Date.
4.4 Tax Withholding. In the event that MDC is required to withhold
taxes imposed upon Glaxo for any payment under this Agreement by virtue of the
statutes, laws, codes or governmental regulations of a country in which Licensed
Products are sold, then such payments will be made by MDC on behalf of Glaxo by
deducting them from the payment then due Glaxo and remitting such taxes to the
proper authorities on a timely basis. After payment of such taxes, the payments
provided for under this Agreement will be adjusted appropriately, provided that
MDC supplies Glaxo with official documentation and/or tax receipt on such
withholdings supporting such taxes and such payments as may be required by Glaxo
for its tax records on or before the date on which such payment is due Glaxo
under this Agreement.
4.5 Foreign Payments. In the event MDC or any of its Affiliates or
sublicensees receives payment for the [*] sold in a currency other than currency
which is legal tender in the United States of America, all payments due to
Affymax under Sections 3.1 and 3.2 hereof shall be converted, prior to payment,
into United States Dollars at the applicable rate of exchange of Citibank, N.A.,
in New York, New York, on the last day of the calendar quarter in which such
transaction occurred. If MDC is prevented from making any payment under this
Agreement by virtue of the statutes, laws, codes or governmental regulations of
the country from which the payment is to be made, then such payments may be paid
by depositing them in the currency in which accrued to Glaxo's account in a bank
acceptable to Glaxo in the country whose currency is involved.
4.6 Audit Request. Glaxo will have the right to engage, at its own
expense, an independent, certified public accountant reasonably acceptable to
MDC, to examine MDC's records from time to time as may be necessary to
determine, with respect to any calendar year, the correctness of any report or
payment made under this Agreement. If any such audit reveals an underpayment of
more than ten percent (10%) of the correct amount of royalties due hereunder,
such audit will be at the expense of MDC. If any audit conducted on behalf of
Glaxo shall show that MDC or its Affiliates or sublicensees underpaid the
royalties due to Glaxo under the licenses herein as to the period subject to the
audit, then MDC shall immediately pay to Glaxo any such deficiency with interest
thereon at an annual rate equal to the U.S. dollar reference rate ("prime rate")
charged from time to time by Citibank, N.A. from the date due until paid.
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4.7 Survival. This Article 4 will survive any termination of this
Agreement for a period of five (5) years.
5. EXCLUSIVITY; OPTION FOR RELATED TECHNOLOGY.
5.1 Exclusivity. Except as expressly provided in this Article 5,
Affymax and Glaxo shall not commercialize any product that is [*] during the
term of this Agreement.
5.2 Option Under Related Technology.
(a) Notice of Opportunity to Obtain License to Related Technology.
If Affymax or Glaxo develops or has developed Related Technology and desires to
commercialize, either itself or together with one or more third parties, such
Related Technology, then Affymax shall promptly notify MDC of such desire
pursuant to Section 11.9 of this Agreement. Along with such notice Affymax shall
provide any relevant data and other information in its possession that is
necessary or useful for MDC to evaluate its interest in obtaining a license with
respect to such Related Technology.
(b) Option and Negotiation of Related Technology License. MDC shall
have an exclusive option to obtain an exclusive license under the Related
Technology to develop, make, use, sell, offer for sale and import products based
upon or incorporating the Related Technology with respect to which Affymax or
Glaxo provides a notice to MDC pursuant to Section 5.2(a) (the "Option"), as
follows: If MDC notifies Affymax within sixty (60) days after receiving notice
and relevant data and information pursuant to Section 5.2(a) that MDC is
interested in obtaining a license, then Affymax and MDC shall negotiate in good
faith, for a period of sixty (60) days following MDC's receipt of such notice
and relevant data or for such additional period of time as the parties may
mutually agree (the "Negotiation period"), the terms pursuant to which MDC shall
obtain an exclusive license under such Related Technology. If, during the
Negotiation Period, MDC decides that it is not interested in obtaining such
license, it shall promptly notify Affymax in writing of such decision.
(c) Exclusivity of Option. Affymax and Glaxo agree that they shall
not offer to any third party the opportunity to obtain a license with respect to
Related Technology or enter into any license with any third party with respect
to Related Technology, until the first to occur of expiration of the period
commencing upon MDC's receipt of notice and relevant data and information
pursuant to Section 5.2(a), and ending sixty (60) days thereafter, if MDC does
not during such period notify Affymax of MDC's interest in obtaining a license
with respect to such Related Technology, (ii) the date upon which MDC notifies
Affymax that MDC is not interested in obtaining such license, or (iii) the
expiration of the Negotiation Period, if the Parties have not entered into a
license with respect to such Related Technology prior to such time. After such
date, Affymax and Glaxo shall be free to offer to third parties the opportunity
to obtain a license, and to enter into a license with respect to such Related
Technology on terms at least as favorable to Affymax or Glaxo as those last
offered by MDC.
(d) No Waiver. MDC's option under this Section 5.2 shall apply on a
Related Technology by Related Technology basis. Any failure by MDC to exercise
its option or any failure by the Parties to enter into a license pursuant to
this Section 5.2 with respect to a
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particular Related Technology shall not be deemed a waiver of MDC's rights to
obtain a license with respect to any other Related Technology.
6. CONFIDENTIALITY
6.1 Confidentiality; Exceptions. Except to the extent expressly
authorized by this Agreement or otherwise agreed in writing, the Parties agree
that, for the term of this Agreement and for five (5) years thereafter, the
receiving Party shall keep confidential and shall not publish or otherwise
disclose or use for any purpose other than as provided for in this Agreement any
Confidential Information or materials furnished to it by the other Party
pursuant to this Agreement, except to the extent that it can be established by
the receiving Party that such Confidential Information:
(a) was already known to the receiving Party, other than under an
obligation of confidentiality, at the time of disclosure by the other Party;
(b) was generally available to the public or otherwise part of the
public domain at the time of its disclosure to the receiving Party;
(c) became generally available to the public or otherwise part of
the public domain after its disclosure and other than through any act or
omission of the receiving Party in breach of this Agreement; or
(d) was disclosed to the receiving Party, other than under an
obligation of confidentiality, by a Third Party who had no obligation to the
disclosing Party not to disclose such information to others.
6.2 Authorized Disclosure. Each Party may disclose Confidential
Information hereunder to the extent such disclosure is reasonably necessary in
filing or prosecuting patent applications, prosecuting or defending litigation,
complying with applicable governmental regulations or conducting preclinical or
clinical trials, provided that if a Party is required by court order, law or
regulation to make any such disclosure of the other Party's Confidential
Information it will, except where impracticable, give reasonable advance notice
to the other Party of such disclosure requirement and, except to the extent
inappropriate in the case of patent applications, will use its reasonable
efforts to secure a protective order for, or confidential treatment of, such
Confidential Information required to be disclosed.
6.3 Survival. This Article 6 shall survive the termination or
expiration of this Agreement for a period of five (5) years.
6.4 Publicity. The Parties will agree upon an initial public
announcement regarding this Agreement to be released promptly after the
execution of this Agreement. The Parties shall agree upon any additional public
announcements regarding the terms of this Agreement in advance; provided,
however that MDC may make public announcements regarding its progress in
developing and commercializing Licensed Products without the prior consent of
Affymax.
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7. OWNERSHIP OF INTELLECTUAL PROPERTY AND PATENT RIGHTS
7.1 Ownership. MDC shall solely own all MDC Sole Inventions, including
without limitation MDC Improvements, and all patent applications and patents
claiming MDC Sole Inventions. Glaxo shall solely own all Affymax Improvements
and all Licensed Patent Rights claiming such inventions. The Parties shall
jointly own all Joint Inventions and all Joint Patent Rights.
7.2 Disclosure of Patentable Inventions. Affymax shall disclose to MDC
all Affymax Improvements and any Joint Inventions of which they become aware
promptly to MDC. MDC shall disclose all Joint Inventions of which it becomes
aware promptly to Affymax.
7.3 Patent Filings. MDC shall have the first right, but not the
obligation, to prepare, file, prosecute and maintain patent applications and
patents (i) that are included in the Licensed Patent Rights other than those
that claim Affymax Improvements, (ii) that claim MDC Sole Inventions, and (iii)
that are included in Joint Patent Rights, in each case [*]. MDC shall keep
Affymax informed of the status of each such patent application and all related
filings. If MDC declines to file, prosecute or maintain any patent application
or patent included in the Licensed Patent Rights or Joint Patent Rights, it
shall so notify Affymax and Affymax may elect to pursue such patent application
or patent, at its expense. Affymax, itself or together with Glaxo, shall have
the first right, but not the obligation, to prepare, file, prosecute and
maintain patent applications and patents claiming Affymax Improvements, [*].
Affymax shall keep MDC informed of the status of each such patent application
and all related filings. If Affymax or Glaxo declines to file, prosecute or
maintain any patent application or patent claiming an Affymax Improvement, it
shall so notify MDC and MDC may elect to pursue such patent application or
patent, [*]. The Parties shall cooperate reasonably in the prosecution of all
patent applications under this Section 7.3.
7.4 Enforcement Rights.
(a) Infringement by Third Parties. If any patent included in the
Licensed Patent Rights or Joint Patent Rights is infringed by a Third Party in
connection with the manufacture, import, use, sale or offer for sale of a
product competitive with the Licensed Products ("Competitive Product
Infringement"), the Party to this Agreement first having knowledge of such
infringement shall promptly notify the other in writing. The notice shall set
forth the facts of such infringement in reasonable detail. MDC shall have the
primary right, but not the obligation, to institute, prosecute or control any
action or proceeding with respect to such infringement of a Licensed Patent
Right or Joint Patent Right), by counsel of its own choice. Affymax shall have
the right to participate in such action and to be represented by counsel of its
own choice. If MDC fails to bring an action or proceeding within a period of
ninety (90) days after having received written notice of that infringement, then
Affymax, itself or together with Glaxo, shall have the right to bring and
control any such action by counsel of its own choice, and MDC shall have the
right to participate in such action and be represented by counsel of its own
choice. If a Party brings any such action or proceeding hereunder, the other
Party agrees to be joined as a party plaintiff and to give the Party bringing
such action reasonable assistance and authority to control, file and prosecute
the suit as necessary. The costs and expenses of the Party bringing suit under
this Article (including the internal costs and expenses specifically
attributable
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to said suit) shall be [*]. Any remaining damages shall be [*] for the purpose
of [*]. No settlement or consent judgment or other voluntary final disposition
of a suit under this Section 7.4 may be entered into without the joint consent
of MDC and Affymax.
(b) Defense and Settlement of Third Party Claims Relating to
Licensed Products. If a Third Party asserts that a patent or other right owned
by it is infringed by the use, license, sale or other activity relating to the
Licensed Products, the Party first obtaining knowledge of such a claim shall
immediately provide the other Party notice of such claim and the related facts
in reasonable detail. Defense of any such claim shall be controlled by MDC,
provided that Affymax shall have the right to participate in such defense and to
be represented in any such action by counsel of its selection at its sole
discretion. MDC shall also have the right to control settlement of such claim
with respect to the Licensed Technology; provided, however, that no settlement
shall be entered into without the written consent of Affymax, which consent
shall not be withheld unreasonably.
(c) Allocation of Expenses Incurred Pursuant to Section 7.4(b). The
expenses of patent defense, settlement and judgments pursuant to Section 7.4(b)
with respect to the Licensed Technology and Joint Technology shall be borne [*],
except as provided in Section 7.4(d).
(d) Settlement of Third Party Claims for Infringement; Payment of
Third Party Royalties. If a Third Party asserts that a patent or other right
owned by it is infringed by the manufacture, use, sale, offer for sale, import
of, or any other activity relating to the Licensed Technology or Joint
Technology, and as a result of settlement procedures or litigation under this
Section 7.4, MDC is required to pay the Third Party a royalty or make any
payment of any kind for the right to use, license, sell or otherwise conduct
activity relation to the Licensed Technology or Joint Technology, such expense
shall be [*].
7.5 Trademarks.
MDC shall select, prosecute applications for, register, maintain
and enforce the trademark for the Licensed Products, at MDC's sole expense. All
uses of such trademark shall comply substantially with all applicable laws and
regulations, including without limitation those laws and regulations
particularly applying to the proper use and designation of trademarks. MDC shall
make the final decision of whether and how to defend the trademark in the event
of any actual, alleged or threatened infringement of the trademark for the
Licensed Products or of any unfair trade practices, trade dress imitation,
passing off of counterfeit goods or like offenses.
8. TERMS AND TERMINATION
8.1 Term. Except as otherwise provided herein, the term of this
Agreement shall commence on the Effective Date and, unless earlier terminated as
provided in this Agreement, shall expire upon the later of (i) the date upon
which the last to expire of the Licensed Patent Rights or Joint Patents expires,
or (ii) ten (10) years after first commercial sale of the Licensed Products.
8.2 Termination for Cause. Either Party may terminate this Agreement
upon sixty (60) days written notice upon or after the breach of any material
provision of this Agreement by
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the other Party if the breaching Party has not cured such breach within the
sixty (60) day period following written notice of termination by the other
Party.
8.3 Termination for Bankruptcy. Either Party shall have the right, in
addition and without prejudice to any other rights or remedies available at law
or in equity, to terminate this Agreement immediately if (i) all or a
substantial portion of the assets of the other Party are transferred to an
assignee for the benefit of creditors, to a receiver or a trustee in bankruptcy,
(ii) a proceeding is commenced by or against the other Party for relief under
bankruptcy or similar laws and such proceeding is not dismissed within ninety
(90) days, or (iii) the other Party is adjudged bankrupt. All rights and
licenses granted under or pursuant to this Agreement by Affymax are, shall
otherwise be deemed to be, for purposes of Article 365(n) of the U.S. Bankruptcy
Code, licenses of rights to "intellectual property" as defined under Article 101
of the U.S. Bankruptcy Code. The Parties agree that MDC as licensee of such
rights under this Agreement shall retain and may fully exercise all of its
rights and elections under the U.S. Bankruptcy Code. Upon the termination of
this Agreement by MDC pursuant to this Section 8.3, MDC shall retain all
licenses to the Licensed Technology granted hereunder subject to the payment to
Affymax of a royalty on Net Sales as provided in this Agreement.
8.4 Effect of Termination.
(a) Upon termination of this Agreement pursuant to Section 8.2,
each Party shall pay all sums accrued hereunder which are then due (except as
expressly otherwise provided in this Agreement). Upon termination for any
reason, both Parties shall maintain confidentiality of the other Party's
Confidential Information consistent with Article 6.
(b) Upon termination of this Agreement by MDC for Affymax's
material breach pursuant to Section 8.2, all licenses granted to MDC shall
survive. The provisions of Section 3.2 shall continue to apply with respect to
any such royalties payable under this Section 8.4(b).
8.5 Accrued Rights, Surviving Obligations. Termination of this
Agreement shall not affect any accrued rights and remedies of either Party.
Additionally, the terms of Articles 4, 6, 9, 10 and 11, and Sections 7.1 through
7.5, 8.4, and 8.5, shall survive any termination or expiration of this
Agreement.
9. REPRESENTATIONS AND WARRANTIES
9.1 Mutual Representations and Warranties. Each Party hereby represents
and warrants:
(a) Corporate Power. Such Party is duly organized and validly
existing under the laws of the state or country of its incorporation and has
full corporate power and authority to enter into this Agreement and to carry out
the provisions hereof.
(b) Due Authorization. Such Party is duly authorized to execute and
deliver this Agreement and to perform its obligations hereunder.
[*]=Confidential treatment requested
12
<PAGE>
(c) Binding Agreement. This Agreement is a legal and valid
obligation binding upon it and enforceable in accordance with its terms. The
execution, delivery and performance of this Agreement by such Party does not
conflict with any agreement, instrument or understanding, oral or written, to
which it is a Party or by which it may be bound, nor violate any law or
regulation of any court, governmental body or administrative or other agency
having jurisdiction over it. Such Party has not, and during the term of the
Agreement will not, grant any right to any Third Party with respect to its
Patents or Know-how that would conflict with the rights granted to the other
Party hereunder.
9.2 Other Representations by Affymax and Glaxo. Affymax and Glaxo
further represent and warrant to MDC that:
(a) to the best of Affymax's and Glaxo's knowledge on the Effective
Date, there are no Third Party claims to, or interferences or oppositions
pending before any court or administrative office or agency relating to, the
Licensed Patent Rights;
(b) Glaxo owns all right, title and interest in the Licensed
Technology, and Glaxo and Affymax own or control all rights necessary to grant
the rights Glaxo and Affymax purport to grant to MDC pursuant to this Agreement;
and
(c) as of the Effective Date, neither Affymax nor Glaxo has
received any notices of infringement or any written communications relating in
any way to a possible infringement with respect to the Licensed Technology, and
is not aware that the practice of the Licensed Technology as contemplated by
this Agreement will involve any infringement or unauthorized use of any
intellectual property rights of any Third Party.
10. INDEMNIFICATION
10.1 Indemnification by Affymax and Glaxo . Affymax and Glaxo hereby
agree to indemnify, hold harmless and defend MDC against any and all expenses,
costs of defense (including without limitation attorneys' fees, witness fees,
damages, judgments, fines and amounts paid in settlement) and any amounts MDC
becomes legally obligated to pay because of any Third Party claim or claims
against it to the extent that such claim or claims result from (i) Affymax's or
Glaxo's negligence, or (ii) Affymax's or Glaxo's breach or alleged breach of any
representation or warranty by Affymax or Glaxo or of any other provision of this
Agreement, in each case except to the extent such claim is the subject of MDC's
obligation to indemnify Affymax or Glaxo, as appropriate, pursuant to Section
10.2; provided that MDC provides Affymax or Glaxo with prompt notice of any such
claim and the exclusive ability to defend (with the reasonable cooperation of
MDC) or settle any such claim, subject to Section 10.3.
10.2 Indemnification by MDC. MDC hereby agrees to indemnify, hold
harmless and defend Affymax or Glaxo against any and all expenses, costs of
defense (including without limitation attorneys' fees, witness fees, damages,
judgments, fines and amounts paid in settlement) and any amounts Affymax or
Glaxo becomes legally obligated to pay because of any Third Party claim or
claims against it to the extent that such claim or claims arise out of (i) MDC's
negligence, recklessness or willful misconduct, (ii) MDC's breach or alleged
breach of any representation or warranty by MDC or of any other provision of
this Agreement, (iii) the
[*]=Confidential treatment requested
13
<PAGE>
development, manufacture, use, sale, offer for sale or import of Licensed
Products by MDC, its Affiliates or sublicense, in each case except to the extent
any such claim is the subject of Affymax's or Glaxo's, as appropriate,
obligation to indemnify MDC pursuant to Section 10.1; provided that Affymax and
Glaxo provide MDC with prompt notice of any such claim and the exclusive ability
to defend (with the reasonable cooperation of Affymax and Glaxo) or settle any
such claim, subject to Section 10.3.
10.3 Mechanics. In the event that the parties cannot agree as to the
application of Sections 10.1 and 10.2 above to any particular loss or claim, the
parties may conduct separate defenses of such claim. Each Party further reserves
the right to claim indemnity from the other in accordance with Sections 10.1 and
10.2 above upon resolution of the underlying claim, notwithstanding the
provisions of Sections 10.1 and 10.2 above requiring a Party to tender to the
other Party the exclusive ability to defend such claim or suit. Neither Party
shall settle any claim in a manner could reasonably be believed to adversely
affect the other Party's business or rights hereunder without such other Party's
written consent.
11. MISCELLANEOUS
11.1 Assignment.
(a) MDC may assign any of its rights or delegate any of its
obligations under this Agreement to any Affiliates; provided, however, that such
assignment shall not relieve the assigning Party of its responsibilities for
performance of its obligations under this Agreement. This Agreement shall
survive any such merger or reorganization of MDC with or into, or such sale of
assets to, another party and no consent for such merger, reorganization or sale
shall be required hereunder. Neither Affymax nor Glaxo shall assign any of its
right or delegate any of its obligations under this Agreement without MDC's
prior written consent.
(b) This Agreement shall be binding upon and inure to the benefit
of the successors and permitted assigns of the Parties. Any assignment not in
accordance with this Agreement shall be void.
11.2 Dispute Resolution.
(a) The Parties recognize that disputes as to certain matters may
from time to time arise during the term of this Agreement which relate to either
Party's rights and/or obligations hereunder or thereunder. It is the objective
of the Parties to establish procedures to facilitate the resolution of disputes
arising under this Agreement in an expedient manner by mutual cooperation. To
accomplish this objective, the Parties agree to follow the procedures set forth
in this Article 11 if and when a dispute arises under this Agreement.
Unless otherwise specifically recited in this Agreement, disputes among
the Parties will be resolved by reference first to their respective chief
executive officers or their successors, for attempted resolution by good faith
negotiations within sixty (60) days after such notice is received. In the event
the designated executive officers are not able to resolve such dispute, either
Party may at anytime after the sixty (60) day period seek to resolve the dispute
through the means provided in Section 11.2(b).
[*]=Confidential treatment requested
14
<PAGE>
(b) Any claim or controversy arising out of or related to this
Agreement or any breach hereof that is not resolved by the designated officers
as provided in this Agreement shall be submitted for resolution to a court of
competent jurisdiction located in California, and each party hereby submits to
the jurisdiction and venue of such court.
11.3 Force Majeure. Neither Party shall lose any rights hereunder or be
liable to the other Party for damages or losses on account of failure of
performance by the defaulting Party if the failure is occasioned by government
action, war, fire, explosion, flood, strike, lockout, earthquake, embargo, act
of God, or any other similar cause beyond the control of the defaulting Party,
provided that the Party claiming force majeure has exerted all reasonable
efforts to avoid or remedy such force majeure.
11.4 Compliance with Law. Each Party hereto shall comply with all
applicable laws, rules, ordinances, guidelines, consent decrees and regulations
of any applicable federal, state or other governmental authority.
11.5 Governing Law. This Agreement is deemed to have been entered into
in the State of California, as applied to contracts entered into and performed
entirely in California by California residents and its interpretation,
construction, and the remedies for its enforcement or breach are to be applied
pursuant to and in accordance with the laws of the State of California.
11.6 Entire Agreement. This Agreement, including all Exhibits attached
hereto, sets forth all the covenants, promises, agreements, warranties,
representations, conditions and understandings between the Parties hereto and
supersede and terminate all prior agreements and understanding between the
Parties, including without limitation the [*] Term Sheet dated August 13, 1998.
No subsequent alteration, amendment, change or addition to this Agreement, shall
be binding upon the Parties hereto unless reduced to writing and signed by the
respective authorized officers of the Parties.
11.7 Transaction Costs. Each Party shall bear all costs incurred by
such Party for legal, accounting and administrative services provided to such
Party in connection with the investigation, negotiation and execution of this
Agreement.
11.8 Relationship of the Parties. Nothing hereunder shall be deemed to
authorize either Party to act for, represent or bind the other except as
expressly provided in this Agreement.
11.9 Notices. All notices hereunder shall be in writing and shall be
deemed given if delivered personally or by facsimile transmission (receipt
verified), telexed, mailed by registered or certified mail (return receipt
requested), postage prepaid, or sent by express courier service, to the Parties
at the following addresses (or at such other address for a Party as shall be
specified by like notice; provided, that notices of a change of address shall be
effective only upon receipt thereof by the other Party).
[*]=Confidential treatment requested
15
<PAGE>
If to Affymax,
addressed to: AFFYMAX RESEARCH INSTITUTE
4001 Miranda Avenue
Palo Alto, CA 94304
Attention: Chief Executive
Officer
Telephone: (650) 812-8700
Telecopy: (650) 424-0832
If to Glaxo Group Limited,
addressed to: GLAXO GROUP LIMITED
____________________________________
____________________________________
____________________________________
Attention: ___________________
Telephone: ___________________
Telecopy: ___________________
If to Glaxo Wellcome Inc.,
addressed to: GLAXO WELLCOME INC.
____________________________________
____________________________________
____________________________________
Attention: ___________________
Telephone: ___________________
Telecopy: ___________________
If to MDC,
addressed to: MOLECULAR DEVICES CORPORATION
1311 Orleans Drive
Sunnyvale, CA 94089
Attention: Joseph Keegan, Chief
Executive Officer
Telephone: (408) 747-1700
Telecopy: (408) 747-3601
With a courtesy copy to: COOLEY GODWARD LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-2155
Attention: Andrei Manoliu, Esq.
Telephone: (650) 843-5048
Telecopy: (650) 857-0663
11.10 Waiver. Except as specifically provided for herein, the waiver
from time to time by either of the Parties of any of their rights or their
failure to exercise any remedy shall not operate or be construed as a continuing
waiver of same or of any other of such Party's rights or remedies provided in
this Agreement.
[*]=Confidential treatment requested
16
<PAGE>
11.11 Severability. If any term, covenant or condition of this
Agreement or the application thereof to any Party or circumstance shall, to any
extent, be held to be invalid or unenforceable, then (i) the remainder of this
Agreement, or the application of such term, covenant or condition to Parties or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby and each term, covenant or condition of this
Agreement shall be valid and be enforced to the fullest extent permitted by law;
and (ii) the Parties hereto covenant and agree to renegotiate any such term,
covenant or application thereof in good faith in order to provide a reasonably
acceptable alternative to the term, covenant or condition of this Agreement or
the application thereof that is invalid or unenforceable, it being the intent of
the Parties that the basic purposes of this Agreement are to be effectuated.
11.12 Headings. The Article and Section headings contained herein are
for the purposes of convenience only and are not intended to define or limit the
contents of said Articles or paragraphs.
11.13 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[Remainder of page intentionally Customer to supply.]
[*]=Confidential treatment requested
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the Effective Date.
AFFYMAX RESEARCH INSTITUTE MOLECULAR DEVICES CORPORATION
By: /s/ Lauren L. Stevens By: /s/ Joseph D. Keegan
---------------------- ----------------------
Title: Secretary Title: President and CEO
---------------------- ----------------------
Date: 28 August 1998 Date: 9/1/98
---------------------- ----------------------
GLAXO WELLCOME, INC. GLAXO GROUP LIMITED
By: /s/ Robert M. Bell By: /s/ Simon Bicknell
---------------------- ----------------------
Title: Vice President, Research Title: Assistant Company Secretary
---------------------- ----------------------
Date: 8/28/98 Date: 28 August, 1998
---------------------- ----------------------
[*]=Confidential treatment requested
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<PAGE>
EXHIBIT A
[*]
The term [*] is used to represent the initial Licensed Product that MDC plans to
develop incorporating the TLLS Technology. [*] will essentially consist of the
TLLS currently produced by Affymax, along with certain modifications (MDC
Improvements) that may be added by MDC. These improvements include, but are not
limited to, rendering the TLLS system [*], addition of a [*] feature such as an
[*], and modified [*].
[*]=Confidential treatment requested
19
<PAGE>
EXHIBIT B
LICENSED PATENT RIGHTS
[*].
[*]=Confidential treatment requested
20
<PAGE>
EXHIBIT C
AFFYMAX TELECENTRIC LENS LUMINOMETER SYSTEM tlls
TECHNOLOGY DESCRIPTION
The TLLS is a microplate luminometer system comprising a CCD camera and a [*]
that provides for [*] of all standard microplates having [*]. The unprocessed
image of the microplate is substantially free from [*]. The system is described
in technical detail in the [*].
The sensitivity of the TLLS system for detecting [*] is as follows: Dilutions of
[*] in [*] are mixed with [*]. [*] is added to multiple wells of a [*]. Within
[*] of mixing the [*] and [*], the plate is imaged for [*] using the TLLS
system. Using this procedure, less than [*] of [*] can be detected as having a
signal greater than [*] fold over the [*] control (both values with invariate
"empty well" counts subtracted).
The system has been used to perform [*] in a manner that provides sensitivities
for assays in [*] well plates equivalent to those achieved by competitive
instruments on [*] well plates.
[*]=Confidential treatment requested
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EXHIBIT D
OTHER TECHNOLOGY TRANSFER ELEMENTS
TRANSFER ELEMENTS
The purpose of this Attachment is to define those elements of the Affymax TLLS
and related proprietary information and technical advice that will be necessary
for MDC to receive from Affymax under the terms of this Agreement in order for
MDC to develop and commercialize Licensed Products.
The following is a list of specific items that have been identified at this
time. While every effort has been made to ensure the list is complete, it is in
the spirit of the Agreement that the first paragraph will be used to guide any
decision with regard to the transfer of any necessary items not yet listed.
1. Patent applications and related office actions and correspondence filed in
regard to the Affymax TLLS.
2. TLLS drawings, circuit diagrams, CAD programs and files.
3. Costed parts listed and associated vendors, including materials
specifications and lead-time for procurement.
4. Vendor information, including letter of right to purchase from Affymax
suppliers (if applicable).
5. Clearance for TLLS information disclosure to MDC from all applicable
consultants and vendors involved in the development of the TLLS, e.g.,
external software consultant, optics design consultant, [*].
6. All [*] for the camera.
7. Information in regard to obtaining software required from outside vendors.
8. Access to external consultants involved in the development of the TLLS,
e.g., external software consultants, optics design consultant, [*].
9. Fabrication documentation, including build sequence.
10. Access to tooling, including molds, jigs, fixtures, dies and associated
documentation.
11. Test procedures.
12. Utility requirements.
13. Special manufacturing room requirements, e.g., darkroom, cleanroom.
14. Agreement that MDC personnel may observe assembly of Affymax TLLS
luminometers by Affymax personnel.
15. Specific documentation for Glaxo units described in Section 2.5.
[*]=Confidential treatment requested
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<PAGE>
TABLE OF CONTENTS
PAGE
1. DEFINITIONS................................................................2
1.1 "Affiliate"........................................................2
1.2 "Affymax Improvement"..............................................2
1.3 "Best Efforts".....................................................2
1.4 "Confidential Information".........................................2
1.5 "[*]"..............................................................2
1.6 "Joint Inventions".................................................2
1.7 "Joint Know-How"...................................................2
1.8 "Joint Patent Rights"..............................................2
1.9 "Joint Technology".................................................2
1.10 "Licensed Know-How"................................................3
1.11 "Licensed Patent Rights"...........................................3
1.12 "Licensed Products"................................................3
1.13 "Licensed Technology"..............................................3
1.14 "MDC Improvements".................................................3
1.15 "MDC Sole Inventions"..............................................3
1.16 "Net Sales"........................................................3
1.17 "Related Technology"...............................................3
1.18 "Third Party"......................................................4
1.19 "TLLS".............................................................4
1.20 "Transition Period"................................................4
1.21 "Valid Claim"......................................................4
2. GRANT OF RIGHTS; PRODUCT DEVELOPMENT AND SUPPORT SERVICES..................4
2.1 License Grant to MDC...............................................4
2.2 Sublicensing.......................................................4
2.3 No Implied License.................................................5
2.4 MDC Marketing and Sales Authority..................................5
2.5 Glaxo Support Services.............................................5
2.6 Transition Period Obligations......................................5
2.7 Commercialization of [*]; Diligence................................5
i
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
3. CONSIDERATION..............................................................6
3.1 License Fee........................................................6
3.2 Royalties Payable to Glaxo.........................................6
3.3 Payment; Records Retention.........................................6
3.4 Payments to Glaxo..................................................6
4. REPORTS; RECORDS; AUDIT....................................................6
4.1 Reports............................................................6
4.2 Marketing Reports..................................................7
4.3 Affymax Cost Reports...............................................7
4.4 Tax Withholding....................................................7
4.5 Foreign Payments...................................................7
4.6 Audit Request......................................................7
4.7 Survival...........................................................8
5. EXCLUSIVITY; OPTION FOR RELATED TECHNOLOGY.................................8
5.1 Exclusivity........................................................8
5.2 Option Under Related Technology....................................8
6. CONFIDENTIALITY............................................................9
6.1 Confidentiality; Exceptions........................................9
6.2 Authorized Disclosure..............................................9
6.3 Survival...........................................................9
6.4 Publicity..........................................................9
7. OWNERSHIP OF INTELLECTUAL PROPERTY AND PATENT RIGHTS......................10
7.1 Ownership.........................................................10
7.2 Disclosure of Patentable Inventions...............................10
7.3 Patent Filings....................................................10
7.4 Enforcement Rights................................................10
7.5 Trademarks........................................................11
8. TERMS AND TERMINATION.....................................................12
8.1 Term..............................................................12
8.2 Termination for Cause.............................................12
ii
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
8.3 Termination for Bankruptcy........................................12
8.4 Effect of Termination.............................................12
8.5 Accrued Rights, Surviving Obligations.............................12
9. REPRESENTATIONS AND WARRANTIES............................................13
9.1 Mutual Representations and Warranties.............................13
9.2 Other Representations by Affymax and Glaxo........................13
10. INDEMNIFICATION..........................................................13
10.1 Indemnification by Affymax and Glaxo..............................13
10.2 Indemnification by MDC............................................14
10.3 Mechanics.........................................................14
11. MISCELLANEOUS............................................................14
11.1 Assignment........................................................14
11.2 Dispute Resolution................................................14
11.3 Force Majeure.....................................................15
11.4 Compliance with Law...............................................15
11.5 Governing Law.....................................................15
11.6 Entire Agreement..................................................15
11.7 Transaction Costs.................................................15
11.8 Relationship of the Parties.......................................15
11.9 Notices...........................................................16
11.10 Waiver............................................................17
11.11 Severability......................................................17
11.12 Headings..........................................................17
11.13 Counterparts......................................................17
iii
EX - 10.21
July 7, 1998
Timothy Harkness
36 Rico Way
San Francisco, California 94123
Dear Tim:
To confirm our conversation, I am pleased to offer you the position of Vice
President Finance and Chief Financial Officer. We have agreed that your start
date will be July 9, 1998. In this position you will report directly to me.
Upon your start date with Molecular Devices your base salary will be $12,500 per
month ($150,000 per annum) payable semi-monthly on the 15th and last day of each
month. Your salary will escalate to $162,600 per annum in three (3) months and
to $175,000 in six (6) months based upon agreed to milestone achievements. In
addition, you will be provided a one-time hiring bonus of $87,500 upon your
start date with MDC.
As a member of the management staff, you will be eligible to participate in the
1998 MDC Executive Bonus Plan (bonus at Plan 40%, which will be prorated for
employment tenure).
You will be eligible to receive 75,000 Incentive Stock Options subject to the
approval of the Board of Directors. These options will vest over a period of 5
years, with 15,000 vesting on the first anniversary of employment date and 3,750
shares vesting every quarter thereafter, and will be subject to the provisions
of the Company's 1995 Stock Option Plan as amended.
Additionally, subject to the approval of the Board of Directors, you will be
eligible to receive 10,000 shares of the Company's Common Stock, subject to
applicable securities law restrictions. A total of 1250 shares will be granted
following each quarter of service. Upon granting, each individual grant will be
fully earned and vested. You will bear all tax responsibilities for these grants
and will make arrangements with the Company to ensure payment of taxes and
compliance with tax withholdings. In lieu of your having to sell stock in order
to make any of the required tax payments, the Company agrees to lend you, for up
to two (2) years, at the minimum interest rate required by the taxing
authorities to avoid the imputation of taxes, an amount equal to your state and
<PAGE>
July 7, 1998
Page two
federal tax withholding obligation arising from the stock grant, any such loans
to be secured by your stock.
In the event of a Change of Control resulting in either termination or demotion
("demotion" means a reduction in base salary, duties, title or reporting
relationship), all your stock options and shares will become fully vested at
such date. In addition, at the time of your leaving the Company, at the
Change-of-control closing date, you would be granted a one-time severance
payment equal to the last twelve months of your total compensation (last 12
months salary plus most recent annual bonus awarded to you).
In the event of termination "without cause" within the first two years: a)
granting of 10,000 shares referred to in paragraph 5 will accelerate such that
you will receive 10,000 shares and b) you will receive a one-time severance
payment equal to the prior six (6) months compensation.
Termination "for cause" shall be determined by MDC based on the belief that one
or more of the following has occurred: i) indictment or conviction of a felony
ii) fraud against MDC or, iii) intentional damage to MDC property.
Upon your start date, as a condition of employment, you will be required to sign
an Employee Confidentiality and Inventions Agreement (copy of agreement
attached). Please review this agreement carefully; if you have any questions
regarding this agreement, please feel free to call me.
This offer is made contingent upon your ability to provide proof of
identification and authorization to work in the United States. Upon employment
at Molecular Devices, you will be required to furnish such documentation as
described in the enclosed materials.
Additionally, this written offer constitutes all conditions and agreements of
Molecular Devices Corporation. Upon acceptance of this offer, please sign, date,
indicate your start date, and return this letter and the Application Form to the
Human Resources Department. However, if you have not responded to this offer
within five (5) days of receipt the offer will be withdrawn.
<PAGE>
July 7, 1998
Page three
Tim, Molecular Devices Corporation is facing many exciting challenges as we
grow. Your experience and talents will be strong additions to our company. We
are looking forward to having you join our team.
Sincerely,
MOLECULAR DEVICES CORPORATION
Joseph D. Keegan//
Joseph D. Keegan
President and Chief Executive Officer
Attachment
Accepted: Tim Harkness//
---------------------------------
Date: July 8, 1998
-------------------------------------
Start Date:
-------------------------------
EX - 10.22
July 9, 1998
Tony Lima
1281 Oak Knoll Drive
San Jose, California 95129
Dear Tony:
To confirm our conversation, I am pleased to offer you the position of Vice
President Worldwide Sales and Service for Molecular Devices. In this position
you will report directly to me.
Your base salary will be $14,585 per month ($175,000 per annum) payable
semi-monthly on the 15th and last day of each month. In addition, as a member of
the management staff, you will be eligible to participate in the 1998 MDC
Executive Bonus Plan (bonus at Plan 40% prorated for time in position). The
Company will guarantee you a minimum bonus of $30,000 under the plan for the
1998 plan year, which will be paid in the first quarter of 1999. You will also
receive all the employment benefits available to regular full-time employees of
Molecular Devices.
You will be eligible to receive 50,000 Incentive Stock Options subject to the
approval of the Board of Directors. These options will vest in accordance with
the Company's vesting schedule over a period of 5 years, and will be subject to
the provisions of the Company's 1995 Stock Option Plan as amended.
Upon your start date, as a condition of employment, you will be required to sign
an Employee Confidentiality and Inventions Agreement (copy of agreement
attached). Please review this agreement carefully; if you have any questions
regarding this agreement, please feel free to call me.
This offer is made contingent upon your ability to provide proof of
identification and authorization to work in the United States. Upon employment
at Molecular Devices, you will be required to furnish such documentation as
described in the enclosed materials.
<PAGE>
July 9, 1998
Page two
Additionally, this written offer constitutes all conditions and agreements of
Molecular Devices Corporation. Upon acceptance of this offer, please sign, date,
indicate your start date, and return this letter and the Application Form to the
Human Resources Department. However, if you have not responded to this offer
within five (5) days of receipt the offer will be withdrawn.
Tony, Molecular Devices Corporation is facing many exciting challenges as we
grow. Your experience and talents will be strong additions to our company. We
are looking forward to having you join our team.
Sincerely,
MOLECULAR DEVICES CORPORATION
Joseph D. Keegan//
Joseph D. Keegan
President and Chief Executive Officer
Attachments
Accepted: Tony Lima//
------------------------------
Date: July 9, 1998
-----------------------------------
Start Date:
-----------------------------
EX - 10.23
July 10, 1998
John S. Senaldi
1243 Laurel Street, Apt. C
Menlo Park, California 94025
Dear John:
To confirm our conversation, I am pleased to offer you the position of Vice
President Worldwide Marketing for Molecular Devices. In this position you will
report directly to me.
Your base salary will be $13,335 per month ($160,020 per annum) payable
semi-monthly on the 15th and last day of each month. Upon your start date you be
provided a one-time bonus of $30,000.
As a member of the management staff, you will be eligible to participate in the
1998 MDC Executive Bonus Plan (bonus at Plan 40% prorated for time in position).
The Company will guarantee you a minimum bonus of $30,000 under the plan for the
1998 plan year, which will be paid in the first quarter of 1999. You will also
receive all the employment benefits available to regular full-time employees of
Molecular Devices.
You will be eligible to receive 46,000 Incentive Stock Options subject to the
approval of the Board of Directors. These options will vest in accordance with
the Company's vesting schedule over a period of 5 years, and will be subject to
the provisions of the Company's 1995 Stock Option Plan as amended.
Additionally, subject to the approval of the Board of Directors, you will be
eligible to receive 2,500 shares of Restricted Stock, subject to applicable
securities law restrictions. These options will vest quarterly over a period of
two years.
In the event of a Change of Control, all your stock options and shares will
become fully vested at such date.
Upon your start date, as a condition of employment, you will be required to sign
an Employee Confidentiality and Inventions Agreement (copy of agreement
attached). Please review this agreement carefully; if you have any questions
regarding this agreement, please feel free to call me.
<PAGE>
July 10, 1998
Page two
This offer is made contingent upon your ability to provide proof of
identification and authorization to work in the United States. Upon employment
at Molecular Devices, you will be required to furnish such documentation as
described in the enclosed materials.
Additionally, this written offer constitutes all conditions and agreements of
Molecular Devices Corporation. Upon acceptance of this offer, please sign, date,
indicate your start date, and return this letter and the Application Form to the
Human Resources Department. However, if you have not responded to this offer
within five (5) days of receipt the offer will be withdrawn.
John, Molecular Devices Corporation is facing many exciting challenges as we
grow. Your experience and talents will be strong additions to our company. We
are looking forward to having you join our team.
Sincerely,
MOLECULAR DEVICES CORPORATION
Joseph D. Keegan//
Joseph D. Keegan
President and Chief Executive Officer
Attachments
Accepted: John Senaldi//
-----------------------------------
Date: July 13, 1998
---------------------------------------
Start Date:
---------------------------------
JAD/jd
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<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Balance sheet as of September 30, 1998 and the
Consolidated Statement of Income for the nine months ended September 30, 1998
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
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0
0
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<LEGEND>
This RESTATED schedule contains summary financial information extracted from the
Condensed Consolidated Balance Sheet as of September 30, 1997 and the
Consolidated Statement of Income for the nine months ended September 30, 1997
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
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0
0
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